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IBM and Time Warner Releasing Retirees from Their Health Plans

From the inception of the Affordable Care Act or ACA, health insurance would sold on large, inter-state public health exchanges and forced to compete with a low-cost public option that would serve to keep the prices competitive. However while dickering for votes in Congress, the public option vanished and the mandates remained. With many of the provisions about to kick in in 2014, companies are scrambling to reduce their costs while still adhering to the letter of the law.

Time Warner, Inc. and IBM are both planning to move retired workers from their health plans due to rising costs. They are not simply cutting their retirees lose, however, but will allocate funds into special accounts which they can then use to purchase insurance from private exchanges.  IBM was the first company to make this move because the cost of keeping retirees on their current plan will triple by 2020.

The companies will make annual contributions to special accounts which the retirees can use to purchase Medicare Advantage or other plans that fill in the gaps in Medicare’s coverage. Retirees are uncertain about the move, but spokespeople for IBM and Time Warner insist that this new strategy will help manage costs by introducing competition into the equation. IBM spokesman Kyu Rhee insists that cutting costs is a secondary motivation and that the company seeks only to provide their retirees with sustainable health coverage and will avoid huge premium increases should the retirees stay on their current plans.

This is part of a larger trend of corporations moving away from the policy of providing care for the retirees and instead sending them directly to private exchanges like Extend Health. These private exchanges are independent of the publicly administered exchanges that are part of the ACA and which will go “live” in October.  


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