2013
The great cost shift in costs is on – under the guise of more choice is better.
IBM, TIME WARNER MOVING RETIREES TO PRIVATE HEALTH EXCHANGES – The corporate giants could signify a major trend in the way big companies handle benefits for former employees. Reuters broke the news on Time Warner, and the Wall Street Journal reports that the moves by both companies mirror the push by the White House to move millions of uninsured. It’s a shift that’s causing some headaches and anxiety, but both companies – as well as exchange boosters – say retirees will ultimately end up with better choices. The WSJ story: http://on.wsj.com/17MFFOM
Here is the quote you really need to pay attention to:
“Companies are moving away from retiree health plans generally as costs become prohibitive in some instances,” said Ariel Gonzalez, director of federal health and family government affairs for AARP.
He said that the advocacy group for older adults generally sees exchanges as a positive development but that it would be a concern if companies use them to cut benefits significantly or shift a lot more of the cost. “If cost sharing becomes too burdensome for retirees, then that would definitely raise concerns,” Mr. Gonzalez said.
Exactly what does old Ariel think is happening here? One party wants to save money so where does it come from? Oh, I know, the same benefits can be provided to retirees at less cost because of competition. Where have you heard that before?
Exchanges such as Extend Health generally present policies from a range of insurers and let individuals choose what best meets their needs and budgets. The aim is to create competition that keeps costs down…
Mr. Williams, of Towers Watson, acknowledged that the transition often causes concern. "This starts out being scary for most people," he said.
He estimated that only 10% of corporate retirees have used Medicare exchanges but that the percentage will grow rapidly as more companies conclude they can’t continue to afford paying for retiree health care. “There are still quite a few others coming,” he said. “We are at the front end of the wave.”
If companies can conclude they can’t continue to afford paying for retiree health care, who can, the retiree of ten, fifteen or more years living in a fixed income?
Keep in mind that many of these companies have already eliminated retiree coverage for future retirees or have capped their contribution in some way. What they are doing to current retirees is all gravy to brighten the day of the CFO.
Make no mistake about it, companies are doing this to save money and lower their accounting liability. Companies have latched on to an idea that perfectly ties in with the current publicity about health insurance exchanges. This may be a reasonable idea if the employer makes no contribution to the cost of coverage, but in all other cases this eventually means cost-shifting to retirees. Companies save money by allocating their contribution (or a portion of it) to a Health Reimbursement Account. That initial amount does not automatically increase as premiums increase but at the discretion of the employer – defined contribution versus defined benefit where the contribution increases to provide the promised benefits as it did when the employer paid even a portion of the premium. In addition, in many cases the amount in the HRA does not rollover from year to year but is forfeited if unused at year-end, thus further limiting the employer liability.
We have entered the age of who cares. Retirees are not former employees with long years of service when their total compensation included the promise of pensions and health care. Retirees are disposable liabilities to be dealt with as a piece of equipment past its years of depreciation.
You know what Mr Employer, you made a commitment people counted on; honor it. Oh, there is no written contract, even union agreements related to future retiree benefits can’t be enforced once the person is retired, it’s just a matter of doing the right thing. This didn’t sneak up on you, you knew the costs were there from the day you made the commitment. On the other hand, your retirees had no idea you were pulling the rug from under them, most thought you would honor your commitment … fools that they be.
Related articles
- A health insurance exchange is coming at you – even if you have employer coverage (quinnscommentary.com)
- Time Warner To Remove U.S. Retirees From Company Health Plan (huffingtonpost.com)
QUINNSCOMMENTARY 
Problem here is that too many assumed there was a commitment far beyond what was actually made. Promises without funding are mere dreams.
Fact is, an employer who makes the commitment to implement AND SUSTAIN the legacy plans indefinitely will fund that plan and carefully document and clarify their commitment with specific language, and specific funding out of current operations.
It is the exception where an employer made that commitment … And didn’t reserve the right to prospectively change benefits that were not vested and future accruals.
You treat this in your comments as if it were a contract that was broken. Who out there enters into a contract they somehow think will last 30 years after employment ends where the promise was not funded, where the contract clearly states one party can change the terms, and where there is no accumulated funding.
Dick, when you criticize seniors about their complaints of low SS cola seems so inconsistent with your critism here. What guarantee is there for my 40 years of work and “contributions” to social security and Medicare? I see my taxes go up and my benefits decline vs projected benefits of decades before. And remember, what I am talking about is a benefit that is far less than the taxes I actually funded.
The govt ability to change SS and Medicare after decades of specific funding is little different than an employers action to change benefits it never committed to sustain and never funded.
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The ability to change and changing are two different things. Changing prospectively is different as well. I changed all benefits as of a certain date for new hires for the purpose of avoiding taking away from long time workers. The employer ended up doing both. In a life or death survival situation one could understand the necessity. However, to boost earnings a penny it two or to simply show Wall Street you are cutting costs is a sad excuse to disrupt peoples lives.
As far as Social Security goes my criticism of people complaining about the COLA is because they expect more beyond the formula and some believe Congress or the President are intentionally holding it down. Social Security is in trouble so something has to be done and my view is that what is done cannot all be on the backs of the following generations. A little less in a COLA which is an unknown promise in any case is one way that can happen. In all cases it is a matter of doing the right thing for all parties with a stake in the outcome.
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