Big Blue is making big changes to the way it provides supplemental health insurance to its 110,000 retirees.
In the latest sign that companies are using Obamacare to change the way they cover current and former workers, International Business Machines announced Friday that it would stop providing coverage to its retirees, instead providing them with a subsidy that they can use to purchase their own insurance from a private insurance exchange.
The change signals a continued move by companies to create defined contribution healthcare retirement plans, instead of defined benefit plans, similar to the shift from pensions to 401(k) plans in the retirement asset space. IBM is widely seen as a trend-setter when it comes to employee benefit and retirement plans.
Yesterday, Time Warner announced that it would also move its retirees onto private exchanges rather than providing benefits directly.
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Fewer companies are offering any retirement health benefits to employees, according to a recent report by the Kaiser Family Foundation. KFF found that just 28 percent of large firms that offer health benefit to employees offer retiree coverage. Twenty-five years ago, two-thirds of companies promised workers healthcare coverage in retirement.
Large corporations are also finding ways to cut back healthcare costs for current workers, too, as Obamacare’s implementation dramatically changes the benefits landscape. Last month, United Parcel Service said it would stop providing health insurance to employees’ spouses who can obtain their own coverage at work. Employers who offer healthcare robust coverage, known as ‘Cadillac Plans’ to their employees are scaling back coverage to avoid having to pay a tax on those plans.
