A Towers Watson survey released in March found that one-third of companies it calls “best performers” on controlling healthcare costs that offer a retiree medical program are planning to switch to health savings accounts and private exchanges for their retirees by 2015. The survey also found that 60% of companies currently offer some kind of retiree health benefit program, though that number has been declining over the past decade.
An Aon Hewitt study of 548 companies covering almost 4 million retirees released last month found that more than 60% of employers are re-evaluating their long-term retiree health strategies because of the healthcare reform law. And of those firms that have decided to make changes for Medicare-eligible retirees, more than 40% will move retirees to a private insurance exchange.
Although many employers have been moving retirees to private exchanges, the decisions by IBM and Time Warner may act as a catalyst for other large companies to follow in their footsteps, says Helen Darling, president of the National Business Group on Health.
Most retirees have no connection with the workforce, so if a company offers retiree medical benefits, it makes sense for the company to outsource the administration of the program to save money and give retirees more flexibility, Darling said.
In most cases, retirees will get a stipend from their employers to buy coverage on the private exchange, though that may not keep up with medical inflation, experts say.
That's one of the potential downsides for retirees when employers decide to move them into the private exchanges, said John Grosso, an actuary and head of Aon Hewitt's retiree health care task force. In addition, some retirees may have to pay more to get the same benefit value they did under their existing company retirement plan. Aon Hewitt offers its own exchange for Medicare-eligible participants, known as Aon Hewitt Navigators.
Paul Fronstin, a senior research associate at the nonpartisan Employee Benefit Research Institute in Washington, said IBM, stopped increasing its contribution toward retirees' health plans many years ago. That has left IBM retirees to bear an increasing share of their health benefit costs.
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