Recently, Time Warner and IBM have announced they are changing their retiree health insurance benefits. This news has some raising concerns that the Patient Protection and Affordable Care Act (PPACA) is undermining the employer. But for the average individual utilizing retirement insurance and those looking to use it in the near future, this can raise some serious concerns about their future insurance coverage.
Even before PPACA came along, companies had been looking to trim health care insurance costs, especially when it came to retirees. It’s no surprise that insuring a retired person increases the costs of providing insurance for everyone in a company. A company that can find a way out of this coverage will cut costs substantially. However, this is not a new trend.
The Kaiser Family Foundation has found that companies have been reducing benefits to retirees for some time. In 1988, the foundation reported that 66 percent of companies employing 200 or more that offered health insurance also offered retirement health insurance. Twenty years later, in 2008, only 29 percent of employers in that same group offered retiree health benefits. As the Kaiser Foundation study shows, this trend has been evident long before the advent of PPACA.
Those affected by the insurance changes at IBM and Time Warner will not be left without insurance options. For example, the changes at IBM are specific to retirees that already accept Medicare from the federal government. Instead of IBM administering these additional benefits for their retirees over age 65, they are sending them to a Medicare insurance exchange where they can then subsidize the cost of the extra coverage. According to IBM, this is a win-win situation for the company and the employee. Sure, retired workers will have to choose the supplemental plan they need, but they will have more options to pick from.
Time Warner will provide subsidies to those retired employees still too young to qualify for Medicare. These retirees will then purchase their own coverage through private exchanges similar to (but not the same as) the public insurance exchanges that became available last October.
Although some claim PPACA was designed in part to preserve the employer provided health insurance system others claim that it will destroy it. The truth is it may take years before the full impact of the new law becomes apparent on the health care system and traditional insurance offerings from companies. With all the fireworks it’s created in Washington, there is little doubt that as time goes on PPACA will undergo its share of tweaks and revisions.
PPACA wasn’t implemented with the purpose of causing corporations to cut back or change their health benefits for retirees. But neither will it do much to slow that trend which has been steadily progressing over the last few decades. The health care law stipulates the minimum requirements that health insurance plans must cover, which is greater than what many current companies offer. This could indirectly raise the costs for companies that might look to save money by cutting retiree benefits. But at the present, companies already offering health benefits are grandfathered in and don’t have to meet these new minimums. However, if they make significant changes to their insurance plans, as many companies often do, then these exemptions will no longer apply.