IBM To Drop Retiree Health Care Plan, Subsidize Options
ARMONK, N.Y. – IBM has announced that it will close down its current health care plan for retired workers and subsidize health care for Medicare-eligible retirees.
The announcement was made in a notice to retirees, reviewed by The Wall Street Journal and confirmed by IBM. The plan was also confirmed by a YouTube video posted by IBM that explains the new plan.
In the video, Dr. Kyu Rhee, IBM’s chief health director, says that the current IBM health care model is “no longer sustainable for [employees] or the company” and that health care costs “will triple in the next few years largely impacting premiums and out-of-pocket costs.”
IBM’s new plan will affect 110,000 Medicare-eligible retirees, according to The Wall Street Journal report.
Instead of offering the company-sponsored insurance plan, IBM said that it would give money to retirees to use to purchase insurance if they enroll in the Extend Health Medical Exchange, a privately run Medicare insurance exchange. In the video, Dr. Rhee said that hundreds of other companies have made similar changes and that under the new plan, retirees will be able to take advantage of programs “that are of equal or better value than what IBM can currently offer.”
The current retiree insurance option will end Dec. 31.
A statement issued by IBM said that “studies show that the majority of people who are presented the concept of an exchange are skeptical at first, but once they understand the options available to them through these exchanges, they have a more positive outlook.”
IBM also said in the statement that the new arrangement puts the retirees in a bigger pool of beneficiaries, spreading risk and lowering cost.
The company has been holding meetings with retirees to answer questions about the transition. It said in a statement that a meeting in San Jose, Calif. on Sept. 4 drew 1,300 retirees. It plans to hold a meeting in the Hudson Valley region but details have yet to be announced.
The company has made other moves recently to lessen its costs for current employees. In the second quarter, IBM spent $1 billion to restructure its workforce, cutting more than 3,300 employees in the U.S. and Canada, according to Alliance@IBM, an employee group. It also required U.S. hardware division employees to take a week off with one-third of the pay.
IBM doesn’t disclose the number of employees by country or by division. The company’s total workforce was 434,246 as of Dec. 31. IBM has facilities in Somers, Yorktown Heights, Hawthorne, Armonk, Poughkeepsie and East Fishkill.