Corporations Shifting Health Care Costs to Retirees, Taxpayers

September 9th, 2013
in econ_news, syndication

Econintersect:  Corporate benefits for retiree health care have been shrinking for years but the latest changes appear to be accelerating the process.  Late last month GEI News covered the shifting pattern of employers moving from sponsored group plans to use of private insurance exchanges where employees shop for individually tailored coverage with corporate support of part of premium costs through donations to HCAs (Health Care Accounts).  The changes are especially common for retirees.


Follow up:

Corporate giants who are making this change include General Electric (NYSE:GE), IBM (NYSE:IBM), DuPont (NYSE:DD), Caterpillar (NYSE:CAT) and Time Warner (NYSE:TWC) which made the announcement today (09 September 2013).  GEI News covered details of the IBM change in the article last month.

Also discussed last month was the lower incidence of group plan replacement by private insurance exchanges for active employees.  Group health care coverage is still considered a valuable benefit by employees and companies benefit by having an incentive for retention of their most productive employees who may be inhibited from leaving for more entrepreneurial ventures because of health care risks.

Retirees are a much different situation.  Companies have no worries that their "most productive" retirees might leave because their group health care tether is removed.

Editor's note: How many corporate employees were reassured that they were well compensated during the 1960s, 70s and 80s because of the company's great retirement benefits?  This editor knows of some such situations from his own personal experiences.

In spite of the "tether" of a company provided group plan some corporations have made the change to private exchanges for active employees.  Bloomberg mentions Sears Holdings (NASDAQ:SHLD) and Darden Restaurants (NYSE:DRI).

At the present time private insurance exchanges are not related to the public insurance exchanges that will be opening in the coming months under Obamacare.  However, the basic operational concepts are essentially the same and the eventual merger of all such operations under a public "umbrella" is possible.

There may be an immediate increase on Obamacare participation for retirees from companies cancelling health plans.  If the retiree is in a lower income status and the company supplement for insurance premiums are low, the retiree may get a higher level of premium offset through a public exchange with government support.

A logical outcome of what is happening is that certain retirees who would formerly have been in a company group plan may end up in Obamacare with taxpayer support of their insurance premiums.


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