IBM, Time Warner Retirees Moving to Private Health Exchanges

In a move similar to one announced by IBM, media and entertainment company Time Warner Inc. plans to move its retired workers off its health plan and provide money to them to purchase coverage on private exchanges at the beginning of next year.

Company spokesman Keith Cocozza confirmed the plan Sunday, according to The Associated Press.

The Time Warner plan, which was earlier reported by Reuters, is the same approach confirmed by IBM on Saturday.

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Both companies plan to allocate money to special accounts for retirees, which they can use in purchasing coverage.

Such moves are meant to lower costs and are part of a corporate trend away from providing traditional retiree health benefits as costs rise.

IBM had selected Extend Health, which is owned by Towers Watson & Co, to provide retirees with new health options for medical, prescription drug, dental and vision coverage, the company said in a statement on Friday.

The plan, it said, offered IBM retirees more choice and better value than the company could provide through existing group plans.

IBM also said it was hosting meetings with groups of retirees across the country to inform them about the move to the country's largest private Medicare Exchange.

While some retirees may be skeptical, studies showed that the majority of people have a more positive outlook once they were presented with the concept and understood the options available to them through these exchanges, IBM said.

Moving retirees to an exchange allows companies to reduce rising health care costs.

"IBM didn't make this change to save money - it does not reduce our costs," a spokesman said.

Projections indicate that healthcare costs under IBM's current plans for Medicare-eligible retirees would triple by 2020, largely impacting retiree premiums and out-of-pocket costs for retirees, he said. With this move, he added, risks are spread across a much larger group in the private marketplace.

According to the website Alliance@IBM, an employee group, the plan will come into effect starting Jan. 1, 2014.

IBM, the world's largest technology-services company, has been reining in costs to ensure stable profits amid slowing demand for hardware.

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At the end of last month most of its staff in its services and technology group was asked to take a week furlough at one-third of normal pay, according to Alliance@IBM.

The company took a $1 billion restructuring charge related to job cuts in its second quarter.

The cuts were taken mainly outside of the United States, a spokesman said at the time, adding about 60 percent were from IBM's services division and 20 percent each from its hardware and software segments.