IBM Tells Retirees Health Contributions to Be Consistent

International Business Machines Corp. (IBM), which is moving benefits for Medicare-eligible retirees to a private health exchange, said its contribution to their health care would be “consistent” with previous years.

As long as retirees enroll with the private insurance exchange, IBM will subsidize their health-care premiums at a similar level, the company said in a letter obtained by Bloomberg. The money will come in the form of a health reimbursement account, or HRA, IBM said.

“The aggregate amount of IBM’s contribution to benefits will be consistent with previous years,” the Armonk, New York-based company said in the letter, signed by Chief Health Director Kyu Rhee. “IBM will communicate your personal HRA contribution amount starting in early October.”

The company said last week that it chose to move 110,000 retirees to an Extend Health exchange by Towers Watson, the country’s largest private Medicare exchange. In the August letter, IBM told the former employees that they will be able to keep their current health providers and prescriptions in most cases.

IBM, the world’s largest seller of computer services, is among the biggest employers in the U.S. starting to move retirees to exchanges where they select their own health plans, a shift that could push more costs onto taxpayers. Time Warner Inc. (TWX) said earlier this week it would move retirees to a privately-run exchange, while General Electric Co. (GE) last year said it would curb benefits, sending former employees to the public exchanges created under the 2010 Affordable Care Act.

“IBM didn’t make this change to save money -- it does not reduce our costs,” Doug Shelton said on Sept. 7. The company capped its subsidies to retirees in the 1990s, he said.

The company is making the change to give former workers more options, as it projects health care premiums and out-of-pocket charges to triple by 2020, Shelton said.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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