Former employers are beginning to drop retiree health insurance coverage.
The health insurance cancellation letters are already in the mail. The retirees who receive these letters will now be required to provide their own health insurance that their former employers once provided for them.
Some companies, fortunately, are at least offering a stipend for these retirees to help them with the costs.
IBM in particular plans to give about 110,000 retirees payment to buy coverage on a health-insurance exchange. The company told The Wall Street Journal that the growing cost of health care through the new health care reform is making its current retirees’ benefit plan unsustainable and moving retirees to health insurance exchanges will also relieve the company from having to manage their benefits.
Their decision has become a model for other large companies—Time Warner and General Electric, for example—who are also struggling to find ways to offer their employees and retirees health care coverage with the growing rates of health care.
The Kaiser Family Foundation has found that retirees are increasingly losing coverage through their former employers. Only 28 percent of companies that offer health benefits covered their retirees in 2013, down from 34 percent in 2006 and 66 percent in 1988.
What Should I Do If I’m a Retiree?
If you don’t yet qualify for Medicare—which is an area that should not change other than on the state level—and find yourself losing coverage, here is what we would recommend and what some retirees are doing:
- Comparing Policies. Search the exchanges for the best plan that fits your needs. You may be able to get discount prices based on your household income. Some retirees believe the new system to be beneficial. Even with the increased rates, they have been able to find plans that are better suited to meet their needs.
- Using Your Company Stipend. As I mentioned, many companies are providing retirees with a stipend to purchase health care on the private exchange. Use the stipend to purchase a good health care plan.
- Taking the Penalty. There is a penalty for people who choose not to purchase health coverage, but first let me tell you of the exceptions. Purchasing healthcare is not required of incarcerated individuals, undocumented immigrants, members of an American Indian tribe, members of a religious group that opposes health care or those that would suffer severe economic hardship purchasing the new insurance—referring to people in which premiums are greater than 8 percent of their income. For those that choose to take the penalty, you will be fined $95 per adult in 2014. This will be taken out of your tax return. However, this amount will increase to $695 in 2016. Those with higher incomes will be subject to higher fines.
- Searching Alternatives to Cut Costs. As you navigate the exchange to search for plans, you can choose two options to search—health and dental. Health care is a requirement under the Affordable Care Act, but dental for adults is not. You can use this to your advantage. Instead of purchasing the costly dental plans on the exchange, consider a discount dental plan, as several IBM retirees have done. By purchasing a discount dental plan, you can save money and use the stipend your company gave you to purchase a good health care plan from the exchange.
Health care is expensive, but hopefully with these options we have given you and a good budget, you can afford your new health insurance plan without breaking the bank.