IBM sending American retirees into Medigap exchanges, as it changes its retiree medical offerings.

Any number of press outlets had the story. Here is Marketwatch.

Is this a result of Obamacare? Or is it IBM, shaving costs against disenfranchised people and otherwise backing away from previous commitments? Probably a little of both.

Large US firms have been reworking their retiree medical programs for 2014. From my viewpoint, it’s because the Affordable Care Act is closing the “doughnut hole” of Medicare (old age health insurance) Part D. Part D covers most pharmaceuticals, to the extent that Part B did not.

The doughnut hole was a range in drug coverage, where the insured was required to pay 100%. You’d think this began at low dollar coverage, but in fact was a range that started after the first $2850 had been spent for medicines. Yeah. At a point, Medicare D reimbursement disappeared, and didn’t reappear until one had spent several thousand more on medicines.

Obamacare is closing the doughnut hole, starting next January. There will be full 75-25 coverage by 2020.

Big companies that had traditionally offered full coverage, and continued to do so, even after Medicare Part D came in, in 2006, now have a new calculation in front of them: do they shoo their retired pensioners over to a Medicare Part D plan (where the government is agreeing to pay more of the coverage), or have them keep their employer-based Medicare supplement—even if that one is NOT going to enjoy this new benefit? (Doughnut hole was irrelevant to employer-based retiree health insurance programs).

A Medicare Part D with the closed doughnut hole is probably a better deal for anyone who currently gets drug coverage through their former employer. But can companies come out and say that they are pushing their costs off on to the federal taxpayer?

Some are being more honest. They say they are setting up a Medicare D, and part of the reason is to conserve retiree medical fund money so that it can stretch out over more years. (The anticipation is that costs will continue to rise, inexorably, into the distant future.)

Ones like IBM, though, seem to be setting up a smoke screen. They say that IBM has already capped its contribution into retiree medical. And that retirees would face a tripling of premiums in the future. But they didn’t explain how Medigap exchanges are going to solve this financial dilemma. Spreading costs over more insured, or offering “more choice”, doesn’t explain why disbanding a program for 110,000 people is going to be more cost effective than keeping everything the same.

But putting people into Medicare D, or the Part C called “Medicare Advantage”, and benefitting from federal subsidies, WOULD make sense. And, it’s typical IBM. Taking from the government, but pretending it never gets from the government.

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