IBM Extend Health for Medicare products Is NOT a true Health Exchange

I don't know why IBM is referring to the transition for medicare eligible retirees as a transition to a private health insurance exchange.  At best it is confusing and at worst it is misleading.  I believe Extend Health does offer "exchanges" to companies for employees but what they are doing for us is much less than what happens in a private exchange.

The words "health insurance exchange" are so overused.  The federal government is even moving away from "exchange" wording and talks about the Health Insurance Marketplace when describing the Affordable Care Act "health insurance exchange" although what is happening with the ACA is really an exchange.  The mechanics of ACA will be set up to help people under 65 who are uninsured find the best, cheapest group insurance plan available to meet their needs and also to help them find out if they qualify for government assistance in paying for that health insurance plan. States will be negotiating with insurance companies (if they setup a state run pool) for the group plan products offered in the exchange.  Individuals cannot buy ACA offered plans directly from insurance companies because ACA plans are not individual plans. Buyers have to contact ACA  support staff to register and ACA representatives will be be helping them pick the best fit products without any financial incentives going to the ACA function or the ACA representatives.

The Extend Health services we are getting are not anything like that.  Extend Health has deals with a number of insurance companies to be able to sell EXACTLY THE SAME standard Medicare insurance policies that are available and for sale to any Medicare eligible individual in the "open marketplace" and at the same price. There is no group discount. There is no specially structured insurance product for medical and prescription drug insurance (ala what we had with IBM in 2013).  EH will also have deals with insurance companies to provide dental and maybe vision insurance because Medicare does not cover routine eye exams and eye glasses - maybe EH will negotiate a group discount for those products. The agent I talked to implied there will not be any vision policies but maybe he was wrong.  I keep saying this --- THINK OF THE SERVICES WE GET FROM EXTEND HEALTH AS USING AN INSURANCE AGENT. 

Extend Health won't be  offering you the cheapest, best policy in the marketplace for your zip code.  They will offer you the best fit for the products they sell.  They won't try to figure out if you would qualify for government assistance to pay for your premiums (yes, there are low income assistance programs for people on Medicare) but it's unlikely IBM retirees would qualify. The ONLY reason to use IBM's Extend Health setup to buy an insurance policy is it will trigger you to be able to get your IBM HRA or IBM FHA subsidy.  It is my plan to buy one insurance policy from EH to get access to my subsidy and the rest of my insurance policies from EH only if they are cheapest, best policies I can buy in the open marketplace.

There is also something I found describing the legal mechanics of an HRA account that you may find interesting. It indicates there is NO LEGAL reason that IBM is not allowing us to roll over HRA balances from year to year and no legal reason to use Extend Health.  Also, IBM could have just given us access to HRA accounts without having Extend Health as a middle man and allowed us to spend the money as we pleased on medical services - even forgo buying insurance policies. I continue to believe IBM is using Extend Health because IBM believes we will not use up all of the subsidy money in our accounts and that will translate to millions of dollars of reduced expense to IBM. This excerpt came out of a much longer position paper from a non-profit organization.  I didn't provide the link because it was a politically biased position paper. I believe the excerpt is not:

In 2002 the Internal Revenue Service issued a Notice (2002-45) and Revenue Ruling (2002-41) creating what it termed a “Health Reimbursement Arrangement” (HRA).7 These rulings were a new way of interpreting Sections 105 and 106 of the Internal Revenue Code, which authorize employer spending on health services.

Essentially, employers may take such spending as a business deduction without adding the funds to the employee’s income. Such money may be deducted only when it is actually spent, not when it is promised. The IRS said employers may allocate an amount of money for employees to spend in the future, but this allocation is only “notional” (there is no actual money in an account) and the employer may deduct it only when it is in fact spent on a health care service.

HRAs allow employers to contribute to an employee’s health care expenses (including premiums) without restriction by creating a Health Reimbursement Account, which is tax-free but may be used solely for health care expenses. Unspent funds may roll over and build-up over time, but always remain the property of the employer until used.

There is no restriction on the amount of money, and there is no requirement that there be any kind of insurance policy to accompany the account. Thus, HRAs may be for any amount of money and they may go along with any kind of insurance programs – or none at all. An employer may simply make an HRA available instead of providing insurance.