IBM Extend Health HRA accounts

I have been looking at various IBM chat boards to see what others are saying about the IBM shift to Extend Health.  I think I understand more about HRA accounts.  However, I have also seen A LOT of information posted that is not correct.  Anyone who is saying they know what specific products Extend Health will provide for us and/or the price of those products is either clairvoyant or they were able to hack into EH.  There are no products nor prices available yet and they will not be officially available until the beginning of October.

I do think the information floating around about HRA accounts is accurate.  I also dug back into my memory of health care changes.  Shame on me for not remembering it better as I was a manager and used to hold meetings on this stuff but I have tried to piece it together based on what I did recall and what I read. Here is my perspective.

In the late 1980s and early 1990s you might recall that there were many retirement incentive packages offered (and many jokes about being hit with a 2 by 4 to take a package).  Anyway, there was usually a component that included health care coverage that would come with the package.  Prior to those incentives when someone retired and became Medicare eligible, IBM covered both the part B premium costs and secondary insurance costs.  Successive retirement incentive packages would include warnings that if one did not take the package they would lose this or that guarantee of health care premium coverage.  In the beginning of 1997 health care premium assistance was eliminated.  Premium assistance is provided to retirees who retired prior to 1997 as a reimbursement.  The retiree files a claim with a third party company to get the reimbursement. I suspect there is a cap on the reimbursement for all employees.  I know this because my spouse, who retired in 1996, gets part B premium reimbursement but it caps at $900. That process is not being changed and is not part of EH.

Separate from that program, IBM subsidized retiree insurance.  What that means is they worked with insurance companies to create insurance offerings and paid part of the cost of a premium for us. In the late 1990s IBM told employees who were retirement eligible they would freeze this subsidy at a fixed amount per employee.  The amount was either $3000 or $3500.  I don't recall and I have seen both numbers being tossed around.  Let's assume it is $3000.  So, as insurance premiums increased from year to year, IBM passed along increases not covered by the $3000 cap to the retiree. We never saw that money and I will guess they had a pool of money so it wasn't literally $3,000/employee because some retirees did not use IBM insurance or used policies that cost less per year and some used policies that were more per year.

In the early 2000s IBM declared to employees who were not retirement eligible the subsidy was changing again.  For those employees, IBM would contribute a fixed amount of money to an account that would max out at $25,000.  So, if the employee got lucky and was not laid off prior to hitting the max, when they retired they would have a retiree subsidy assistance for as long as the $25,000 lasted.

Several years ago IBM totally removed the benefit --- ergo, there are some retirees that are "Access Only".

I am sorry I don't know the exact dates of all of those changes.  But you get the gist.

So, here's how that plays out with this move to EH.  Each of us will now get an HRA account that contains the subsidy we are eligible to receive.  The people who cap at $25,000 face the same process.  They can spend that money out of the HRA account until it runs out.  It rolls from year to year.

For people who get the $3000 subsidy - every year IBM will fund your HRA account with that money.  You then have to file paperwork to get that money as a refund for premiums and copays.  If you don't use it all or file paperwork to get it back by year end you will "lose it". You can only access that money if you buy an EH product.  In October you will be told exactly what will be in your HRA account in 2014.

An interesting aspect to this change is that IBM will likely now spend less than $3000/retiree because some will forget to file the paperwork and some might pick plans that don't use it all up.  So, it is another way for IBM to claw money back.  Sigh.