IBM Extend Health - How IBM saves BIG BUCKS

IBM spokes people are running around the country telling retirees that IBM is making this change because of the run away cost in health care and this change is meant to help retirees contain their health premium costs.  Really?  Really?

I've been trying to think of all the ways IBM will save money by this move to "help retirees" as they will no longer be providing services directly to 110,000 medicare eligible retirees.  As boomers become Medicare eligible they can throw even more people over the transom. 

IBM will likely be saving MILLIONS OF DOLLARS by reducing or eliminating:

• The team that negotiated with private insurance companies or were working with other companies to provide unique IBM offerings such as Aetna Integration plans, IBM medical plans or CVS/Caremark prescription drug plans.  Wonder how many people they will be able to lay off.
• People who answer the IBM Employee Service Center helpline.  The bulk of the questions that came into that helpline from older retirees had to be about the medical plans coverage and/or claim complaints.  Eliminating that workload means IBM won't need as many people to answer questions.  That service was probably outsourced - so less money goes to the outsource company. 
• Cost overruns from the negotiated premium prices.  Retirees paid fixed premiums every month and the rest of the cost of the policies came from our subsidy pool.  The premium prices were established before we picked our choices.  There was likely a best case scenario where the subsidy pool would under run and a worst case scenario where the subsidy pool would overrun. Predicting that probably gets more difficult as more and more people became Medicare eligible. 
• Pension deduction processing.  Our premiums were paid out of our pensions.  There was a workload associated with adjustments and life changing events such as when spouses die.
• The cost of sending us materials every fall during open enrollment and handling the bump in helpline workload.
• There are probably other costs that IBM will be able to eliminate but the biggest payback to IBM is there is a HIGH probability we will not spend the subsidy money. It is well known in the retail industry that people are very sloppy about claiming rebate money (http://www.investopedia.com/financial-edge/0810/how-mail-in-rebates-rip-you-off.aspx).  About 40% of the rebate money goes unclaimed.  Let's presume IBM retirees are better than the general population so if 30,000 retirees screw up the HRA claim process IBM will get back 30,000 x 3,000 or $90 MILLION DOLLARS.  Old people are particularly vulnerable about handling rebates and the HRA claim process couldn't be more confusing. Even if it is half that amount it is a lot of money!!!! 

The notion that we will be getting a better price deal with Extend Health is just ridiculous.  Extend Health is negotiating nothing with insurance companies.  As I said, they are nothing more than an insurance agent. 

Updated on 2/9/14 - I wrote this posting before we knew about the beneficiary change that required the retiree to take a benefit cut to provide survivor benefits.  My guess is retirees and survivors were lasting longer than first predicted by the actuaries so the trust fund for the benefit was running low.  There'd be no way IBM would do the right thing and pump more funds into the trust to compensate so, instead, they trimmed the benefit. 

IBM Extend Health Press Release

Looks like the media are finally reporting on this transistion.  Here is a blurb I found this morning.  IBM is now doing media management and the media is just parroting what the company tells them.  Whatever happened to investigative journalism?

IBM to move some retirees off its health plan

The Associated Press | Posted: Sunday, September 8, 2013 2:00 am
IBM plans to move many retired workers off its health plan and give them money to buy coverage on a health-insurance exchange. The move is part of a corporate trend away from providing traditional retiree health benefits as costs rise.
The company said it acted after projections showed that costs under its present plan for Medicare-eligible retirees will triple by 2020 and that the increases would be paid by retirees through premiums and out-of-pocket costs.
An IBM spokesman said Saturday that the change will affect about 110,000 retirees who are eligible for Medicare.
Under the change, IBM will make annual contributions to health-retirement accounts. Retirees would use the money to buy Medicare Advantage or supplemental Medigap policies through a private Medicare exchange.
The change affects medical, prescription drug, dental and vision coverage.
The company is meeting with retirees around the country to explain the change. About 1,300 retirees attended the first one last week in San Jose, Calif. The next is planned for Monday in Austin, Texas.
IBM acknowledged that “some retirees may be skeptical” about the changes. But it said the health exchange, Extend Health, will offer benefits not now available under IBM’s group plans and possibly at lower cost to retirees.
Spokesman Douglas Shelton said IBM capped health subsidies to retirees in the 1990s, and so higher costs would mostly lead to higher premiums and out-of-pocket costs for retirees.
Other large employers are also moving away from retiree health benefits. American Airlines parent AMR Corp., for example, is seeking approval for the change from a federal bankruptcy court judge.
A Kaiser Family Foundation report issued last month found that among companies with at least 200 workers, 28 percent that provide health benefits also offer retiree coverage.
The study’s authors said few large employers have turned over benefits for workers or retirees to private exchanges like Extend Health. But they said 29 percent of companies with at least 5,000 workers are considering it.
The authors said there could be “a significant change in the way that employers approach health benefits and the way employees get coverage, with employers playing a less active role.”

IBM Extend Health Insurance Offerings

I was able to get in touch with a friend of mine who worked at Dupont and asked him about his Extend Health (EH) selection of insurance plans.  I am really frustrated and disappointed with what he said.  It appears Extend Health will not be negotiating premium prices with insurance companies.  He said there was no premium price break in EH offerings. That means a medigap plan monthly premium will be exactly the same in the open market as via EH. I believe this premium pricing will be true for IBM employees as well.  Otherwise, Dupont would not be very happy that EH gives IBM retirees a better deal than Dupont employees! After all - isn't EH supposed to have the leverage of over 500,000 retirees to do insurance plan price negotiations. To put it succently - WTF.

So, the truth EH is nothing more than an insurance agent and an administrator of the IBM HRA accounts. 

Surely, IBM is paying EH to "support" us.  Seems to me we'd be better off by having IBM just give us the HRA money.  The reason they won't do that is I bet they are counting on a number of people not understanding the whole thing and leaving that money on the table.

I really have tried to not use this blog to blow off steam about IBM and will try to get back some of my composure for future postings.  But I have to say that this is truly a low blow by IBM.  Whatever happened to the company that had a conscious, that acknowledged that employees were the underpinning of its success.  Had it not been for hundreds of thousands of dedicated employees in the 1960s, 1970s, 1980s and particularly in the1990s- when we really held it together - there would be no IBM. 

OK - back to business.  YOU MUST find out what Medicare insurance plans cost in your zip code.  You do that by first going to www.medicare.gov to find out who will sell plans in your zip code.  Then you contact your state's health insurance assistance department aka your state SHIP and ask them for policy prices in your state. To find out how to contact your ship go to:  https://shiptalk.org/public/home.aspx?ReturnUrl=%2f.

DECIDE WHAT INSURANCE YOU WANT BEFORE YOU CALL EXTEND HEALTH IN OCTOBER.

I also think you should write to Dr. Rhee and tell him what you think of this switch to Extend Health: kyurhee@us.ibm.com

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.

IBM Medicare Extend Health Pre-Call Research

I was talking to a colleague today and he asked me why he had to fill out information about his doctors, the conditions he has or the drugs he takes in his profile before he talks to an advisor.  The truth is you don't need to provide any of that information.

The reason they want to know about your doctors is because they will look for Medicare Advantage private plans that have those doctors in the group when they are advising you.  So, that is information you only need to supply if you want them to talk to you about a Medicare Advantage plan.  The reason they want to know about your drugs is so they can look for a private insurance plan that will cover those drugs.

I highly recommend you decide before you make you call in October what structure of Medicare insurance you want. It will save you and the advisor from wasting time on products you don't want. So, let me remind you of a few things about Medicare.

1. Original Medicare is the federal government insurance pool and the federal government is the payer.  There are no networks and it is not zip code based.  If a doctor takes Medicare you can go to that doctor.  If you decide to spend time in different states during the year this is the best kind of insurance to have since you are covered where ever you go.  If you decide you want to go to a specialty clinic (like Sloan Kettering) - if the clinic takes Medicare you can go.  It is easy to remember your copays and deductibles.  They do not vary from service to service whether it is an ambulance ride or a visit to a specialty doctor.  Any part B procedure always has between a 20% and 35% copay depending on whether or not the doctor takes assignment.
2. Original Medicare copays and deductibles can be covered by secondary private insurance called medigaps.  If you buy a medigap you pay the insurance premium directly to the medigap insurance company.  Again, there is no network.  If the doctor takes Medicare then the doctor takes your medigap because the Medicare claim that is filed is automatically sent to the medigap insurance company. If you want a medigap plan decide what kind of medigap plan you want. The plan types are described on www.medicare.gov and they will tell you what insurance companies sell those plans.  There is also general info at the following link:  http://www.medicareinteractive.org/page2.php?topic=counselor&page=script&slide_id=231 
3. Original Medicare and medigaps do not include prescription drug coverage.  If you want prescription drug coverage that is another type of private insurance. Do list the drugs you take in your profile so your advisor can find a part D plan that covers those drugs.  If you don't buy prescription drug coverage and then decide some years later you actually should have there will be a penalty on the premium of 1% per month of the average premium for every month you were without insurance. Look on www.medicare.gov for part D plans in your zip code that cover your drugs so that you have a comparison to any part D plan offered by Extend Health.
4. Medicare Advantage plans are a substitute to original Medicare and are offered by private insurance companies but must conform to government rules.  If you use an MA plan that private insurance company becomes your payer.  There will  be a group of doctors associated with the plan and a doctor can decide at any time to not be part of the group. How much doctors charge depend on whether they are "in network" or "out of network" - for the latter your copay will be higher.   The plans are zip code based so you must use the doctors that are part of their group.  If you move to another area you must get a new MA plan. These plans must cover all the procedures that original Medicare covers but they can vary copays from service to service.  So, an ambulance ride might have a 50% copay. Most MA plans do not include use of specialty clinics. MA plans can also include prescription drug insurance. They might also require an additional premium over an above the part B premium you pay out of Social Security.  Look on www.medicare.gov to see what MA plans are sold in your zip code so that you have a comparison to plans offered by Extend Health.  Reminder - MA plans are sold by profit and loss institutions. The federal government insurance pool obviously is not. 

 Decide what insurance structure you want BEFORE you talk to an advisor.  It will save a lot of time and let the advisor focus on plans that fit the structure you want. Also, I highly recommend you directly pay any premiums to private insurance companies the old fashion way.  Don't let them suck money from you automatically because if you switch insurance policies from year to year you'll get a major headache trying to disconnect direct paying to the old company.

IBM Medicare Extend Health Transition Questions, Questions, Questions

I just created a list of questions for Extend Health and thought I would post them up as they might help you think about what you want to ask them as you begin to understand this change.  Also, I don't understand the HRA subsidy so ignore what I said in my last post.  I believe I am wrong about the premium subsidy going into the HRA because on page 9 of their brochure they imply that the SHAP process stays the same.  My questions so far are: 

1.       Are all the Extend Health plans traditional CMS Medicare plans that are currently in the marketplace? Will there be any unique offerings like the IBM secondary medical plan that only kicks in after $4000+ deductable?  That was not a CMS approved plan.

2.       There are no CMS approved plans for dental or vision insurance as separate plans.  Will these still be offered as separate insurance plans or is the only way to get this coverage going to be  through a Medicare Advantage plan?

3.       If the offerings are all traditional CMS plans are Medigap plans then subject to the same state rules as CMS Medigap plans?  Like not being able to switch Medigap plan types once you make a selection unless that plan type goes away.  Will Medigap plans be subject to state rules such as age rated and zip code rated premiums?

4.       Does Medigap ‘guaranteed right”  still apply even if someone only used the IBM’s prescription drug plan in 2013 and had no secondary insurance?

5.        Will there be any non-CMS structured offerings like IBM’s prescription drug offering that had no donut hole and capped at $3500 of pay out – e.g, it was a CMS qualified plan because it was creditable coverage but not at all structured like a CMS part D plan. If there are any such plans will they still be subject to the higher premium rule for higher income individuals?

6.       Your brochure (page 6) implies you will only be offering Medicare Advantage plans that include prescription drug insurance.  Is that true?

7.       Both my husband and I are IBM retirees.  Is there any financial advantage to us enrolling separately versus as husband and wife?

8.       If I don’t buy insurance through Extend Health in 2014 am I precluded from buying through the exchange in future years? I am not an Access Only retiree.  What is that?

9.       What is subsidized IBM group coverage?  My husband receives a Medicare part B premium subsidy and he gets reimbursed through SHAP reimbursement.  Your brochure implies (page 9) that the process will be the same and it is not part of the HRA process and subsidized coverage.  Is that correct?

10.    You say your current insurance pool covers about 500K users for the companies you serviced before IBM contracted with you.  What is the current typical wait time for them to get answers to their questions? When IBM retirees join the pool how big will the pool become and what is your anticipated typical wait time to accommodate that big an influx of people?

A Little More Information

I did a little research about private exchanges and urge you do do the same - I just used google and found several articles about how companies are moving to these exchanges. I also went online to extendhealth.com and created a profile, scheduled an appointment on October 1st. I tried looking at the plans that will be offered but that information won't be available until October! They will be sending me a BS enrollment guide now that I have built a profile but that will be a generic description of the types of plans that will be offered.

From everything I have read so far it appears that we will be offered the same type of plans that are in the general market place. If you look on page 6 of the big brochure you will receive you see the generic options. That probably means offerings like the IBM secondary plan of $0 with a $4000+ deductible or Aetna Integration A will be gone - there is nothing like that in the marketplace - certainly not at that price - unless IBM subsidizes such an offering ... it doesn't sound like that is their plan. I think what IBM is doing is paying Extend Health to be the total administrator for selecting plans from the marketplace and that Extend Health will have more negotiating power with insurance companies because they have a huge pool of people who are generally healthier even though they are old farts because they tend to be upper middle class so EH will get "better" premium prices than one can get from AARP, for example. The interesting thing is if we have a claim complaint we have to deal with the specific insurance company --- not Extended Health and IBM is now totally out of it.

There is also a lot about an "HRA". I think I know what that is and, once again, IBM is messing around with people.  I know someone who retired in 1996 and gets a subsidy to pay his part B medicare premiums. It caps at $800 and he has to file to receive it - the deadline to do so is one year later. Well, now that subsidy goes to an HRA account with Extend Health. In order to receive it one must be using Extend Health insurance plans (even though some people don't want to use IBM offerings) and the withdrawal claims must be done within the claim year. Shame on IBM! People who retired earlier than 1996 had an even better deal - and, of course, are older - so the likelihood that they will screw it up and IBM will not have to pay the money is even better!

I am also wary that if you decide not to use Extend Health or screw up and forget to sign up you lose this health benefit for the rest of your life. I don't know what "Access Only" retirees are but it applies to them - it is not clear if it applies to us. They are really messing with people because they know old people do screw up.

Several friends and I plan to meet in the next week or two and create a list of questions. Then we will each call the information number to ask the questions and compare our answers. Stay tuned!

Big changes coming to the IBM Medicare options in 2014

I don't have the package yet but someone sent me the following link:

 www.extendhealth.com/ibm

There is a video on the website that is worth watching but it is basically content free when it comes to details. 

They use the word "Exchange" in the description which is unfortunate because people will get confused that this is somehow related to the Affordable Care Act.  It is NOT.  What IBM is doing is basically offloading our health insurance benefits to a third party who then decides what options to offer to us and at what price based on whatever subsidy IBM pays them.  My guess is IBM will freeze or shrink that payment over the years so our insurance benefit will eventually offer not much. We don't know what the offerings are yet but there are a few big changes that I think I see but don't completely understand. 

It looks like we will be offered traditional Medigap policies.  That means they are subject to the state Medigap rules.  In some states there are pre-existing condition wait periods and/or if you didn't buy a Medigap when you first turned 65 you can never buy one.  There may be a "guaranteed right" issue that can be used to override the second condition.  I don't know.  There will also now be zip code based premiums for Medigaps.  That means that policies in New York will be more expensive than policies in, say, Ohio.  Also, if you get any kind of subsidy from IBM (e.g., part B premium payments) IBM will now put that money into an HRA and then you have to file claims against that HRA to access the money.

More to come - just wanted to give you an early warning. 

Here's my biggest fear for our future - the next thing IBM will offload is our pension plan ala what some other companies have done.  That means they will be converted into an insurance company annuity or will offer a deeply discounted lump sum payment.  So, any ERISA rules governing the pension no longer apply.

Buying a Medigap policy

Most IBM retirees use IBM secondary insurance instead of buying a medigap plan on the market.  However, some of you might decide to buy a medigap plan instead.  There are several reasons why you might do it.  I won't go into those reasons right now. 

Over the last several months I have helped a couple of friends pick a medigap plan and then they try to buy it.  Notice, I said try to buy it.  I just filed a complaint with the NYS Department of Insurance because it turns out that it is not easy always to get companies who are offering the plans to respond.

As I have mentioned in the past - there are at least ten varieties of medigap plans that are strictly defined by the federal government.  The plan types are identified by letters like K, L, F, A and so on.  There are some medigap plans that are "high deductible" meaning they don't kick in unless you are really sick.  The offset to those plans are low premiums.  For example, the medigap F high deductible plan has a $2010 annual deductible but the monthly premium can be as low as $50/month.  If you are healthy, you'll end up spending way less in premiums and that will offset the part A &B deductibles and part B copay bills you will pay.  It takes a lot of being sick to be worth paying a premium of, say,  $200/month to have immediate coverage.

There is absolutely NO difference between one insurance company's K plan and another company's K plan.  These plans are defined by law. There are no doctor networks associated with these plans.  They simply work as secondary to Medicare so if the doctor takes Medicare then the doctor takes the medigap plan.  That means the logical thing to do is to buy the cheapest offering in your zip code.  The premiums can vary as much as 200% from one company to another. How do you know who is the cheapest?  Sometimes your state's department of insurance has the rates.  New York State publishes the rates. How do you know who sells a policy in your zip code?  Either call 1-800-MEDICARE or go onto medicare.gov to find out.

Why did I file a complaint?  Because the insurance companies with the lowest premiums are very, very difficult to reach or insist you must be contacted by an insurance agent in order to buy the policy.  I know this will shock you - the agent will then try to up-sell you to a Medicare Advantage plan or a no deductible medigap plan.  Many times the insurance companies did not even return phone calls when the buyer insisted they wanted a high deductible medigap. In one case - the agent hung up on a buyer when she insisted she wanted an F+ plan.  Some insurance companies (like AARP United Healthcare) won't even sell a high deductible plan (which is perfectly legal) but won't tell you that you can get one - just not from them.  Why don't they sell the plan?  Because they don't make much money on it.

If you decide you want a high deductible medigap plan - be persistent.  If the insurance company with the lowest premium is not responding COMPLAIN to the state department of insurance that they are doing bait and switch selling.

ACA Insurance Pools and Medicare

Several people have asked me if they can participate in the ACA individual policy provider insurance pools instead of being on Medicare.  The short answer is no.  Once you are over 65 years old most private insurance companies do not want to sell you insurance unless it is a Medicare Advantage or a medigap policy.  If you can find a company that will see you an individual policy still be very wary of doing so as it is highly risky on two fronts.  First, they can drop you at any time and tell you to go onto Medicare. That often happens when you get really sick.  I know this because 65+ people think they can stay on COBRA plans when they are terminated because it is offered. The insurance companies take the premiums until they get sick and then say WHOOPS you are too old to be on this plan.  And you cannot just go onto Medicare whenever you want - you have to wait for an enrollment window to enroll. Second, you will pay a Medicare premium penalty of 10%/year for every year you are not on Medicare which is a forever penalty and is calculated using the current year Medicare premium.  That means, as yearly premiums go up so does the cost of your penalty.

As the ACA begins insurance pool implementation I predict there will be a lot of erroneous reporting.  Do a lot of fact checking before you believe what you read.