Obamacare has struck again. Last week, 3M announced plans to drop health benefits for retirees, citing the new law’s impact as a contributor in its decision.
In 2013, 3M retirees who qualify for Medicare will lose their current employer-sponsored health benefits, and instead receive a health reimbursement account (HRA) with which to buy a Medicare plan.
In 2015, this policy will extend to all 3M retirees. Those who do not qualify for Medicare will be able to use their HRA to purchase a health plan in the new federally mandated insurance exchanges.
The Wall Street Journal reports that 3M claimed “the recently enacted health care reform law has fundamentally changed the health care insurance market.” The company added that cheaper options in the marketplace encouraged their decision. However, reports show that the new law will not curb health care costs. So while other options will be more affordable under the new law for employers and consumers, it’s not because they offer better value. Instead, a larger share of costs will be picked up by Washington, courtesy of federal taxpayers.
Several provisions in the legislation create incentives for employers to drop health benefits. In this case, it was likely the elimination of tax deductibility for federal subsidies for retiree prescription drug coverage, as 3M’s coverage elimination date coincides with enactment of this part of the bill.
Employer penalties offer another reason for businesses to drop health coverage. It’s more beneficial for employers with a large proportion of low-income workers to stop offering health benefits, but the success that Obamacare supporters claim hinges on employers continuing to offer current health benefits. Favorable cost projections for the overhaul also heavily rely on this assumption. Reality is likely to be quite different.
As more employers find it beneficial to end health coverage—former Congressional Budget Office Director Douglas Holtz-Eakin predicts will be the case—the cost of Obamacare for taxpayers will soar because of the growing reliance on government health programs and subsidies.
Technically, moving from employer-sponsored health benefits that offer defined benefits to defined-contribution HRAs is a positive change for 3M retirees. Defined contribution plans empower patients to choose the health plan that best meets their personal needs.
But in this case, the change is an unplanned consequence incompatible with system created by new law. To learn more about the right way to create a defined contribution system, check out “Utah’s Defined-Contribution Option: Patient-Centered Health Care.”
This was something the democratic powers that be have been pushing for since the 50's and possibly before that. The timing was the perfect storm for the democratic party they got their prize. Rather than focus on the employment problems and housing concerns they chose to throw their eggs in one basket their basket. Claiming that it had to do with jobs also and that it would create jobs……. The reality of these changes is starting to reveal itself. I have worked my whole life and to what end? The government now controls my destiny, I am no longer free to choose my path.
In East Tennessee, Eastman Chemical Inc.,a couple of years ago, dropped it's access to retiree healthcare and contributed a set amount for each retiree in an HSA to purchase a medicare supplement or advantage plan through Extend Health Inc. Our BCBST Blue Diamond Medicare Advantage Plan which went up l7% in 2009, will now go up another 29% in 2011. The Out of Pocket limit has almost doubled, co-pays have mostly doubled on doctor visits and other services. I'm grateful that we can still pay this, but since the HSA figure is frozen, as inflation and inevitable increases occur, we may not be able to keep up with it going forward. People did not heed the warnings about this! Obamacare seeks to gradually cut back services for people as they age to give them to all the uninsured. We stayed with companies throughout our careers because of the security offered to us when we retired. The minute we retired, they broke their promises and threw us out on our own. We planned for retirement based on their promises. Now we will suffer the consequences. Retirement planning guidelines need to be changed!