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Retiree health plans taking hits

– America’s biggest employers, from GE to IBM, are increasingly moving retirees to insurance exchanges where they select their own health plans, a historic shift that could push more costs onto U.S. taxpayers.

Time Warner Cable Inc. on Sunday said it would steer retired workers toward a privately run exchange, days after a similar announcement by IBM Corp. General Electric Co. last year said it, too, would curb benefits in a move that may send some former employees to the public insurance exchanges created under the 2010 Affordable Care Act.

While retiree health benefits have been shrinking for years, the newest cutbacks may quickly become the norm. About 44 percent of companies plan to stop administering health plans for their former workers over the next two years, a survey last month by consultant Towers Watson & Co. found. Retirees are concerned their costs may rise, while analysts predict benefits will decline in some cases.

“Things are going to change dramatically,” said Ron Fontanetta, a partner at New York-based Towers Watson, which advises GE and other large companies. “Over the next two to three years, we see a much more aggressive rethinking of what employers are going to provide.”

The adjustments come as insurers have increased access the past few years to Medicare Advantage plans that provide benefits beyond the U.S. government health program for the elderly. Additionally, the health-care law promises to make it easier for those younger than 65 to buy insurance that’s guaranteed and subsidized by taxpayers.

Retiree coverage has been dwindling since the early 1990s, as health-care costs increased and changes to accounting standards forced companies to declare future health-care liabilities. Only about half of large employers still provide the benefit, a decrease from 80 percent two decades ago, Aon Hewitt’s Grosso said.

Already, many companies exclude new hires from retiree benefits and cap contributions to covered retirees, said Paul Fronstin, a researcher at the nonprofit Employee Benefits Research Institute in Washington. At the unionized or public-sector employers where the benefits are more common, “they’re dealing with the same cost pressures,” he said.

General Electric said last year that it would close its retiree plan to new entrants starting Jan. 1, 2015. The Fairfield, Conn.-based company has established a call-in line and other resources for former workers who’ll be buying their own insurance after that point, said Seth Martin, a spokesman.

“We continuously assess our benefit programs to strike a balance among employees, retirees, investors and our ability to compete,” Martin said by email.

The change hasn’t come without controversy. Retirees feel GE “stripped them of something of substantial value that they believed they earned,” Dennis Rocheleau, 71, a former GE labor negotiator, wrote last year in a letter to the company’s board.