3M to dump retirees from medical coverage

Posted on October 5, 2010

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Remember when Barack Obama repeatedly promised that no one’s current coverage would have to change if Congress approved the health-care overhaul he demanded?  When the ObamaCare bill passed, the Associated Press suddenly discovered that the change of tax law that would supposedly generate billions of dollars to pay for the costs of the bill would also drive companies to dump retirees from their existing drug coverage and push them into Medicare.  Minnesota-based 3M became one of the first large corporations to do just that — and push retirees off of all their plans as well:

3M Co., citing new federal health laws, said Monday it won’t cover retirees with its corporate health-insurance plan starting in 2013.

Instead, the company will direct retirees to Medicare-backed insurance programs, and will provide reimbursement for that coverage. It’ll also reimburse retirees who are too young for Medicare; the company didn’t provide further details.

The company made the changes known in a memo to employees Friday; news of the move was reported in The Wall Street Journal and confirmed Monday by 3M spokeswoman Jackie Berry.

The ObamaCare bill created a fund to subsidize employers who didn’t dump their retirees, but the WSJ notes that it simply wasn’t enough to change the negative incentives created by the government interventions:

The changes won’t start to phase in until 2013. But they show how companies are beginning to respond to the new law, which should make it easier for people in their 50s and early-60s to find affordable policies on their own. While thousands of employers are tapping new funds from the law to keep retiree plans, 3M illustrates that others may not opt to retain such plans over the next few years. …

Democrats that crafted the legislation say they tried to incentivize companies to keep their retiree coverage intact, especially until 2014. The law creates a $5 billion fund for employers and unions to offset the cost of retiree health benefits. More than 2,000 entities, including many large public companies, have already been approved to submit claims for such reimbursement. 3M did not apply.

How did Democrats come up with the $5 billion figure for subsidies to protect retirees from losing their plans? From the looks of it, they simply made it up. They also didn’t do much calculation to determine whether the subsidies would actually incentivize employers into rejecting this strategy for cost savings. To some extent, they may not have been able to make that calculation, because thanks to the massive amount of ambiguity in the bill, no one can really say for sure what the future costs would be. And of course, that’s why 3M chose now to dump the retirees.

3m has 23,000 retirees, many of them likely to be living in Minnesota. They’re also likely to vote in the upcoming midterms, perhaps even more likely now than ever. That won’t be good news for House Democrats in the Minnesota delegation hoping to win a new term in four weeks.

via hot air

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Posted in: Healthcare