And So It Begins: IBM to move about 110,000 Retirees Off it's company sponsored Health Plan

International Business Machines Corp. plans to move about 110,000 retirees off its company-sponsored health plan and instead give them a payment to buy coverage on a health-insurance exchange, in a sign that even big, well-capitalized employers aren't likely to keep providing the once-common benefits as medical costs continue to rise. 

The move, which will affect all IBM retirees once they become eligible for Medicare, will relieve the technology company of the responsibility of managing retirement health-care benefits. IBM said the growing cost of care makes its current plan unsustainable without big premium increases. 

IBM's shift is an indication that health-insurance marketplaces, similar to the public exchanges proposed under President Barack Obama's health-care overhaul, will play a bigger role as companies move coverage down the path taken by many pensions, paying employees and retirees a fixed sum to manage their own care. 

In notices signed by Chief Health Director Kyu Rhee, IBM has told retirees in recent weeks that to keep receiving coverage, they will need to pick a plan offered through Extend Health, a large private Medicare exchange run by New York-based Towers Watson & Co. 

Medicare is the federally administered system of health insurance for people age 65 and over, and the disabled. Some people buy Medicare Advantage plans, administered by private insurers, and others buy policies to cover gaps in Medicare coverage. 

IBM told retirees that its current retiree coverage will end for Medicare-eligible retirees after Dec. 31, 2013, according to documents reviewed by The Wall Street Journal and confirmed by IBM.

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