Some Company Retirees Can't Keep Their Health Care Plan After All

COMMENTARY Health Care Reform

Some Company Retirees Can't Keep Their Health Care Plan After All

Oct 13th, 2010 3 min read

Policy Analyst, National Security

Tina Korbe chronicles wasteful spending and other abuses of an expanding federal...

Late last month global consulting firm Towers Watson started sending its retirees scary notices that their health-care premiums were about to go up substantially. Some retirees point to Obamacare as the source of their woes, and even the company warns that “health care reform may affect the future of all retiree medical coverage.”

Retirees such as Joan Mitchell said the change could be devastating. She’s 75 years old and her husband, George, a retiree of Sun Oil Co., is 84. The two live on fixed incomes.

“We live within our means,” Mitchell said. “This could affect our means.”

Mitchell worked for Towers Perrin, a precursor to Towers Watson, for 22 years. She started as an executive secretary and eventually became an internal consultant with a staff of 20 people.

Towers Watson, which employs 14,000 associates, currently subsidizes the cost of retiree medical and dental coverage by contributing a fixed percentage of premiums -- but, as of Jan. 1, 2012, it will cap its contributions at a set dollar amount.

The change ultimately means retirees will pay more for medical care starting in 2013, while the company’s share will remain the same.

For example, if the monthly premium for a retiree is $250 and Towers Watson’s subsidy is 70 percent, the company would contribute $175 a month and the retiree would pay $75. If that premium increased to $300 in 2013, Towers Watson would continue to pay $175 per month and the retiree’s cost would increase to $125, reflecting the $50 premium increase.

Just why the company decided to change its plan now is unclear -- but Mitchell said she thinks it’s a response to Obamacare.

“Well, we know why,” she said. “It’s because of what’s happening in Washington.”

The company, which confirmed the policy change, disputed the assertion that it’s directly related to Obamacare.

“It really was not the sole driver behind our decision,” said Lisa Swatland, global leader in external communications and media relations for Towers Watson. “The policy has changed, but health care reform was not the driver … We had a merger, as you may know, so we were aligning our company benefits and taking a look at a lot of different things because we had to bring the two together.”

Mitchell was troubled by the notice not only because of the adjustment it did include, but also because it hinted at changes to come. In it, Towers Watson reserves the right “to make further changes to [retiree] benefits, including increasing the cost of coverage or eliminating coverage entirely. Also note that that (sic) health care reform may affect the future of all retiree medical coverage.” Mitchell’s been relatively healthy, she said, but last year she had to have a stent placed in her heart.

“I’m getting older now, and I was very happy to have the kind of coverage that I had,” she said. “When I got this letter, I thought, ‘What if I have to do something like this again and they drop my coverage? At our age, where would we even get coverage?”

Mitchell’s not the only retiree who’s concerned.

Albert Hill worked for the firm in finance for nearly 20 years, and his wife, Mary, worked for the company for about 30 years and is now on the company’s long-term disability plan. Hill won’t be immediately affected by the change -- he’s currently covered as a dependent under his wife’s insurance -- but, while his wife is considered an active employee now, she’ll eventually retire and the policy change will hit them hard at that point. Hill has no question it’s connected to Obamacare.

“Personally, I think it’s intrinsically linked into that, especially with some of the surveys Towers Watson has done right after the bill was signed,” he said.

One such Towers Watson survey, for example, revealed a majority of employers anticipate that health care reform will increase their organization’s health benefit costs. Some 88 percent of respondents plan to pass on the increase to employees and 74 percent plan to reduce health benefits and programs, according to the survey.

Towers Watson might have conducted that research, but Swatland maintained that Obamacare does not entirely account for the policy adjustment,

But as Hill put it, “It almost states that it’s linked in with health care. If it’s not linked in, why even bring it up?”

The question of what really did motivate the firm has sparked fierce online debate among retirees. The manner in which Towers Watson notified retirees has also raised eyebrows.

Towers Watson, which advises other organizations in the areas of employee benefits, talent management, rewards and risk and capital management, didn’t follow its own guidance about the importance of internal communication, retirees said. A notice one day simply appeared in their mailboxes, undated and unsigned -- and it wasn’t even on company letterhead.

“It looks like somebody just ran [it] off on a Xerox machine,” Mitchell said. “‘Subject: Retiree Medical Cost Sharing.’ How cold can you get?”

Tina Korbe is a reporter in the Center for Media and Public Policy at The Heritage Foundation.

First appeared in The Examiner

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