IBM health benefits blackout leaves retirees footing the bill

Medical payments expected to resume ... soon?

IBM retirees have been forced to pay for some medical expenses out of their own pockets as a result of the IT giant's handling of their healthcare funding.

Meanwhile, a large sum of cash remains in limbo.

It all started when IBM began transferring the management of retirees' snappily named health reimbursement arrangement (HRA) accounts from Via Benefits to Optum Financial.

To recap: last September, IBM announced changes to its benefits program. It sold some of its pension obligations to Prudential and MetLife, reworked its 401(k) plan, and transitioned medical coverage for Medicare-eligible IBM retirees to a new IBM-sponsored Group Medicare Advantage program administered by UnitedHealthcare, starting on January 1, 2023.

To motivate former employees to trade their former health coverage for UnitedHealthcare's privatized version of Medicare, IBM said it would withhold retiree HRA funds for those who retained their legacy healthcare plans. In effect, ex-IBMers had to transfer or be locked out of healthcare subsidies.

A former IBM employee told The Register he was glad he refused to switch, despite losing access to his HRA funds, citing $50,000 in recent expenses covered without hassle by his original IBM health plan and Medicare Supplement Plan G.

But then, the HRA funds were never really his.

HRA subsidies are intended to supplement existing health insurance by paying for expenses not normally covered. They're classified by the company as "notional" – which is to say, they exist only in theory.

"There are no actual funds held in your name, and the account is not portable," the Optum website for IBM benefits explained. "When the time comes to pay benefits on your behalf, the money comes out of the Plan Trust or IBM's operating funds."

Former Big Blue employees are now wondering what's become of these notional funds – and why it is taking so long to make them available – when the money is presumably sitting within IBM, awaiting dispersal by its designated agent Optum.

Folks were forced to draw from their personal accounts to make required premiums and prescription copays

"IBM and the companies that it has contracted with to administer their retiree's health reimbursement accounts have dropped the ball," a second former IBM employee said in an email on Thursday to The Register. "They have failed to complete the transfer of funds to Optum Financial HRAs by January 1, 2023.

"When they missed that deadline, folks were forced to draw from their personal accounts to make required premiums and prescription copays. When contacted employees were told that the funds would be transferred by February 1, 2023, this proved to be false as well. Therefore another month of expenses had to be drawn from personal savings."

A third former employee told The Register in January that retiree HRA accounts with Via Benefits closed on January 13, 2023, and said Optum accounts would be funded by February 3, 2023. That hasn't happened yet.

Optum's website presently displays a deadline of January 13, 2023 to submit claims for reimbursement from 2022 and declares a blackout for processing new claims from January 14, 2023, through February 17, 2023.

The retiree who wrote to us on Thursday said while funds are supposed to be available by February 17, Optum accounts might not be accessible until the end of the month, citing a discussion with an Optum representative. And Via Benefits doesn't have the funds either.

"I contacted Via Benefits who administered these Future Health Accounts previously (and faithfully) and they claim that the monies left their hands on December 31, 2022 and know nothing more," he said.

Steve Bergeron, a former IBM employee who has been trying to rally other retirees to support a petition to restore IBM's former health plans, told The Register in a phone interview that HRA account holders used to be able to submit claims for health expenses to Via Benefits and receive reimbursement in five to ten days.

"Now that we've changed to Optum, everybody is thinking, 'Why would it take IBM so long to do the HRA conversions and to get the money active?'" he said. "The money is still, today, not active."

That is to say, IBM retirees checking their Optum HRA accounts presently see a balance of zero.

Bergeron said he expects this affects retirees under financial constraints.

"There are some people on fixed incomes who, you know, may have more aggressive relationships in accounts receivables or payables with their physician and their hospitals," he said. "And they have not been able to pay those bills because in some cases they can't afford to pay."

Those with greater financial resources we're told have charged insurance premiums and medical bills on credit cards with the expectation they will be able to seek reimbursement from Optum eventually.

Our first retired IBM source said, "For some, I expect the lack of reimbursements could be problematic, as some retirees live on social security and/or from pension check to check, along with drawing down other resources. This is yet another burden impacting retirees who have given the better part of their lives, loyally, to IBM."

Our second IBM retiree speculated that the lack of Optum HRA funds affects somewhere between 75,000 and 100,000 former employees. Bergeron, however, disputed that figure. "We do not know that number," he said. "What we do know is IBM sold 100,000 pensions to MetLife and to Prudential."

If the HRA balances revealed by Bergeron and others are typical – $35,000 to $45,000 – it may be that IBM is sitting on several billion dollars in HRA funds. With any luck, come February 17, company retirees will once again be able to recover their out-of-pocket expenses – and will receive monthly interest credits for the transition period.

"The transfer of IBM retiree HRA balances to Optum Financial is proceeding as per plan, with the balances expected to be available to eligible members on or before February 17, 2023," an Optum spokesperson told The Register in an email.

"The blackout dates are an industry standard approach when completing a transition of this nature and allow time for prior claims to be processed and ensure that balances being transitioned to the new administrator are current and accurate. This can take up to 30 days.

"For IBM participants with an HRA/FHA balance, monthly interest for January and February will be applied. Participants will be able to view their monthly interest credits when their HRA balance becomes available after the blackout period."

IBM is also fighting a lawsuit alleging a separate effort to shortchange pensioners. Knight v. International Business Machines Corporation, et al., filed in June 2022, alleges the IBM Personal Pension Plan relies on outdated mortality tables to value annuity payments in a way that results in married retirees receiving less than they should under the law.

IBM did not respond to a request for comment. ®