3M to end retirees' health plan

3M Co. said it will soon stop offering its company health insurance plan to retirees, giving them a sum of money to shop and buy insurance on the open market instead.

The Maplewood-based maker of Post-it Notes and Scotch Tape said it is making the change in response to the new health reform law.

"Health care options in the market under the health care reform law became better," said spokeswoman Jackie Berry, adding that taking retirees off the 3M group plan would save money for both 3M and retirees.

The move is part of a longer-term trend by employers to get a grip on the ballooning costs of retiree benefits. Most employers already have done away with the rich pension plans of the past and switched to 401(k) plans, under which they limit their exposure to future costs.

3M may be one of the first large employers to take this step in response to health reform, but it's not likely to be the last.

"I suspect they're ahead of the game in terms of arriving at this decision," said Henry Van Dellen, who heads the health and benefits practice at Aon Consulting. "Practically speaking, this likely will happen with a lot of employers."

3M retirees started receiving letters about the changes last Friday.

In 2008, 3M announced changes to its pension program, changing it from a defined-benefit plan to a defined-contribution plan. It also changed its retiree medical plan so retirees would get an account with a credit they could use to buy into the 3M group plan.

Those changes took place in 2009.

The changes announced last Friday build on those changes. Starting Jan. 1, 2013, 3M retirees eligible for Medicare will get a health reimbursement arrangement: an account with credit in it to buy a Medicare supplement plan or a prescription drug plan.

Heading for the open market

Starting Jan. 1, 2015, retirees not eligible for Medicare will also get a retiree health reimbursement arrangement to buy an individual insurance plan on the open market.

The law gradually closes the much-criticized doughnut hole in Medicare prescription drug coverage, which forced many consumers to pay several thousand dollars out-of-pocket.

Also, under the law, insurers will be required to take all comers starting in 2014, regardless of medical condition, and most Americans will be required to buy insurance. The law also sets up health insurance exchanges that year for consumers to shop for insurance.

Meanwhile, some employer tax perks will go away.

"This makes it more difficult for employers like 3M to provide their own employer-sponsored retiree group medical plans that are as competitively priced as those available in the Medicare marketplace," Berry said.

"In addition, the Retiree Drug Subsidy will no longer be tax-free."

For most 3M retirees, it will be the first time they've ever had to shop for a health plan and contract directly with an insurer. In the past, they simply checked a box each year.

Rita Horne, 73, whose husband Einer Horne worked 33 years at 3M, was not pleased to receive the letter.

"I got to tell you, I would like to take Congress and wring their necks," said Horne, of Hudson, Wis. "They've taken a very satisfactory and good health insurance program and going to I don't know what."

Horne said she already had e-mailed complaints to her elected representative.

Her husband, 75, who's had cancer and open-heart surgery, said he knew this day would come ever since "Obama passed Obamacare."

Will the new plan save money for him? Horne laughed: "I have no idea."

Art Fry, 79, one of two scientists who invented Post-it Notes, had just picked up the envelope from his former employer Monday afternoon at his Maplewood home. Describing it as "not quite the size of the New Testament," Fry said he hadn't had a chance to read it yet.

"I'm the trusting sort," he said. "3M is always taking care of my needs, so I will look to see what they recommend."