Duke Energy Corp. is joining a growing list of corporations scrapping long-held practices of providing retirees with health insurance and giving former workers a fixed amount to buy their own supplement to Medicare coverage.
The country's largest electric company last week began notifying about 14,500 retirees of Duke Energy and predecessors or subsidiaries in North Carolina, South Carolina, Florida, Ohio, Indiana and Kentucky, The News & Observer of Raleigh reported Wednesday. The retirees previously worked for Duke Energy, Progress Energy, Carolina Power & Light, Cinergy, Florida Progress and others, and the changes apply to all Duke retirees except union members in Florida.
In a letter, the company told retirees it had observed double-digit annual increases in the cost of their health coverage.
"We are therefore announcing a change in the way retirees age 65 or older can purchase health coverage that we believe provides more plan options and better value," the company wrote.
Duke Energy plans to release details later, but retirees won't get the company's stipend unless they buy coverage from UnitedHealthcare for policies that take effect in January.
The move affects not only retirees ages 65 and older but also their spouses and dependents ages 65 and older who receive retirement benefits from the company or any of its predecessors or subsidiaries in six states.
The retirees will not have the option of buying subsidized coverage under the national health care overhaul law because they already get insurance through Medicare.
IBM, Time Warner, Caterpillar, General Electric, DuPont and others have made similar announcements. More companies are expected to follow the trend of offloading retirees from the company's responsibilities.
The primary benefit motivating the move is lower costs as businesses seek ways to manage runaway health care bills, said Skip Woody, a health care benefits expert at Hill, Chesson & Woody in Durham.
"The stipend can be a fixed amount, not escalating year to year," Woody said. "You can freeze the cost at what it is today."
Duke Energy is assuring retirees their options will be better as a result of the changes. Retirees currently choose from among several plans but will have more options from UnitedHealthcare, Duke spokesman Dave Scanzoni said.
The retirees' health care stipend in 2014 will be the same as the company's contribution to retiree health plans this year, Scanzoni said.