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.

“Cost increases under our current retirement group health care plan are no longer sustainable for you,” IBM said in the notices. “Health care costs under IBM’s current plan options for Medicare eligible retirees will nearly triple by 2020, significantly impacting your premium and out of pocket costs,” the notice said.

Exchanges such as Extend Health generally present policies from a range of insurers and let participants choose what best meets their needs and budgets. The aim is to create competition that keeps costs down.

Instead of subsidizing retiree health premiums directly, IBM will give retirees an annual contribution via a health retirement account that they can use to buy Medicare Advantage plans and supplemental Medicare policies on the exchange, as well as pay for other medical expenses. Retirees who don’t enroll in a plan through Extend Health won’t receive the subsidy.