Deep Concerns Over GIC Insurance Costs

Association Initiative Would Lower Expense Cap

MAY 2015 VOICE: After five-years of low cost growth and medical inflation, retiree costs with the state’s Group Insurance Commission (GIC) are set to jump come July 1, 2015. The sharp increase in what some retirees will be forced to pay for healthcare has resulted in an Association legislative proposal seeking to lower the cap on out-of-pocket costs.

Medical inflation is largely viewed as the culprit behind the higher costs, with the price of medical care and prescription drugs once again on the rise. Costs had largely held steady since 2010, which was the last time the GIC voted to universally increase out-of-pocket costs.

FY16 cost increases are a separate and distinct issue from reports by our Association that centered on deficits from previous fiscal years. The FY15 deficit has been closed by a $190 million supplemental budget supported by Governor Charlie Baker and the legislative leadership.

The controversial vote to increase copayments and deductibles took place in February, with the majority of the GIC Commissioners voting in favor. Labor representatives and our Association opposed the increase, citing the obvious cost shifting onto members who can least afford to pay.

Then in March the Commission approved the GIC’s FY16 monthly premium contributions, with an average increase of 5.7% across all plans. Retirees enrolled in the Optional Medicare Extension (OME) plan will see their monthly premium rise $2.49 (90/10), $3.75 (85/15), $4.99 (80/20). The increased premium amounts represent an overall increase of 6.5%.

Members, not enrolled in Medicare but are enrolled in the GIC Indemnity Plan (UniCare), face a 4.3% increase. Harvard Pilgrim Independence clocks in at 9.2% and Tufts Navigator at 7.3%.

“We never want to see any of these costs go up, regardless of the reason why. And we can’t forget that these higher monthly premiums are on top of the higher copayments and deductible that were just approved last month,” says Association Legislative Director Shawn Duhamel. “Many retirees are going to have a hard time finding a way to pay these bills. Thankfully, most of our members are enrolled in the OME plan, where the dollar increase is modest compared to the other plans.”

Association officials also oppose Governor Baker’s plan to increase insurance premium contribution percentages for all active state employees and for those retiring on or after July 1, 2015. Current state retirees would remain grandfathered at the 10%, 15% or 20% rate that existed at the time of their retirement.

OPC: Great Concern

While periodic insurance premium increases can be expected, what Association officials find most troubling is the increase in copayments and deductibles, so-called out-of-pocket (OPC) costs.

Come July 1, non-Medicare retirees and active employees face a $300 per person annual deductible ($900 per family). The deductible for Medicare retirees remains at $35, as set by the federal government.

In addition, the GIC has increased prescription drug, office visit and other copayments.

In voting in favor of the increase in out-of-pocket costs, GIC officials pointed to the rising cost of healthcare as the driving force behind the decision. The GIC’s overall costs are expected to increase by some $160 million in FY16, driven largely by higher drug costs and the inability of some health plans to meet benchmarks set by the state’s cost containment law, Chapter 224, Act of 2012.

“Unlike past years when higher insurance utilization was truly the driving force behind cost increases, the culprit today is simply the cost of healthcare. In other words, it is due to the cost of the product increasing faster than anticipated,” says Association President Frank Valeri. “I understand that Massachusetts is the most expensive healthcare market in the country and likely the world. But that is not the fault of our members, many of whom are now going to struggle to pay higher out-of-pocket costs.

“More needs to be done to control prices and establish a reasonable cap on what any individual is required to pay out-of-pocket. In reality, these increases are a $60 million tax increase on public retirees and employees.”

Association Response

In response, the Association has called upon the legislature to provide relief to those retirees and employees with extraordinary OPC. Senator Jim Timilty (D-Walpole), Senate Chairman of the Joint Committee on Public Service, has filed Association-backed legislation that lowers the annual OPC cap to $2,500 per person or $5,000 per family.

“According to the GIC’s own reports, 10% of enrollees have OPC above the $2,500 threshold. For the average state retiree, with a pension in the $27,000 range, this presents an incredible financial hardship that we must address,” explains Duhamel. “Requiring those who are battling a severe illness or injury to shoulder the financial burden of our healthcare system is wrong.”

The bill is now pending before the Joint Committee on Public Service, while the overall issue of GIC financing is under review by the House and Senate Committees on Ways and Means.