GIC EYES RARE MID-YEAR INSURANCE CHANGES

December 1, 2008: Following a $32 million budget cut, officials with the state’s Group Insurance Commission (GIC) are grappling with the possibility of mid-year changes to the 16 insurance plans offered through the agency.

With the economic recession causing a sudden and severe drop in state tax revenue, the governor was forced to use his so-called “9C” powers to cut $1 billion from the current state budget in October. The GIC’s FY’09 budget, which totals nearly $1 billion, was reduced by $32 million resulting in the shortfall. In addition to cuts in most state agencies, 1,000 state employees were laid off.

Along with the budget reduction, the governor filed legislation that would increase the insurance premiums paid by active state employees. Under the governor’s plan, the rates of active state employees would be graduated or tiered in three levels, depending on salary.

Workers with annual salaries less than $35,000 would contribute 15%, between $35,000 and $50,000 contribute 20%, and above $50,0000 would contribute 25% toward their GIC insurance. This proposal, which was also made by the governor in House 1 (FY’09 budget recommendation), was rejected by the Legislature last spring.

“At the present time, there does not seem to be an appetite within the Legislature to reconvene and take up the governor’s proposal. Things may change as the end of the session approaches, or it could be addressed in early January in the new session,” said Association President Ralph White. “There has also been hope that the economy will stabilize and revenues rebound. That does not appear to be the case.”

Copayments and Deductibles

At its November 21 meeting, the GIC spent considerable time addressing the budget cuts and examining potential solutions to the problem. GIC officials have recommended that increasing the premiums of active employees, on a graduated scale, is the best available option.

However, GIC Executive Director Dolores Mitchell made it clear that if the Legislature does not act on an alternative plan (ie. raising premium contributions) by January, then the Commission would have no choice but to sharply increase copayments and deductibles on all GIC enrollees, including retirees and municipal workers.

“We must face up to the realities that we are living in,” said Mitchell, in reference to the extreme economic downturn and resulting budget cuts. “It is illegal for us to spend money that we know we don’t have.”

Beyond a quick economic turnaround or raising insurance premium contributions, the only other short-term option GIC officials have to cover budget shortfalls is increasing copayments and deductibles. However, it was also pointed out by Mitchell and several of the Commissioners that it would be unfair to balance the agency’s budget on the backs of those needing to use the insurance, namely retirees and employees who are sick or injured.

“Worse case scenario is doubling the copayments and deductibles across the board,” continued Mitchell. “This is not fair to our members, who are already paying a lot of money for their premiums and copayments. We’ve told the governor and the Legislature that the fairest thing to do is raise premiums (on active employees).”

The GIC already has higher copayments and deductibles than most other plans across Massachusetts. Association officials have been critical of the GIC’s three-tier prescription drug copayment plan, which currently charges $7 (generic), $20 (preferred name-brand), and $40 (non-preferred name brand) for retail drugs for the Medicare supplement OME plan, under which the majority of retirees are insured. Mail order is $14, $40 and $90 respectively for a 90-day supply.

The non-Medicare Unicare State Indemnity Plan is already utilizing a number of cost saving measures, that include tiered copayments for office visits, a $200 deductible for inpatient hospital care, and a $100 outpatient surgery deductible.

“We also can’t forget that Medicare retirees are paying for their entire Part B premium on their own. That’s another $96.40 coming out of our member’s pockets each month,” said Association Legislative Liaison Shawn Duhamel.

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