Medicare Extension Costs Drop

MAY 2009 VOICE: A glimmer of good news has come to public retirees and employees who are insured under the state-run Group Insurance Commission (GIC). Once again the GIC has come in with insurance rates that are well below state and national averages.

Although the average insurance premium increase hovers between 5-6%, the average GIC increase across all ten plans for Fiscal-Year 2010 is 3.1%. However, premiums for all but one of the state’s Medicare plans will drop on July 1.

The monthly premiums of state retirees are determined based on one’s retirement date. Those retiring before July 1, 1994 contribute 10%, while those retiring on July 1, 1994 to the present, contribute 15% of the insurance premium.

State retirees, insured under the Optional Medicare Extension (OME) plan, will pay $45.39 (10%) and $62.79 respectively. Retired Municipal Teachers (RMT), who are among the 68 school districts insured under the GIC, will pay $45.24. Indemnity plan rates, as shown here, include the optional Catastrophic Illness Coverage (CIC).

Under the non Medicare UniCare Basic (Indemnity Plan), retirees see a slight increase of 2.3% in their monthly premium. In 2008, approximately 27,588 state retirees, RMTs and active employees belonged to the non Medicare UniCare Basic plan. But, the overwhelming majority of Medicare retirees and RMTs, some 52,220, belong to the OME plan.

In total, the GIC insures over 289,000 lives, excluding RMTs and municipal retirees/employees. Of that number, 101,000 are enrolled in either the Medicare or Basic Indemnity Plan. Roughly 157,000 are enrolled in PPO-type plans, with the remaining 31,000 belonging to an HMO.

Tufts and Harvard Pilgrim remain the most popular alternatives to the UniCare Indemnity plans, with 6,117 and 2,721 retirees enrolled respectively. Harvard’s rates came in below the GIC average at 2.9% for their basic plans, with a decrease of -1.3% for their nation-wide Medicare Independence plan.

“Given all of the bad news surrounding the economy, the fact that most members will see a slight decrease in their monthly insurance premium is very good news. The fact that the GIC continues to beat the national averages is very impressive,” said Association President Ralph White. “It is also important to point out that the GIC has kept costs down without cutting benefits or limiting choice. Of course, we are concerned about out of pocket costs, which are going up. That isn’t going to be easy for many members to swallow.”

Copayments On The Rise

While receiving overall welcome news about monthly premiums and plan design, Association officials are concerned about increases in so-called out of pocket costs. Following national trends in healthcare, GIC officials have chosen to offset higher insurance premiums by raising certain copayments and deductibles.

In an effort to further standardize copayments and deductibles across all GIC plans, the Commission has announced the first increase in prescription drug copayments in seven years. For the first time, Medicare and non Medicare retirees will also face copayments for radiology tests, along with a higher non admittance emergency room copayment.

Active employees and non Medicare retirees will also face higher copayments for office visits, outpatient surgery, inpatient hospital stays, and further tiered services. In total, the GIC anticipates generating over $41 million in savings by passing costs onto retirees and employees.

“I think a combination of copayment and premium increases are an appropriate mix to combat higher insurance costs. That said, I am concerned about the impact of higher out of pocket costs on our members,” explained GIC Executive Director Dolores Mitchell. “We are at the higher end of the scale for government sponsored plans, but lower than most private sector plans.”

“With the majority of our members on Medicare, they will escape most of the copayment increases. But anyone visiting the pharmacy will feel the impact of higher prescription drug payments,” said Association Legislative Liaison Shawn Duhamel. “After seven years, the costs were bound to go up, but that does not make it any easier on retirees who may be on multiple prescriptions.
“The $19 million the state is going to save by increasing prescription copayments is money coming directly out of retirees’ and employees’ pockets.”

Local Costs Set

Come July 1, over 30,000 retired and active local employees will be insured under the plans offered by the state’s GIC. These enrollees will have access to the same insurance plans and healthcare benefits as state retirees and employees. While the total premium charged by the GIC to the city or town is the same, local entities have individually negotiated the premium contribution with local retirees and employees through the coalition bargaining process (Section 19).

As members may recall, municipalities and other local government entities can now choose to join the state GIC by using the coalition bargaining process. Under this system, the local government negotiates with the local employees and retirees as one group, called a Public Employee Committee (PEC). Retirees have an automatic 10% weighted vote, with 70% of the PEC members being required to vote in the affirmative for the switch to the state plan to go forward.

To date seventeen municipalities, along with another dozen school districts and other entities, have voted to join the GIC. The approval process, which must be complete by October of each year, triggers enrollment in the GIC-sponsored plans the following July. Once entering the GIC, a local entity must remain in the state plan for a minimum of 3 years.

While the PEC agreement dictates the premium contribution split for each community, GIC officials control plan design and set all copayments and deductibles, which are then uniform for all enrollees across each plan.

Contained in the chart on page 11, are the total cost of each insurance plan for municipal systems. The actual cost per enrollee is determined locally under the provisions agreed upon in the PEC agreement. That agreement, then becomes a contract between the community and retirees/employees.