Health insurance increase 265%

[Katsmeow]

We have subsidized retiree health insurance from DH's megacorp that he retired from a couple of years ago. I just received the benefits retirement folder for next year. The premium for the kids and I (DH just moved to medicare) has gone up 265% from 180 a month to around $478. This is for the low premium plan with a $3000 deductible. The company will only absorb premium increases of up to 5% so the rest is on us. Last year they got the funds from the federal government so there was no increase.

Anyway, I was totally shocked by the huge increase. It is somewhat subsidized (would be almost double if it wasn't subsidized) but just more of an increase than I was expecting.

This is on top of the fact that our medical already went up hugely by DH going on medicare.

 

[Alan]

Sorry to hear that Kats.

Ours went up by 266% in 2011 the year after I'd retired. It had been unchanged for several years before that. I'll be receiving the 2013 prices soon and have no idea where they will go.


Correction, I have a good idea that they won't be going down.

 

[Katsmeow]

Yes. I guess my post is not really a complaint by the way. We are fortunate to have subsidized retiree and family coverage at all. Just surprised that the increase was so huge...

 

[Animorph]

It's that subsidized part that kills you. It's like a leveraged ETF. You pay a fraction of the value but see (almost) all the volatility.

Still, that's quite a jump.

 

[Sue J]

We are also using subsidized retiree health insurance through DH's pension plan. When he retired in 2010 we had 3 options for levels of insurance and we chose the lower cost with a higher deductible. Our subsidies were based on the premium for the top level, most expensive, plan so by taking the lower cost plan we had no additional costs, the subsidy covered both of our costs. Sweet!

Now for 2013 they have stopped offering the lower cost plan that we loved. The subsidy stays the same but the cost for the only plan offered, the top level/low deductible plan is $200 more for each of us. So for 2013 $400/month will be deducted from DHs monthly pension payment.

That is a huge hit to the budget! We expected the cost of insurance to go up every year but never thought they would stop offering the lower cost plan that we loved.

In the big picture, $400/month for the 2 of us for an excellent insurance plan with low deductibles and low co-pays is a very good deal. The stinger is that the subsidy used to cover our cost and now the cost has outpaced the subsidy because of the plan change.

Coming up in 2015 the change is that they are reducing the subsidy for the retiree (DH) and transitioning to NO SUBSIDY for the spouses. Just for me the cost will increase by $175/mo each year until I pay the entire premium (currently $814) and then in 2019 spouses will no longer have access to the insurance at all.

They can do all this because the health care insurance is not mandated, was never promised and is not guaranteed. It's been provided since the early 1970's and now they decided that they can't afford to provide for the spouses, only the retirees.

I know from reading here that many of the posters pay full price for individual insurance. I know we've had a very good deal. But that's one problem with retiree insurance. They can change the rules when they want to and your only option is to go get insurance on your own. Another issue is that retiree health insurance means your group is mostly 55 years old or older, a very expensive group to insure.

 

[sheehs1]

Wow ...quite a jump.! I pay $392 a month for just myself with a $3500 deductible. My husband pays over $500 a month with a $1,500 deductible. He's changing it to $3,500.
Mine was a nominal change last year but this year it went up 20%. No where near your increase but I'm sure it's coming.

BTW both of ours are private plans.

i'm 57. Talked with a person I know in the grocery store the other day who is my age. She and her husband pay $2,400 a month because they both have medical issues like diabetes and such.

 

[W2R]

The premium for the kids and I (DH just moved to medicare) has gone up 265% from 180 a month to around $478. This is for the low premium plan with a $3000 deductible.

This increase is quite a financial blow, whether your health insurance was subsidized or not. I am shocked too, and sorry that you are experiencing this.

the cost for the only plan offered, the top level/low deductible plan is $200 more for each of us. So for 2013 $400/month will be deducted from DHs monthly pension payment.

Ouch. It sounds like as big a blow for you as for Katsmeow. Ugh.

 

[bbbamI]

I hold my breath each time our enrollment (retiree medical benefits from Megacorp) begins for the new year. Our premiums did not increase, but the deductible rose $100 (from $2400 to $2500). Where they used to pay 90% of most types of expenses, it's now 80%.

Fortunately, the max-out-of-pocket has not increased.

I'm relieved we have insurance...especially after last year's adventure.

 

[JoeWras]

I know from reading here that many of the posters pay full price for individual insurance. I know we've had a very good deal. But that's one problem with retiree insurance. They can change the rules when they want to and your only option is to go get insurance on your own. Another issue is that retiree health insurance means your group is mostly 55 years old or older, a very expensive group to insure.

The lesson for everyone here is to just be very aware of this fluid situation. If you have a really good plan, consider what you would do if it was changed. Be aware of scenarios. Have a backup plan.

I have some friends who currently are early retired with a state plan that pays 100% of the premium, they only have copay and coinsurance. This may not last forever, although they are confident it will due to politics. Don't be so sure!

Your other point about the group plans and age is good. I think this is partly what causes my Megacorp's group plan to be so expensive. This plan is not subsidized, but also has no qualifications (except age and years of service). Still, for 1 person it is $600 per month, $1500 for family, with a qualifying HSA high deductible. My takeaway from this is to at least investigate an individual plan. IF I qualify for some of the good individual plans, over the life of the plan (as it is today) from age 50 to 65, it will be a much better deal -- as structured today. But maybe not! Who knows what rules they'll change.

With this in mind, I'm planning for the scenarios I have access to, but keeping a backup plan assuming the worst case as seen on these boards, which is about $24,000 per year out of pocket for two people in 2012 dollars.

 

[Sue J]

When they changed from 3 options for level of insurance (Enhanced/Intermediate/Basic) to just the single offering equal to the Enhanced Plan, I posted on their blog asking why we lost the low cost/high deductible Basic plan. The response was that when you offer 3 levels there is an "adverse selection", explained like this -

Multiple plans contribute to a greater chance of adverse selection. That means the healthiest people tend to pick plans with less coverage, and those with chronic illnesses tend to pick the more comprehensive plans. This drives up the cost for everyone by going against general insurance principles in which everyone is in one pool, thereby spreading the costs equally among those with good health and bad health.

So those of us with lower costs for our health care are grouped with the higher cost folks to even it out for everyone in this retiree group. Unfortunate and expensive for us. Another issue that came up is that most of the retirees have 30 years of service and their subsidy has been 100% of the cost, they paid nothing monthly. DH retired with 26 years of service so his subsidy was more like 85%. If the more expensive coverage is paid in full, it's easy to decide to take that option rather that the one where you pay part of the monthly cost. It turns out that a large majority of the retirees chose the Enhanced or Intermediate plans, a small minority chose the Basic plan.

So we are stuck with being a minority (on the younger healthier end of the retiree spectrum) in a large, older, expensive group and they have the ability to go and change the plans and the subsidy and the eligibility whenever they want. They need to make changes now because the money for the health care benefit comes from employer contributions (based on payroll), and investment earnings from the employer contributions. Obviously, investment earnings are much less than planned on years ago, more employees are retiring due to current economics and health care insurance costs are much larger than expected. They had to cut something to keep this going for the retirees and cutting the subsidy and making spouses ineligible in the future were what they decided to do.

The change from three options for insurance to just one happens in Jan 2013. The other changes go through a transition period. This is state public employees pension plan, nothing happens quickly, it's like turning a large ship.

 

[MichaelB]

Katsmeow, I share your premium pain. It’s tough to see steep increases and must be especially challenging for people with little disposable income. Unfortunately, I imagine more of this is to be expected for people with subsidized plans.

Multiple plans contribute to a greater chance of adverse selection. That means the healthiest people tend to pick plans with less coverage, and those with chronic illnesses tend to pick the more comprehensive plans. This drives up the cost for everyone by going against general insurance principles in which everyone is in one pool, thereby spreading the costs equally among those with good health and bad health.

Sue J, that sounds like insurance industry doubletalk to me. Different levels of deductible and cost sharing should be actuarially similar, so by design adverse selection should not be present. Reducing choice is more often associated with driving people toward options that benefit either the insurer or the benefit provider, or both, but at the expense of the user.

 

[Sue J]

Sue J, that sounds like insurance industry doubletalk to me. Different levels of deductible and cost sharing should be actuarially similar, so by design adverse selection should not be present. Reducing choice is more often associated with driving people toward options that benefit either the insurer or the benefit provider, or both, but at the expense of the user.

Yes, that's what I thought, too. But that's their "reasoning" that they give as the answer. They certainly wouldn't be making a change like this if it was more expensive for them. They made the change because it is less expensive for them by being more expensive for the retiree.

If Obamacare really happens, I will leave the group insurance in 2015. I still don't know if I will be able to buy single care as a married person and how my cost will be determined. We will look at DHs cost compared to his Obamacare options and see what looks better.

I'm hoping that by 2015 I'll have some options to consider.

 

[Brett_Cameron]

My premiums for the subsidized Mega-Corp retiree health, dental, and vision plans are unchanged at $401/month for a family of four. Health premium is $337/month.

 

[FUEGO]

This is why I laugh at all the suckers at work that want to put in 20-30 years so they can get the crappy retiree health insurance benefits. You pay the expense over a certain amount and all the expense for spouses and dependents. I think it is up to $700/month now for family coverage ("only" ~$500ish for spouse coverage). It is probably still a slightly better deal than state risk guarantee pool, so not a completely worthless benefit, but there is still lots of time to tinker with it between now and when coworkers will be eligible for it.

We just received DW's awesome insurance annual enrollment (she's still working). No increase for the gold plated $0 deductible plan we are on. Still $105/month for family coverage. And they expanded coverage ever so slightly per Obamacare regs.

 

[Mulligan]

Katsmeow, I share your premium pain. It’s tough to see steep increases and must be especially challenging for people with little disposable income. Unfortunately, I imagine more of this is to be expected for people with subsidized plans.

Sue J, that sounds like insurance industry doubletalk to me. Different levels of deductible and cost sharing should be actuarially similar, so by design adverse selection should not be present. Reducing choice is more often associated with driving people toward options that benefit either the insurer or the benefit provider, or both, but at the expense of the user.

Based on my employer when I was working, I find you to be correct. Our employer (the provider) did research into providing another lower cost plan option. But the numbers came back in a way that they couldn't , because they would be on the hook for more of the total cost as the healthier people would have went with that plan to save money themselves.
Sue, I understand your situation. I could have stayed on with the group plan when I retired, but found it a lot cheaper just getting my own individual plan. Been retired for over 2 years now, and have saved over $15,000 already in that short amount of time.

 

[Alan]

The change from three options for insurance to just one happens in Jan 2013. The other changes go through a transition period. This is state public employees pension plan, nothing happens quickly, it's like turning a large ship.

This is also something that would affect us big time. We rely on there being an out-of-State PPO plan available as we have no desire to move back to Louisiana away from our son.

 

[ohyes]

Katsmeow,

right there with you. Arkansas' retired teacher plan offers Gold/Silver/Bronze. We went with Bronze which includes HSA and $1500 deductible per year or total of $3000 for family. Our youngest (22) is included.

Last year it was $352.42. January 1, 2013 it goes up to $538.02.

This is proving to be no fun, although I know we are still lucky. Some belt-cinching is not far away and i hate tight belts.

 

[ratto]

That's a huge jump! I don't know how high it will go when I retire.

They can do all this because the health care insurance is not mandated, was never promised and is not guaranteed. It's been provided since the early 1970's and now they decided that they can't afford to provide for the spouses, only the retirees.

So those of us with lower costs for our health care are grouped with the higher cost folks to even it out for everyone in this retiree group. Unfortunate and expensive for us.

So we are stuck with being a minority (on the younger healthier end of the retiree spectrum) in a large, older, expensive group and they have the ability to go and change the plans and the subsidy and the eligibility whenever they want.

Without a fundamental policy in place to encourage and reward healthier life style, no any mandate will make sustainable change to the big picture. However, it might not stand legal challenges in court.

 

[palomalou]

Hmmm, glad I read this one, because when I hit Medicare, Beloved Spouse will still have another three years on my retiree health plan. I hadn't thought about the concept that we'd be paying Medicare and its supplement AND our portion of retiree. Oh well...

 

[Lsbcal]

On the bright side, just think about the tax deduction we get to claim on those high premiums.

Ours is going up to $687/month next year. But DW and I will be on Medicare sometime next year and I'm hoping that Medicare Advantage is lower then that figure.

 

[Sue J]

On the bright side, just think about the tax deduction we get to claim on those high premiums.

No deduction for us. We have no mortgage and our real estate taxes are only $2400/year so we haven't itemized in a long time.

We've been covering all our monthly expenses on just about 90% of DH's pension payment so we've had some savings left over every month. This increase in insurance costs eats up our entire cushion in the monthly budget and then some. We have been able to save all of my part-time income so next year a portion of that will be used to cover the increased expense, which will be deducted from the monthly pension payment. I'm glad I have my part-time job and that's it's something I enjoy. Many of the other retirees are going to have to make major changes in order to handle this health care insurance expense.

 

[M Paquette]

We just got our notice for our individual policies (no employer subsidy). The policies go up by 11.3% for next year. The past two years have seen increases below the 14% rate I budgeted for on retiring. Um... Yay?

 

[Lsbcal]

No deduction for us. We have no mortgage and our real estate taxes are only $2400/year so we haven't itemized in a long time.

We've been covering all our monthly expenses on just about 90% of DH's pension payment so we've had some savings left over every month. This increase in insurance costs eats up our entire cushion in the monthly budget and then some. We have been able to save all of my part-time income so next year a portion of that will be used to cover the increased expense, which will be deducted from the monthly pension payment. I'm glad I have my part-time job and that's it's something I enjoy. Many of the other retirees are going to have to make major changes in order to handle this health care insurance expense.

Sounds like you have been hit hard.

Our insurance has gone up at double digit rates for several years now. If DW goes to the doc it's $200 for a standard office visit. IMO we should all be able to get the same medical deal if we can pay for the insurance. How many of us chose our career based on how well the medical insurance would work out?

Sometimes I need to bitch a little.

 

[W2R]

How many of us chose our career based on how well the medical insurance would work out?

Me? But that is because I have a very low risk tolerance in nearly all aspects of life, and surely doesn't mean I think that what is happening to Sue and others is anything but shocking and abominable.

 

[Lsbcal]

Me? But that is because I have a very low risk tolerance in nearly all aspects of life, and surely doesn't mean I think that what is happening to Sue and others is anything but shocking and abominable.

There is always one smart one in the crowd. Still I bet there were a few other considerations in your career + employer choice.

When I started work in the 1970's I had no idea that medical benefits would be the only tangible thing left to me by the employer after retiring. Even a few years before retiring I did not guess that medical premiums would escalate as they have. Oh well, no point in going on about this. Will just have to grit the old teeth and carry on.