Retiree Insurance Changed

[Katsmeow]

I've talked a little bit about this in other threads, but wanted to do a separate thread about how our retiree health insurance has changed. For 2016, the big change has been made. DH's former employer had been providing subsidized coverage for a group PPO plan. For 2016, we have been moved to the individual health insurance market with Megacorp paying a substantial share of the premium.


DH retired from Megacorp about 5 years ago. He was in a group of employees entitled to subsidized retiree coverage. When he retired, the coverage covered him, me, and our kids.

Megacorp's share of premium increases was limited to (I think) 5% per year. This was a good PPO plan with the typical broad network. This was a high deductible plan with a family deductible of $3000.

Over the years monthly premiums started going up.

2011 - $289
2012 - $289 until DH went on Medicare and then it dropped to $180.
2013 - $479
2014 - $780
2015 - $842

Obviously the last 2013 and 2014 premium increases were surprising, especially the increase in 2014. At the end of 2014, Megacorp said that had they simply applied the % limitation there would have been another large increase for 2015. However, they elected not to do that so we had a small increase. They also said they were looking at other options including a private exchange where you could buy plans and by being in a larger group could get better rates.

At the time this seemed reasonable to consider. As the retiree plan was getting more and more expensive I was thinking people might start jumping from it. So being able to be in a larger group didn't sound bad.

Of course, I was thinking this would be in a larger group that would be buying group coverage.

A few months ago Megacorp wrote us and said they were going to go the private exchange route. Significantly, they said we could buy similar coverage at more affordable rates.

Again, that sounded OK.

About a month ago, we were told about the private exchange and were told that there would be larger risk pools so we could have affordable coverage comparable to what we have now through Megacorp.

They said they would give a specific amount as a Health Reimbursement Arrangement. The amount itself was fine. It wouldn't cover everything but would cover a lot of the premiums. The one negative is that it increases according to CPI, capped at 2.5% per year. Obviously that isn't great since premiums go up more than CPI.

Still, I didn't think it was that bad. At no point, in any of the letters did Megacorp say that what was really going on was that they were putting us on the individual market to buy whatever plans would be sold to the general public. We would no longer have access to group plans.

Once I could log into the private exchange it became clear that what we were being offered were the ACA exchange plans plus other non-exchange plans offered to the individual market.

The result is that our premiums are going to be less in 2016, but the coverage is not remotely comparable.

I had a plan with a very broad network (including MD Anderson if I was to get cancer). The family deductible was $3000 and the OOP max was $7000. The out of network deductible was $7000 (I don't remember what the OOP max is).

After scouring all the plans available in my area, nothing is remotely similar. The best plan I've found is a Cigna EPO. There are no PPOs in the Houston market. There are no plans that have MD Anderson in network. Most plans have tiny hospital networks.

The Cigna EPO actually has a decent hospital network (with the exception of not having MD Anderson). The family deductible for the plan we will likely choose is $12800 with an OOP of $13400. There is no out of network coverage at all (except emergencies).

Even though our share of the the premiums will be lower than our premiums before the overall cost to us will likely be thousands of dollars more given the high deductibles, not to mention the lack of out of network coverage.

DH and I did talk to Megacorp about it. They expressed surprise at the lack of PPOs in Houston. I don't think that they anticipated it would shake out that way. I would guess that when they made the decision to do this, they thought that there would be PPOs available. But, the reality is that they aren't.

When the ACA went into effect, I predicted to my Houston that Megacorp would eventually do this. Why continue to provide group coverage (Megacorp has historically self-funded coverage) when retirees can get coverage now from the individual market. It is way easier for Megacorp to simply subsidize those premiums. And, if PPOs comparable to our current PPO existed in the individual market -- even at higher cost -- I would be OK with it. As it is, I am not remotely happy about it.

I know I should be happy to be able to have any retiree insurance at all, especially subsidized retiree insurance. And, I am happy about that.

Still, it doesn't make me happy that my coverage choices are so limited now and that I have absolutely no option for a PPO with out of network coverage.

I will be eligible for Medicare in 3 1/2 years so hope that I can make it to then without this whole out of network thing causing problems. And, I hope that we 2017 there will be better options.

I just wish Megacorp had continued to offer the group PPO as an option even if the premiums would have been higher.

[stepford]

Katsmeow's experience describes one of my major fears as I head into ER. I too will have a Megacorp subsidized BCBS group plan and pay a nominal premium to retain essentially the same insurance as active employees.

All well and good - for now.

But I can see the way the winds are blowing and it is 10 long years until I will be Medicare eligible. I suspect I would be fortunate indeed not to find myself sharing the OP's predicament well before those 10 years are up. Just how big a monkey wrench that throws into my ER plans is TBD.

[Another Reader]

I get pre-Medicare retiree medical insurance through the pension system of a government entity. A PPO is offered, but at over $2,000 a month, it does not make sense, even with the subsidy offered Fortunately the HMO plan, at a little under $1,000, supports the group I use, which is now part of Palo Alto Medical Foundation and Sutter Health. I'm paying around $700 a month, which turned out to be a good bet this year when I ended up in the local emergency room with an allergic reaction. For the ambulance ride, the emergency room, the tests, and the various doctors, the bill was around $20,000. United Health negotiated the cost down to around $8,000. I paid $50.

For the last couple of years, the pension plan managers considered a private exchange but elected to stick with the current plans. Fingers crossed they do the same for the next three years, until I am eligible for Medicare.

[Cobra9777]

Quote:

Originally Posted by stepford Katsmeow's experience describes one of my major fears as I head into ER. I too will have a Megacorp subsidized BCBS group plan and pay a nominal premium to retain essentially the same insurance as active employees. All well and good - for now. But I can see the way the winds are blowing and it is 10 long years until I will be Medicare eligible. I suspect I would be fortunate indeed not to find myself sharing the OP's predicament well before those 10 years are up. Just how big a monkey wrench that throws into my ER plans is TBD.

Same here. Although, Megacorp has already shifted to a private exchange for medicare-eligible retirees. Megacorp pays a fairly generous subsidy based on years of service. And there are dozens of options compared to the two Megacorp plans. I'm also 10 years from medicare, but I went to the private exchange and priced out some of the options, including my subsidy, and it wasn't bad at all. Of course, a lot can change between now and then.

My pre-medicare group plan is pretty amazing. Like you, I pay a nominal premium and have the same PPO coverage I had while working. It's a HSA-eligible HDHP with $1.5K deductible and $3.0K OOPM. Including the tax savings from HSA contributions, my annual premiums are less than $1K.

In a letter from Megacorp regarding the changes for medicare-eligible coverage, they commented that pre-medicare would stay as a group plan "for now" because costs continue to be competitive for both retirees and Megacorp. Also, the available options still provide flexibility for retirees. There are 3 PPOs (1 HDHP) and 2 HMOs. But they left it open that pre-medicare coverage might eventually shift to a private exchange with Megacorp paying a fixed subsidy. As you said, all is well and good - for now... and hopefully the inevitable monkey wrench is smaller than OP's.

[Likes_to_Lurk]

Ten years ago, I took a buyout package from my Megacorp that included retiree medical. The premiums are subsidized, but Megacorp's contribution is capped at some level (the amount has never been divulged). I was able to defer my coverage. Of course, nothing is guaranteed.

I subsequently found another job that had good health insurance, where the company paid about 75% of the premium. This was a much better deal than using the retiree medical. Last year, I retired from that j*b and continued coverage under COBRA.

I was planning on using the COBRA coverage for 2015, and then switch to Megacorp's retiree plan in 2016 and beyond. However, I received a notice from Megacorp last fall that deferral of coverage was no longer possible. Either I signed up for 2015 coverage or I had to give ever using the retiree medical. The Megacorp plan premium for 2015 was on par with the COBRA coverage, given the different deductibles and OOP maximums. Since Megacorp is subsidizing the premium and my COBRA coverage has an administration fee, this tells me that Megacorp's claims experience is poor.

Megacorp's pool of eligible retirees is shrinking, as this benefit was not offered to those hired after a certain date and Medicare eligible retirees are handled differently. I think that the reason that they eliminated the possibility of deferring coverage was to try to increase the number of younger and healthier people in the plan. It may make sense for them to pay the premium subsidy in order to do that.

I have just over 3 years until Medicare. I am concerned that Megacorp may do what Katsmeow's did. I live in NY and NONE of the ACA plans offer out of network coverage. I would have to try to get a policy outside the ACA exchange. Going back to work is not appealing.

[Sue J]

Our health insurance history goes along the same path as that of Katsmeow's. DH is retired with insurance offered from his public retirement system. Every year it has become more expensive. It's now at the level that it would have the Cadillac tax when that goes into effect. For 2016 the full cost is $969/mo/person. DH would get a hefty allowance and I would get a much smaller allowance that is declining every year until there is no allowance for a spouse in 2019. For 2016 our combined cost would be $665/mo.

Starting in 2014 we opted out of the retiree insurance and used the ACA instead. Much less insurance coverage but a much lower cost. I'm fine with that. But just like everyone else we are now seeing that the networks are smaller, deductibles higher and now for 2016 very few PPOs. And in our ACA offered plans there are no low cost HSA eligible plans.

We've pretty much decided that we will change insurers again this year (3rd time in 3 years) and this time it means changing almost every provider.

I'm just hoping we can get through the next few years until Medicare in 2020. DH can rejoin his retiree plan and will have a nice Health Reimbursement Account with a monthly allowance. The retirement system is currently changing to a Medicare Connector system and we will be able to use his allowance for Medicare supplemental policies or Medicare Advantage via One Exchange.

I've been following the changeover on a blog by the retirement system and it's a huge change for all the current retirees already on Medicare. With the way things are changing with all health insurance it may be completely different by the time we get to Medicare.

[Katsmeow]

Quote:

Originally Posted by Likes_to_Lurk T Megacorp's pool of eligible retirees is shrinking, as this benefit was not offered to those hired after a certain date and Medicare eligible retirees are handled differently.

I think that is a big part of what is happening here. DH is within a group that still gets subsidized pre-65 retiree coverage. Many of the people in that group are now over 65 and on Medicare. In our case, I am still under 65 and we have kids who are on the plan as well. But, I think the group was definitely shrinking each year.

So, I understand why Megacorp did this. I even appreciate that the amount of the subsidy they are offering is good at this time.

What I would have rather seen is them finding some group plans with large groups where we could buy more traditional PPO type coverage (even with a large deductible).

I do think that when Megacorp started deciding to do this, they thought there were going to be a wider range of plans offered and that there would be PPOs with out of network coverage. I think they were surprised that it didn't shake out that way in this area.

[Gotadimple]

Quote:

Originally Posted by Likes_to_Lurk I was able to defer my coverage. Of course, nothing is guaranteed. I was planning on using the COBRA coverage for 2015, and then switch to Megacorp's retiree plan in 2016 and beyond. However, I received a notice from Megacorp last fall that deferral of coverage was no longer possible. . . . this tells me that Megacorp's claims experience is poor. Megacorp's pool of eligible retirees is shrinking, as this benefit was not offered to those hired after a certain date and Medicare eligible retirees are handled differently. I think that the reason that they eliminated the possibility of deferring coverage was to try to increase the number of younger and healthier people in the plan. It may make sense for them to pay the premium subsidy in order to do that. I have just over 3 years until Medicare. I am concerned that Megacorp may do what Katsmeow's did. I live in NY and NONE of the ACA plans offer out of network coverage. I would have to try to get a policy outside the ACA exchange. Going back to work is not appealing.

As you indicate, you are a victim of adverse selection - a shrinking pool of individuals, aging, and staying on the plan because of the coverage. As you also indicated, nothing is guaranteed. It is unfortunate that we get used to the "perk" of subsidized health care when we work.

But one doesn't have to be younger than 65 for that to happen. Here is my story:

I retired after 16 years working for a "Blue" health plan. In 2001, the employer froze it's retirement plan and stopped offering subsidized retiree health care for those with more than 15 years of service. I retired in 2008, and had the same coverage as when I worked but at a higher premium.

As I aged into Medicare, the employer offered a Medicare Advantage plan - the same one they sell to the public with lower deductibles and out of pocket - and at the time at a competitive price (with my retiree subsidy). This Medicare Advantage plan is also a group-funded plan, with restricted eligibility, and no hope for increasing the membership with younger retirees.

This year: pricing went up 40%. The coverage continues to be 'sweetened' with overall lower out of pocket for every coverage. Adverse selection: older members using more drugs and services. A quick check of their "private" plans - meaning the ones they sell to the public - higher (but not significantly) co-pays, a large Part D deductible that follows what CMS requires, and the same broad PPO network. Cost: 40% lower than what the retiree plan offers.

A quick look showed me that 40% of the monthly increase was to buy back the drug deductible. The rest of the increase is for lower co-pays and coinsurance. The "sweetened" part has resulted in increased claim costs being directly passed on to retirees. So the lesson for me was to move from a closed plan to an open plan, where they will constantly replenish membership with younger and healthier members, and hopefully, the premiums will be relatively stable.

The ACA is still in its early years, as plans that have never offered coverage as broad as required get the claims experience and price accordingly. There "should" come a point where this is enough experience and where the carriers have driven the cost of care down so that premiums once again become affordable.

That's the theory, anyway.

Rita

[athena53]

Definitely a trend. I worked for a megacorp from 2003-2013 and they offered retiree health insurance, but only if you retired from there, and I was going on to another employer. (I was 59 at the time.) They'd already decided to freeze it at what they paid in 2011, I think, so the value was already going to erode over time.


If I'd known I was going to last less than two years at the new job, I would have told the earlier employer to consider me retired, and signed up for the retiree health insurance, even though my new job had good coverage with a very reasonable employee premium. Oh, well. I wouldn't be surprised if they'd watered it down again since I left.

[txtig]

I have a similar situation to that of Katsmeow. I took an early retirement about four years ago from a Houston-area Megacorp after 27 years of service. When I retired, I was eligible for the maximum retiree health care benefits offered by the company, including a Pre-65 PPO Plan and a Post-65 Medicare Supplement Plan. However, I took job with Megacorp 2 following my early retirement and elected to get my health coverage from them, as it was a little cheaper than the Pre-65 Plan from Megacorp 1. I still have access to my Megacorp 1 coverage when I leave Megacorp 2, which I’m thinking will be next summer. Well, earlier this year, I got a letter from Megacorp 1 stating that their Post-65 Medicare Supplement Plan was being converted from a company-funded plan to a plan that would offer subsidies to a privately-purchased Medicare Supplement Plan through One Exchange. I haven’t yet researched the impact of this change, but I’m pretty sure it’s not going to be good. The old Post-65 Supplement Plan offered great coverage at a very low monthly premium. I guess I’m thankful that I still have some form of coverage, but I’m kind of bummed out that I’m not going to get what I thought I was going to get.

[harley]

Well, as long as costs are going down and if you like your plan you can keep it, everything will be alright.

Truthfully, I'm just glad I can get coverage. Without my retiree medical coverage, pre ACA, I wouldn't have been able to buy coverage for love or money. Even if Megacorp drops retiree coverage, which I've been expecting since ACA went into effect, we can still get coverage in the "open" market. Prices have gone through the roof, although it seems worse in the ACA market than what we're getting through Mega. But I budgeted in a pretty huge percentage of our retirement income for health care, so we're OK for now. If worse comes to worst, I'll probably just die to save a few bucks.

[Katsmeow]

For me, the big issue is that what is available in the individual market (whether ACA plans or off-exchange plans) is just not comparable to what we have now. I think that Megacorp itself was blindsided by the changes in the individual market. I imagine that they expected that comparable, but cheaper, PPO plans would be available. Maybe the deductibles would be higher, but premiums would be lower which is a reasonable enough trade.

As it turns out, though, there are none of those PPOs available in this area in the individual market. Yes, overall premiums are lower with an EPO or HMO but that doesn't make up for the narrower networks and lack of out of network coverage.

[stepford]

My question arising from this thread is how to project expenses. In my retirement modeling I've been assuming, probably naively, that my medical expenses would be double their current low level. I had originally thought that conservative, but now I am not so sure. For the next 10 years my Megacorp plan will pay 92% of premium costs while I pay the other 8. The questions are:

8% of how much?
Will the plan itself remain viable?

Megacorp itself isn't going away anytime soon, but they are following national benefit trends:

No retiree medical for employees hired after 1999. Reduced subsidy for those who retire after 12/31/2015 (my retirement date - what a coincidence). I had thought I was being smart by locking in the existing plan, but the comments in this thread emphasize that my situation is probably far less secure than that.

So how should I model health care costs for the next 10 years? Use my Megacorp plan rates, assume fully self funded ACA rates or something in between?

These are the sort of questions that drove me to my last 2 OMYs. Luckily (or not) I've already signed my exit paperwork and that is no longer an option.

[Katsmeow]

As you can see by my initial post our premium costs have gone up sharply over the years. I think this has probably been due to the shrinkage of the pool size.

Probably the safest thing is to see what a plan would cost on the exchange and assume you got no subsidy from Megacorp. Then based on past expenses try to figure out an average amount of health care spending each year. If the plan has a high deductible and your current plan doesn't remember to add in amounts that your insurer has been paying that you would be paying in future. For example, for us, on such a plan we would have meet the $13,400 OOP max this year but wouldn't have met it on every year. So for forecasting I would take an average figuring some years I would be above and some below (I would also look at what happens if I had to meet the OOP max every year). Also, be sure to include expenses that aren't covered by insurance such as vision care or dental care.

[Cobra9777]

Quote:

Originally Posted by stepford My question arising from this thread is how to project expenses. In my retirement modeling I've been assuming, probably naively, that my medical expenses would be double their current low level. I had originally thought that conservative, but now I am not so sure....

For us, medical expense is one of the more difficult categories to model into the future. DW and I have separate employer-subsidized retiree coverages (pre and post-medicare), along with different deductibles, copay, coinsurance, and OOPMs. Plus, we are different ages and she's still working, so lots of different "stages" and variables to plan for.

I have an expense planning spreadsheet that breaks it down by year into manageable sub-categories like employer-subsidized premiums (pre-65, post 65), Medicare Part B, medical OOP, prescriptions, dental, vision. Most of these sub-categories are further split into his-and-hers for reasons stated above (different timing/coverage). OOP spending is based on history with some estimated increases as we age, but capped at the OOP maximums for each plan.

Then of course, all of this is inflated at 5.7% per year. I think I got that figure after researching several estimates of medical inflation about a year ago. Each major category of expense in the spreadsheet has a unique rate of inflation. Medical is second only to energy, where I use 6.8%. All this gets adjusted annually based on the latest information at open enrollment. Clearly, the biggest risk is changes to the employer-subsidized plans. But for now, we assume they continue as promised.

WRT your question about medical expenses doubling after retirement... for our model, here is the resulting medical % of total spend (excl tax), for various stages:

1. DW still working next couple years... 7-8%
2. After DW retires (pre-medicare)... 14-15%
3. Both on medicare... 16-17%
4. Both on medicare, after downsizing house... 22-26% (denominator went down)
5. Age 75-85... 27-36%
6. Age 86-100... 37-47%

Seems to me, medical expense is the one area where we increase consumption as we age and also bears a very high rate of inflation. I suspect that double-whammy is under-estimated in many retirement plans. The ever-changing regulatory and competitive landscape further complicates things. I'm quite sure I'll be "sent back to the drawing board" many times. For now, I just feel fortunate for whatever period of time we continue to have rather generous employer-subsidized retiree coverage.

[Katsmeow]

Follow up on this. In short, Megacorp came through. I am extremely happy right now.

Megacorp has decided to offer retirees the same PPO that we had available last year, along with allowing us (if we choose) to buy an marketplace or off marketplace plan in stead if we want to.

Essentially Megacorp is providing us a certain amount of money which we can use to buy the PPO or an individual policy.

In the letter that they sent out they explained how the lack of PPOs in the Houston area this year was a surprise. The information they had received was that plans similar to the group PPO would be available. As it turns out the plans in this area have limited networks and a lack of hospitals. The letter specifically points out the fact that MD Anderson is not in any individual plans' networks.

So, for 2016 at least, we will again have an option for a group PPO.

I am really happy as to this and extremely impressed that Megacorp was willing to look at this and make it right. I like having the option for the group PPO while having an option to buy other individual market plans if we want to (in our case, we will take the PPO).

[W2R]

Quote:

Originally Posted by Katsmeow Follow up on this. In short, Megacorp came through. I am extremely happy right now. Megacorp has decided to offer retirees the same PPO that we had available last year, along with allowing us (if we choose) to buy an marketplace or off marketplace plan in stead if we want to. Essentially Megacorp is providing us a certain amount of money which we can use to buy the PPO or an individual policy. In the letter that they sent out they explained how the lack of PPOs in the Houston area this year was a surprise. The information they had received was that plans similar to the group PPO would be available. As it turns out the plans in this area have limited networks and a lack of hospitals. The letter specifically points out the fact that MD Anderson is not in any individual plans' networks. So, for 2016 at least, we will again have an option for a group PPO. I am really happy as to this and extremely impressed that Megacorp was willing to look at this and make it right. I like having the option for the group PPO while having an option to buy other individual market plans if we want to (in our case, we will take the PPO).

Victory!

I am so happy for you. Thanks for the great follow-up post.

[audreyh1]

Wow, I bet you are tremendously relieved.

I'm sure many folks here wish they had access to a group policy.

[radiotec]

My megacorp retiree pre-65 plan had a large increase for 2016. The base rate went up 21%, and since i have an early retirement factor (which makes me share 25% of the employer subsidy), I ended up with a total increase of 37% and a family premium of 807/month. This is about 5x the active employee rate and is now about the same cost as the ACA with subsidy at 400% FPL.

At this rate I'll be forced onto the ACA in no time, even if I get no subsidy as I'm 11 years away from medicare. This is putting a huge burden on my ER plan and making it really difficult to forecast the expense. I haven't figured out how to get spending down to 63k to get an ACA subsidy.