Now that the Kentucky Retirement Systems Board of Trustees has decided to shift Medicare-covered public retirees from the state’s self-funded supplemental insurance into a Medicare Advantage plan run by Humana, pensioners will have to watch to see whether the putative savings last – and wonder whether more ominous changes to benefits might be in the works.
The trustees voted 5-3 to accept the idea supported earlier on a 3-2 vote of the KRS Retiree Health Plan Committee. Its biggest selling point is that Medicare Advantage will save both retirees and the state some cash. That’s critical to KRS, which faces a $19 billion unfunded liability in its combined pension systems. Advantage, an option available to anyone eligible for Medicare, is generally more economical than comprehensive Medicare supplement plans that cover virtually every conceivable medical expense. KRS expects to save $27 million to $37 million, some of which will be shared with insured members through lower fees.
Public retirees have their suspicions, aired at earlier meetings and reiterated after Monday’s board meeting. Some told State Journal reporter Katheran Wasson they wish the board had waited for a vacant retiree representative seat on the board to be filled, and to see results of the upcoming presidential election.
Republican Mitt Romney has promised he’ll work to repeal the Affordable Care Care Act if he’s elected. President Obama would do no such thing. He’s even beginning to embrace the formerly pejorative epithet – Obamacare – as a label of pride.
There’s concern that Medicare Advantage, a product of Republican ideology, won’t fare so well under the new health care law. Federal subsidies keep the public-private concept of Medicare Advantage coverage alive, but they are scheduled to be reduced so that more funds go to basic Medicare.
Public retirees justifiably ask themselves how good a deal the state insurance move will be if Medicare Advantage ends up a poor relation in the family of government-supported services. Some were more comfortable with the state’s self-funded program and worry that Humana, if its government subsidies suffer cutbacks in the future, will raise the premiums they have to pay.
State Journal reporter Kevin Wheatley looked into the experience of the Kentucky Teachers’ Retirement System, which earlier moved to Medicare Advantage coverage by Humana, and found that the company did increase rates after the initial two years. However, Jane Gilbert, the KTRS director of retiree health, told him retired teachers still ended up better off than if they’d gone back to the state’s self-funded approach under a third-party administrator.
Humana offers three plan options ranging from $84 to $198 a month depending on how much coverage retirees want. The state’s self-insured rates were $84 to $272 for comparable plans.
The insurance change doesn’t alter the “inviolable contract” that guarantees state retirees get every penny they were promised under their “defined-benefit” pension program. So far, the idea of moving future hires into a “defined-contribution” plan – like the 401(k) accounts that suffered huge losses in the economic meltdown – has gained little support. But if the insurance cost savings make too small a dent in the KRS deficit, politicians may have second thoughts about their distaste for riskier retirement alternatives.