After removing University System retirees from the system’s health program, the state Board of Regents voted Wednesday to give them about $2,700 a year to buy Medicare supplemental insurance.
The contribution, which breaks down to $228 a month, will be placed in a health reimbursement account for Medicare-eligible retirees, who are older than 65. Human resources officials say the fixed amount ensures the out-of-pocket cost to those retirees for health coverage next year will be relatively close to what it is now.
But some retirees, particularly a large group from the University of Georgia, have criticized the roll-out of the change, and the possibility that they could have to pay more in health costs.
It’s too early to know whether the costs will be comparable to what retirees are currently paying, said Brahm Verma, immediate past president of UGA’s retiree association.
“This could create anxiety among retirees who may think their health care amount has been cut,” Verma said.
Monthly premiums for a Medicare-supplement, or “Medigap” policy for someone in good health in Atlanta or Athens generally range, according to the government’s Medicare website, from $76 for the least coverage up to more than $325.
The change is one of a series of phased-in steps approved two years ago to cut steadily climbing health care costs. Beginning in January, those 17,000 Medicare-eligible retirees and their eligible spouses will no longer have secondary coverage under the University System’s plans. Instead, they may use the subsidy from the system to buy their own supplemental insurance. Medicare already covers 80 percent of their heath costs.
Without the changes, the University System’s health care costs were becoming unsustainable, said Marion Fedrick, human resources chief.
The University System will spend about $43.3 million on retiree health care in 2015. Moving retirees to the private market won’t save money — there will still be a $43 million cost next year — but an anticipated $6.8 million increase can be avoided, Fedrick said.
UGA retirees attending an informational meeting with system officials in April said they had not learned about the shift until reading about it in an Athens-areas publication just two months before, even though the Regents approved the initial decision in November 2013.
“I don’t think anyone would say the roll-out was ideal,” said Tom Lauth, 77, president of UGA’s retiree association. “There were some who were angry and upset when they learned of the change, but I think that’s all in the past.”
The focus now, he said, is on ensuring that retirees — particularly the elderly — don’t fall through the cracks and are helped along with enrolling in one of the private plans.
Another round of human resources visits to each of the system’s 30 institutions begins next week for talks with retirees before insurance open enrollment begins in October. UGA is first on the list, and officials at the state’s flagship institution will provide its own call center to help UGA retirees.
Any change that affects someone’s income or benefits is very difficult, University System Chancellor Hank Huckaby said Wednesday, noting the pushback on the plan changes. “We’ve taken a few arrows and spears on this and there will be some more, but it is the right thing to do,” he said. “Implementing this approach will stop the buildup of unfunded liability in this category and that was something we had to do.”
The Regents’ actions are part of a national trend, as employers look to stem the increase of health care costs by shifting retirees off employer plans for supplemental coverage and onto private insurance exchanges. Companies such as AT&T, IBM and Time Warner have made the shift, and several colleges and universities have, including Emory University.
Emory began offering Medicare-eligible retirees a subsidy in 2014 to purchase their own supplemental plan. The move affected about 1,200 retirees, school officials said.
The University System will be the first state agency to make the change, Fedrick said.
The University System health plan is separate from the State Health Benefit Plan, which covers about 650,000 teachers, state employees, retirees and their dependents. The Department of Community Health board is expected Thursday to review rates for the upcoming year for state plan.
“With the rising cost of college and tuition, there is just a lot more scrutiny on total costs, and health care is the one that is hard to control. it’s a big problem,” said Raymond Scheppach, a senior public policy lecturer at the University of Virginia. The move may not save college systems huge amounts of money, but can help them spend less, he said.
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