Public retirees on Medicare say the decision to privatize their supplemental health insurance coverage is premature and worry it could result in reduced benefits and denied claims down the road.
The Kentucky Retirement Systems Board of Trustees voted 5-3 Monday to sign with Humana for a Medicare Advantage plan starting next year. Since 2006, KRS has self-insured its members over age 65.
KRS officials expect to save millions with the switch. Estimates presented Monday put the savings somewhere between $27 million and $37 million depending on how much health care costs rise in the next year.
That savings will be split between retirees – in the form of lower premiums, co-pays and deductibles – and the KRS trust fund, which had an unfunded liability of $19.2 billion last year.
But state and municipal retirees who attended Monday’s meeting aren’t happy with the decision. About 38,000 of the state’s 85,000 retired public employees used the Medicare plan last year.
Retirees who gathered at the Capital Plaza Hotel for Monday’s board meeting told The State Journal they are worried the move could eventually result in increased costs or more denied claims.
Many said the board should have waited to see the results of the upcoming presidential election and the future of the Affordable Care Act before voting to change insurance providers.
They also said they feel underrepresented on the Board of Trustees, which typically has five members elected by retirees, three members appointed by the governor and a representative of the Personnel Cabinet.
One of the elected seats has remained vacant since May, when Robert Wilcher resigned his post.
“I think there are so many unknown variables, that this is not a time for us to be making such a huge change in our health care benefits,” said Paul Guffey, president of Kentucky Public Retirees, a nonprofit association of more than 3,000 members.
“We feel that we were not very well represented (on the Board of Trustees), and so we are definitely disappointed in this decision – this decision could have been made next year.”
His organization passed a resolution at a June meeting, asking KRS to reconsider to move to Humana.
The resolution said that the self-insurance program has been “satisfactory” to retirees, and the switch to a private insurer would put a “further drain on the dwindling assets” of the KRS trust fund.
Private companies like Humana can contract with the federal government to offer Medicare Advantage plans, earning subsidies each month for every person who participates.
According to Medicare, those companies must follow certain rules, but they can charge different out-of-pocket amounts and set forth their own rules for how retirees get medical services, and those rules can change each year.
Last month, the KRS Health Plan Committee voted 3-2 to approve a contract with Humana for a Medicare Advantage plan. The full board considered the recommendation, but tabled the final decision for about a month.
Bobby Henson and Susan Smith voted against the Humana deal during that July committee meeting, and both continued to speak out against it Monday.
Henson and Smith were both elected to their posts by state retirees. Along with Randy Overstreet, elected to the board by retired state police, they voted against the measure Monday.
The remaining members voted in favor of the switch.
Shirley Clark, vice president of Kentucky Public Retirees, said retirees should have had the chance to make comments or ask questions before Monday’s vote.
She questioned why the Board of Trustees renegotiated its contract with Humana several times, but didn’t give other companies a chance to bid again.
She said retirees – especially those who now live out-of-state – worry that they will have to pay health care costs up front because their doctors won’t accept Humana’s Medicare Advantage plan.
“Many retirees cannot afford to pay up front (and wait for reimbursement),” she said.
KRS officials have said the new plan would include the same network of physicians that accept Medicare in the current self-insurance plan, and the same benefits, for less money.
Clark said KRS has reduced the cost of medical and prescription insurance on its own, and the move to a private insurer will further deplete the trust fund.
“I’ll be the first to admit that what they promised for 2013 is a good plan,” she said. “But everybody knows that these companies lowball everything to get their foot in the door.”
Humana has agreed to monthly premiums of $144 for medical only members, $84 for the “essential” plan and $198 for the “premium” plan in 2014. That’s compared to $125 for medical only, $84 for “essential” and $272 for “premium” under the self-insured plan.
Humana has agreed to limit premium increases to no more than 12 percent in 2014.
“If Humana is short, they’re going to make money off of us by simply reducing benefits, by denying claims,” Guffey said. “That is my concern.”