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Retiree Network News

Articles from the AFT Michigan Forum

Volume 63 No. 2, Spring 2004

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Cost of Retirement Benefits to Increase
John Olekszyk
MFT&SRP Retiree Network Chair

The MPSERS Board will be meeting late in June to consider a series of proposals that will substantially increase the cost of health and prescription coverage for all school retirees.

According to the MPSERS Insurance Committee, the recommended increases are needed to offset an incurred deficit of $92M over the past 4 years and a projected shortfall of $41M for 2005. If approved, the changes will go into effect on January 1, 2005.

Representatives from various retiree groups such as the R.C.C. will attempt to limit the financial impact of the proposals but approval by the Engler appointed MPSERS Board is expected without a great deal of debate.

The most significant change that will impact all retiree's who utilize the current BCBS program is a major increase in the deductible for Health Insurance.

The current deductible for individuals will increase from $165 to $330 and the family rate of $235 will double to $470. This means that the retiree will be responsible for the first $330 of their office calls and other medical costs before the insurance coverage takes affect. This doubling of your out of pocket expenses is in addition to the 10% premium cost which was imposed in January of 2004.

The second part of the health care proposal is to create a built-in escalator clause in these out of pocket expenses by indexing the amounts to future increases in medical costs to the system beginning in 2006.

This means that the deductible rates will automatically increase each year without any further action by the MPSERS Board.

The other major change that will impact all retiree's will be a number of changes in the drug prescription program that will also increase out-of-pocket expenses. The first step will be to impose an annual $50 deductible for prescriptions. The second step that will generate cost savings to MPSERS but increase expense for the retiree is to raise the current co-payment maximum of $20 to $30. The mail order maximum will also increase from its current $50 to $75. These maximums will also be indexed to increases in prescription costs just like the health insurance deductibles.

For those retiree's who utilize their local pharmacy to fill your prescriptions, the MPSERS plan will impose an additional 10% penalty cost to the retiree starting with the 4th drug refill on all maintenance drugs. The purpose of this is to "encourage" retiree's to take advantage of the mail service for drugs. Currently about 12% of retiree's utilize the mail program. It is hoped that the use will increase to 40% under this "penalty" clause. This means that 60% of the retiree's will not only pay the increased deductible, a larger maximum co-pay, but will also be burdened with a 10% premium on each prescription.

In the MPSERS Vision coverage co-pays will also be doubled for exams from $5 to $10 and for materials from $7.50 to $15.00. These increases along with the small premium increase that was imposed at the beginning of 2004 will allow the vision plan to increase the reimbursement rate to vision providers for frames and contact lenses.

On the upside of this equation MPSERS is also recommending some "improvements" in our coverage plan. They will consider expanding the human organ transplant coverage to include small intestines. In that same vain the MPSERS Board has already given approval of a change in the Delta Dental Program which will allow out of state users to save some money on their co-pays and those using PPO dentists will experience a $5 savings on some of their co-payments.

There is one positive development that should arise from these proposed changes. The need for a Graded Premium System for retiree's with less than 30 years of service should not be given further consideration in the legislature if these proposed increases are adopted. The Graded Premium plan was put forth as a way to generate more premium revenue from retiree's and to offset increased costs.

It is clear that the MPSERS "long term solution" to the increasing costs of medical and prescription coverage is to shift a greater and greater proportion of the increasing costs to retiree's whose ability to pay these costs are limited.

One of our responses to their solution could be to have a MPSERS Board that is more sympathetic to the financial condition of retiree's.

Governor Granholm will soon have an opportunity to appoint several new members to the MPSERS Board. The MFT&SRP Retiree Network will be part of the effort to recommend candidates for these vacancies who will recognize the needs of those groups they are chosen to represent.

Michigan school retiree's have enjoyed a comprehensive pension benefit program that is considered to be one of the best in the country. Teachers, school related personnel as well as retiree's, will need to work together to protect our current plan and to limit the impact of the changes that we expect to see on January 1, 2005 and into the future A call, letter or email to Mr. Chris DeRose, Director, Office of Retirement Services, 7150 Harris Dr., PO Box 30171 before the June meeting to express your concerns would be appropriate For more information on this issue and to link to the Office of Retirement Services you are invited to visit the MFT&SRP Retiree Network Website at "http://retirees.mftsrp.org".