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LANSING UPDATE

From: Ellen Hoekstra
AFT Retirees Update
November, 2009

School Retirees to Pay More for Prescription Drugs--UPDATED

Unfortunately, most retired school employees will be paying more for their prescription drug coverage. Starting on January 1, retirees who are not in HMO’s (Blue Cross Network, HAP and Priority Health) will pay an additional prescription drug premium, equivalent to 5% of the net prescription drug costs. In 2010, this will mean an additional $10 per member/contract per month.

Additionally, retirees currently using a non-formulary brand name drug that has a generic equivalent will have to pay the full price of these drugs, whereas right now they pay just the cost difference between that medication and a generic. Medicare regulations prohibit this option, known as “reference pricing”. This change will only affect about 2% of members. Members can avoid this cost by utilizing the available generic.

Other ways to avoid additional costs include utilizing one of the HMO options, and—for lower income members—checking out access to the Medicare program for assistance with premiums. Although an update comparison chart is not yet available from ORS, it will be at this location: http://www.michigan.gov/documents/R379C_135126_7.pdf or you can contact their office at 1-800.772.1213.

The Michigan Public School Employee Retirement Board also is moving away from the “Medicare Advantage” program because it is no longer producing savings now that the federal government has reduced funding for it. The Board approved a return to a Medicare supplement program to reduce increased costs. However, a gap of $26 million remained, resulting in the MPSERS Board making the changes in prescription drug “cost sharing” described above. The staff and Board did attempt to avoid making the cost increases onerous for any particular subset of retirees.

The change back to a Medicare supplement program means that retirees will be back to a two card system, their health plan card and the Medicare card. The good news is that the Office of Retirement Services has persuaded the feds to do a mass “reissuance” of Medicare cards to all eligible retires to be sure that members have no difficulties receiving services. These cards are likely to arrive in late December—please be sure to put yours someplace where you can easily find it, like in your wallet.

Another change is that although Blue Cross/Blue Shield will remain the Hospital/Medical Vendor for the plan, pharmaceutical services will be provided by Catalyst-Pharmacy Benefit Manager. At the Board meeting regarding these changes, we conveyed AFT Michigan’s concerns about the impact of increase cost-sharing on retirees, particularly older retirees. We also asked to have more information made available to low income members about the Medicare program for assistance with premiums that is available for low income members, and ORS has agreed to provide it. Note other items on this site.

All of these changes will take place on January 1, and retirees will be receiving more information from the Office of Retirement Services.

Impact of Dillon Health Plan on School Retirees

HB 5345, the state mandated health care legislation introduced by House Speaker Andy Dillon (D-Redford Twp.), will give retirees far less input into their healthcare than the current system. This legislation, which is scheduled for two more hearings in December, is expected to result in a choice of only four to six health plans for all public employees and retirees in the state—regardless of whether they work or are retired from a school district, the legislature, a city fire department, or a county road commission.

Right now, education retirees’ health care is very broadly mandated by state law, with most of the detail regarding benefits and cost sharing determined by the Michigan Public School Employees Retirement Board, a 12 person board, 10 of whom have some kind of educational setting background and two of whom must be school retirees.

However, under HB 5345, these decisions would be made by a 13 person board, including only one slot for school personnel and one for a retiree—and the retiree slot could be filled by any type of public sector retiree, including, for example, a retired legislator or judge. Under our current system, when changes to health care are proposed, AFT Michigan is invited to attend meetings at which the proposed changes are discussed and to submit written concerns and comments.

Additionally, before the MPSERS Board makes any changes, there is an opportunity to see the proposed modifications in advance and make public comment. There is nothing in HB 5345 that guarantees this level of access to the process of making decisions, nor can we expect this level of attention to any one “subset”.

In addition to the flat out risk of having reductions in benefits and increases in cost sharing, the plan options will not be designed around the particular needs of retirees, both in terms of age-related health issues or the likelihood that retirees may travel extensively. Currently, the health benefits are designed to coordinate well with Medicare and to take advantage of any federal Medicare-related savings. Finally, if there are shortfalls in funding health care in some other part of the public sector, those costs will be spread across everyone, with potential negative impact on school districts, community colleges, and universities.

Other Bills of Interest

HB 5323 (Rep. Richard Hammel, D-Mt. Morris Township) would require more disclosure from financial service providers to public pension plans and greater ability for public pensions to diversify their assets. The bill has had one hearing before the House Banking and Finance Committee.

SB 802 (Senator Wayne Kuipers, R-Holland) is the reintroduction of a bill that would permit community colleges a one-time opt out of MPSERS for new hires. The bill is in the Senate Education Committee, which Senator Kuipers chairs. AFT Michigan opposes this bill, which reduces the future pool of MPSERS members.

By: Ellen Hoekstra
Capitol Services, Inc.
November 25, 2009