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Senior Star Third Quarter 2012


For every sale you miss because you’re too enthusiastic, you will miss a hundred because you’re not enthusiastic enough.”

 Zig Ziglar


Stockton Retirees File Lawsuit To Retain Health Benefits.

The Los Angeles Times (7/12, Marcum) reports, “A group of Stockton retirees has filed suit in US Bankruptcy Court asking for a restraining order against the city’s moves to cut their health benefits.” The move to cut benefits is said to be part of the Stockton’s “pendency plan” keep that will keep the city solvent as it seeks protections from creditors under federal bankruptcy law. The suit “seeks class-action status covering all retirees,” although several of the managers with higher incomes have indicated they would be willing to give up their benefits. The Times notes that “two-thirds of the city retirees do not meet poverty requirements for California’s low-income healthcare program but cannot afford private insurance.”

HHS plans to announce Wednesday that in the first six months of this year, “more than 1 million seniors and people with disabilities saved $687 million on prescription drugs in the doughnut hole” as part of the President’s healthcare law, USA Today  (7/25, Kennedy) reports. That amounts to a savings of “$629 per patient” and administrators “expect to see larger savings in the second half of the year because more people will have hit their coverage limit by then.”

It’s D-Day for the Post Office

“Wednesday, Aug. 1 … the Postal Service is obligated, by statute, to make a $5.5 bil.lion payment … to ‘prefund’ health benefits for future retirees. But, with less than $1 bil.lion in the bank, the Postal Service announced on Monday that it would not be making the payment. It has a second payment, for $5.6 bil.lion, due in September. Unless lightning strikes, it won’t be making that one either…. [T]hat prefunding requirement … has cost the post office more than $20 bil.lion since 2007—a period during which its total losses amounted to $25.3 bil.lion. Without that requirement, the post office would still likely be struggling, but it would have a lot more wiggle room—and a lot more cash. (Its pension obligations are also overfunded by around $11 bil.lion.)” (The New York Times; free registration required)

How California Has Failed to Prepare for its Accumulating Retiree Health Care Obligations

“Retiree health care is the largest component of these Other Post-Employment Benefits (OPEBs). As the Baby Boomer generation has begun to retire, we have seen an upswing in the number of retirees accompanied by both longer predicted life spans for those retirees and an overall increase in health costs. In short, more people are earning benefits for longer periods of time at higher costs. Together, these factors will make it increasingly difficult for California to pay for these benefits in the future. Unlike pensions, which the State pre-funds by setting aside money for benefits when they are earned, retiree health care benefits are currently paid out of the State’s operational budget, forgoing potential savings from investment profits.” (California Common Sense)

The Chicago Tribune.  There are still many brand name prescription drugs losing patents this year and next.  For a list of the drugs going off patent, click into the article.  (Elejalde-Ruiz, 8/1)  Full story

City Bankruptcies Target Retiree Health Care Costs

“Lifetime retiree health care from an employer, rare in the private sector, is an important benefit [for] public employees… In 2007 [the California state Controller] made the first estimate of the cost of providing retiree health care for current state workers and retirees: $50 bil.lion over the next 30 years. Last February his actuaries increased the estimate to $60 bil.lion.” (CalPensions)

Public Employer Retiree Health Costs Rising

“State and local governments in New York will have to come up with an additional quarter of a trillion dollars to pay the entire tab for retiree health care, according to a new report. The $250 billion bill for retiree health coverage is up from $210 billion two years ago, said the study issued by the Empire Center for New York State Policy on Wednesday. Referred to as ‘other post-employment benefits,’ or OPEB, the unfunded obligations represent a troubling strain on budgets.” (The Wall Street Journal)

Senior Star July 2012

The Benistar Senior Star keeps you informed of the news in the world of Retiree Benefit Plans. Here are some of the recent news articles we think will be of interest to you.

As Retiree Drug Subsidy Program Becomes Less Attractive, Employers Consider Using ‘Group Waiver Program’         
"Employers who currently receive a federal tax subsidy for providing retiree prescription drug coverage under the retiree drug subsidy program, or RDS, will no longer be able to take a deduction for that subsidy as of 2013 … Therefore, many employers are considering an alternative subsidy program referred to as the Employer Group Waiver Program, or EGWP, as an attractive way to achieve significant plan savings and are weighing the benefits of the EGWP against the RDS." (G Law Group)

Final Medicare Part D Regulations Include Coverage Gap Discount Program
"The regulations include changes reflecting HHS’ experience to date in administering Part D and will be of interest to sponsors of Part D prescription drug plans. In addition, some group health plans must coordinate with Part D prescription drug plans, among other reasons, to determine which coverage pays first and to disclose to Part D individuals whether the group health plan coverage is creditable." (Practical Law Company)

Medigap gets high marks

By Kathryn Mayer

Nine in 10 seniors enrolled in Medigap say they are satisfied with their coverage and the vast majority (91 percent) say they’d recommend the coverage to a friend or relative when they turn 65, a survey from America’s Health Insurance Plans finds…Read more

New York State Retiree Health Liability Rises to $72 Bil.lion; NYC’s Is $84 Bil.lion
"Most states cover retiree health benefits on a pay-as-you go basis. They don’t set aside money annually to pre-fund the obligations, as they do with pensions. Last year, New York, the third-biggest U.S. state by population, spent $3.3 bil.lion on health care for active and retired employees as health-care spending rose 6 percent." (Bloomberg)

Walgreens, Express Scripts in new deal

(Crain’s) — The Deerfield chain will participate "in the broadest Express Scripts retail pharmacy network available to new and existing clients."

Senior Star 1st Quarter 2012

Providence, RI, Mayor Asks City Retirees to Accept Reduced Pensions and Less Generous Health Care Coverage
“During a sometimes tense meeting at Rhodes on the Pawtuxet in Cranston, the mayor asked Providence’s 4,300 retirees to accept three changes: the suspension of future pension cost-of-living adjustments (COLAs) until the system gets from its 32% funded level to 70%; a 20% health insurance co-share for retirees under the age of 65; and a transition to Medicare with a supplemental plan for those 65 and older.” (


States Facing 96% Unfunded Retiree Health Care Benefits
“States haven’t financed almost 96 percent of the $627.4 bil.lion they were projected to owe for future retiree benefits in 2010, according to Bloomberg Rankings data. The estimated deficit grew from about 95 percent in 2009 as governors coped with lower general-fund revenue and rising demand for services following the longest recession since the Great Depression.” (Bloomberg)


West Virginia Reins in Public Retiree Health Benefit Costs

“West Virginia is already reaping benefits from recent efforts to rein in public retiree health benefit costs, officials say: They expect to shrink the projected funding shortfall further, by more than $1 bil.lion, and a Wall Street credit rating agency appears ready to praise the state’s handling of its last major liability.” (The Herald-Dispatch)


Employees Cannot Opt Out of Medicare Part A Without Also Rejecting Social Security Benefits, U.S. Court of Appeals for the D.C. Circuit Rules
“Several employees, who were receiving Social Security benefits, sued on the grounds that they suffered harm due to the Medicare Part A coverage because private insurers reduce the benefits they can receive once they become covered by Medicare Part A. They said they wanted to receive the benefits they would be entitled to under their employer’s group health plan.” (HighRoads)


A New Set of Best Practices for ‘Other Post-Employment Benefits’
“Fortunately, the Government Finance Officers Association (GFOA) has stepped up to the plate with a new guidance document providing best practices to public employers seeking to establish an OPEB trust. This primer covers the basic questions that most public officials and managers will face, outlines the basic legal options and pitfalls, explains in simple terms the paths available and the pros and cons of each, and directs readers to literature in the field to help support sound decisionmaking. Any finance officer can start with this roadmap and easily chart a course to implement a trust within six months.” (Governing)


Benistar Completes Record Year

BENISTAR, one of the nation’s largest administrators of group retiree medical and prescription drug plans, reported its most successful year for new business for the fiscal year ending June 30, 2011.

To open the Press Release in a new window, click here

Happy New Year! Senior Star 1st Quarter 2012

2012 Medicare Premiums, Deductibles and Coinsurance

“The standard monthly Part B premium and deductible will both decrease by just over 13 percent. This is a dramatic change from between 2010 and 2011 when they both increased by slightly more than 4 percent . . . .” (The Segal Company)

VEBA Cuts Health Care Costs for Retirees

“Thousands of retirees from auto parts manufacturers that abandoned their pension plans will be able to get health care coverage through a groundbreaking arrangement that will use a special trust to tap federal premium subsidies.” (Business Insurance)

ADEA Exemption for Coordination of Health Benefits with Medicare Does Not Permit Employer To Terminate Current Employees’ Benefits

“The ADEA provisions notwithstanding, Medicare law requires that employers who are subject to the Medicare as secondary payer (MSP) rules provide the same group health plan coverage to workers and their dependents who have Medicare coverage as they provide for other workers and their dependents who are not Medicare-covered.” (Wolters Kluwer Law & Business / CCH)

Retired California Public Workers Can Count on Promised Benefits, Court Says

“Health benefits for government retirees may not be eliminated if state andlocal governments had clearly promised workers those benefits, the California Supreme Court ruled in an Orange County case . . . .” (Los Angeles Times)

Cutting Retiree Benefits a Sore Subject for Military

“Military retiree benefits cost the Pentagon $50 bil.lion a year. . . . There are 1.9 mil.lion military retirees drawing pay and benefits, compared to 1.5 mil.lion in the active duty force. In 2010, then-Defense Secretary Robert Gates said those costs are ‘eating the Defense Department alive.'” (NPR)

New York unions sue over retiree health care change

ALBANY, N.Y. (Reuters)—Seven New York state unions filed federal lawsuits on Wednesday seeking to prevent Gov. Andrew Cuomo from increasing the amount that retired workers pay for health care.

Senior Star 3rd Quarter 2011

Health Insurance for Active and Retired City Employees: Asheville, Denver, and Oklahoma City (PDF) 10/02/2011

Although all three cities offer retiree health care benefits and require retirees who are eligible for Medicare to enroll, only one city has begun to prefund retiree health obligations. The other two cities pay for retiree health on a pay-as-you-go basis, typical of American local governments.

St. Louis Post-Dispatch Faces Second Suit over Retiree Health Benefits


According to the Riverfront Times, the CWA Local 14620, also known as the St. Louis Mailers Union No. 3, represents the 220 employees who work in the mailroom, as well as retirees . . . . It filed suit in an attempt to force the company to resume providing healthcare for the 22 retirees who were kicked off the company’s plan in March.

Measuring the Cost Impact of Changes to Government Retiree OPEB Before Contracts Are Signed


In the corporate world, it is almost unheard of for employers to adjust their retiree benefit promises without first measuring the cost impact. This is especially true of collectively-bargained pension and retiree health plans. Both sides hire an actuary to estimate the cost of these benefits and bring their numbers to the table.

Employers Adjust Retiree Drug Plans As Tax Break Ends


The value of the tax break has been significant. ‘For corporate America, this makes a world of difference,’ said Michael S. Jacobs, national clinical practice leader at Buck Consultants L.L.C. in Atlanta. If a company receives a $500 per retiree subsidy for providing prescription drug coverage to a retiree, the subsidy’s tax-free status makes it equivalent to $1,500, he said.

Top Reasons to Change Your GASB 45 Valuation Schedule


GASB 45 requires a complete actuarial valuation of public retiree health plans to be completed every 2 to 3 years (depending on number of plan members), and sponsors usually don’t look forward to the administrative hassles of their next study. However, there are several situations where a new valuation could be advantageous and, likely, mandatory.

Senior Star 2nd Quarter 2011

Aon Hewitt Report Shows Potential Impact of Health Care Reform on Retiree Medical Programs

Excerpt: LINCOLNSHIRE, Ill., April 20, 2011 — Most large employers are now beginning to rethink their retiree health care strategy as a result of federal health care reform, according to a recent report by Aon Hewitt, the global human resource consulting and outsourcing business of Aon Corporation (NYSE: AON).
In late 2010, Aon Hewitt surveyed 344 companies, representing 2.2 million retirees nationwide, and found that 61 percent were either already evaluating or were expected to evaluate their long-term retiree medical strategy by the end of 2011, due to health care reform. Meanwhile, 23 percent of respondents indicated they were still considering whether to assess their current strategy and only 16 percent had no immediate plans to review their current approach.

CMS Announces Indexed Medicare Part D Amounts for 2012

Excerpt: On April 4, 2011, the Centers for Medicare & Medicaid Services (CMS) announced the indexed Medicare Part D standard benefit and Retiree Drug Subsidy (RDS) amounts for 2012.1 This Capital Checkup features charts comparing the 2012 numbers to the 2011 numbers.
The Medicare Modernization Act (MMA) requires CMS to announce indexed Medicare Part D standard defined benefit amounts each year that reflect the increase in drug costs. In 2012, the Medicare Part D standard defined benefit amounts will increase by 3.34 percent, a rate that is based on drug cost trend of 4.67 percent in 2011 (almost the same trend as one year earlier: 4.63 percent), adjusted by CMS for prior year revisions.

Factbox: States’ Underfunding Of Retiree Health Benefits

Excerpt: (Reuters) – Many states cannot afford to cover promises made to their future retirees, with the Pew Center on the States reporting on Tuesday that there is a $1.26 trillion gap between what they have pledged to pay and the amount they have set aside. Nearly half of that amount, $604 billion, is for healthcare and other benefits not included in pensions, such as life insurance.


Seniors Not Getting Important Preventive Health Services Too few getting recommended vaccines and screening for cancer, diabetes and osteoporosis, report warns

Excerpt: TUESDAY, March 15 (HealthDay News) — Many Americans aged 65 and older are not receiving potentially lifesaving preventive health services, says a new report by several U.S. Department of Health and Human Services agencies. Too few seniors are getting recommended vaccinations for influenza and pneumococcal disease, including bloodstream infections, meningitis and pneumonia; help with quitting smoking; or screenings for breast cancer, colorectal cancer, diabetes, high cholesterol and osteoporosis, according to the report released March 14.


‘Common sense’ bill would change Medicare requirement

Excerpt: A bill to cover seniors’ need for skilled nursing care following an observational stay at a hospital is making its way through Congress. The bipartisan legislation, entitled the Improving Access to Medicare Coverage Act of 2011, is being praised by provider groups, such as the American Health Care Association.


Medicare Reform’s OPEB Side Effects Public employers need preemptive cost-control strategies.

Excerpt: Last week the U.S. House majority leaders announced a sweeping $6 trillion strategy to reduce the federal budget deficits structurally. State and local officials are largely focused on the immediate impact on intergovernmental assistance programs and the Medicaid program. They should also pay attention to the hidden impact that Medicare reforms would have on their retiree medical benefits plans (or “OPEB” for other post-employment benefits).

Medicare’s Drug Coverage Gap to Shrink Away Under Health Care Reform
Experts say changes kick in this year, with the ‘donut hole’ disappearing by 2020

Excerpt: Starting this year, Medicare Part D’s widely despised “donut hole” — the gap in drug cost coverage enrollees encounter when they reach a certain spending threshold — will start to disappear, one result of the health care reform package enacted last year, experts say.


Sweeping Changes Could Slash Generous Retirement Benefits

Some articles the staff at Benistar think you should read:

New York Faces $200 Billion in Retiree Health Costs

Excerpt: “The daunting size of the health care obligation raises the possibility that localities will be forced at some point to choose between paying their retirees’ medical costs and paying the investors who hold their bonds. Government officials aim to satisfy both groups, and have even made painful cuts in local services when necessary to keep up with both sets of payments.”

(The New York Times; free registration required)

New Ways to Manage Retiree Benefits

Excerpt: “Milliman offers a four-step strategy for managing GASB 45 sticker shock.” (Milliman)

Sweeping Changes Could Slash Generous Retirement Benefits of Former Cincinnati City Employees and Future Retirees

Excerpt: “With the troubled city retirement system struggling to dig out of a $1 billion-plus long-term hole, a new pension board – one on which outside financial experts recently replaced city officials with personal stakes in the decisions – is reviewing changes to lower benefits, raise retirement ages and cap pensions well below the current 90 percent-of-salary ceiling.”

Maryland Panel Recommends Sweeping Retirement Benefit Changes for Public Employees

Excerpt: “Maryland state workers would have to work for 15 years instead of the current five to become eligible for pension or retiree health care benefits, according to new recommendations from a study panel. An Associated Press news report said the Public Employees’ & Retirees’ Benefit Sustainability Commission is also recommending that state employees would have to spend 25 years working for the state, instead of 16 years, to receive the maximum retiree health care premium subsidy and put in 10 years instead of five to become pension vested.” (PLANSPONSOR.COM)

Retirement Benefits Helping Employers Attract and Retain New Workers, Towers Watson Survey …

Retirement benefits — especially defined benefit (DB) programs — are giving employers an added advantage when it comes to attracting and retaining new […]


“The past cannot be changed. The future is yet in your power.”

Mary Pickford