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Benistar News on Retiree Medical Plans Summer 2013

The Benistar Senior Star Brings You the Latest News on Retiree Medical Plans.

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Benistar Retiree Medical Plans

Benistar Retiree Medical Plans

Retirees’ Medical Bills Are Bringing Down Detroit
“Pension and retiree-health-care obligations make up the bulk of the city’s unsecured debt, and their costs are rising rapidly. The emergency manager, Kevyn Orr, is right that Detroit must reduce its retirement-related debt to secure its future, but he has to be more specific about his target. Cutting retiree health care … should take priority over pensions.” (Bloomberg)

 

Even More Retirees Coming After Baby Boomers
“The number of Americans reaching age 65 each year will continue to grow beyond the Baby Boomers, according to a trend analysis from LIMRA…. Specifically, 3.4 million individuals are projected to reach age 65 in 2013. By 2023, 4.1 million Americans will reach 65 and then 4.2 million by 2050.” (PLANADVISER.com)

 

Report sees first drop in traditional prescription spending in 20 years

The aggregate trend for 2012 was a bump of 2.7%, similar to that of 2011, according to pharmacy benefit manager Express Scripts. However, the company also finds that the spending decline was offset by an 18.4% rise in spending on specialty medications.read more »

 

Step Onto the Cable Car and Deposit $13,487 for San Francisco’s Retiree Health Care
“To cover the gap [in pension funding for San Francisco city workers], each household in the city would have to fork over $1,677…. But when it comes to retiree health care costs, it’s another story. San Francisco has saved less than one percent of its $4.4 billion tab — and each household would have to pay $13,487 to make up the difference.” (SFGate)

 

Cost of Retiree Healthcare Benefits for States and Municipalities: The Next Shoe to Drop?
“Kentucky is … opting to issue bonds in order to cover its annual costs for ‘other post-employment benefits’ (OPEB), which includes benefits like health care and life insurance for retired workers. In fiscal 2012, the state’s five main retirement health insurance plans combined for a total unfunded liability of more than $6 billion, while the state’s OPEB cost that year was nearly $850 million … The tactic of borrowing money to pay for those costs has not won the state favor with ratings analysts.” (Governing)

Senior Star 1st Quarter 2013

 

Retiree benefits costs push California city into bankruptcy
By Tracie Cone

All retirees get health insurance for themselves and a dependent for life. Read More

 

Text of CMS 2012 Report on ACA Effect on Costs for Medicare Beneficiaries (PDF)
“This second annual report details how millions of seniors and people with disabilities with Medicare continued to experience lower costs on prescription drugs and improved benefits in 2012 because of the [ACA]. Since the law’s enactment, 6.1 million Americans with Medicare who reached the Part D coverage gap also known as the ‘donut hole,’ have saved over $5.7 billion on prescription drugs. Drug savings of $2.5 billion in 2012 are higher than the $2.3 billion in savings for 2011…. [Projected] average savings per Medicare beneficiary [are] approximately $5,000 from enactment through 2022, while those with high prescription drug spending are projected to save much more — over $18,000.” (Centers for Medicare & Medicaid Services)

 

A Widening Gap for Cities: Shortfalls in Funding for Pensions and Retiree Health Care
“Besides pensions, many localities also have promised health care, life insurance, and other non-pension benefits to their retirees, but few have started saving to cover these long-term costs. These unfunded liabilities loom even larger than for pensions … As of fiscal year 2009, the cities in this report had promised at least $118 billion more than they had in hand to cover retiree health care benefits. Wide disparities exist in how prepared cities are to fulfill their pension obligations … Cities have more in common when it comes to gaps in funding for retiree health care and other non-pension benefits. As of fiscal year 2009 … Only Los Angeles and Denver had even half of the money needed.” (Pew Center on the States)

 

Sacramento City Manager Details Unfunded Retiree Healthcare Liability
“Most worrisome … is $440 million in retiree medical benefits that the city has no plan to fund besides annual payments of $11 million from the already battered general fund budget, which funds core city services such as police protection, park maintenance and fire personnel. The total unfunded liability stemming from medical benefits has grown by $60 million in the past five years.” (Sacramento Bee)

Michigan Cities Have $12.7B In Retiree Health Costs
“Michigan cities and townships that provide health care for retired public workers face nearly $13 billion in unfunded costs … with half setting aside no money to cope with a bill gobbling up more of their budgets…. [Detroit] is not alone in grappling with how to pay promised health benefits to retirees. More than 300 cities, townships and villages — home to two-thirds of state residents — face a combined $12.7 billion in unfunded liabilities in the next 30 years.” (CBS Detroit)

Retiree benefits costs push California city into bankruptcy

By Tracie Cone

All retirees get health insurance for themselves and a dependent for life. Read More

 

Text of CMS 2012 Report on ACA Effect on Costs for Medicare Beneficiaries (PDF)
“This second annual report details how millions of seniors and people with disabilities with Medicare continued to experience lower costs on prescription drugs and improved benefits in 2012 because of the [ACA]. Since the law’s enactment, 6.1 million Americans with Medicare who reached the Part D coverage gap also known as the ‘donut hole,’ have saved over $5.7 billion on prescription drugs. Drug savings of $2.5 billion in 2012 are higher than the $2.3 billion in savings for 2011…. [Projected] average savings per Medicare beneficiary [are] approximately $5,000 from enactment through 2022, while those with high prescription drug spending are projected to save much more — over $18,000.” (Centers for Medicare & Medicaid Services)

 

A Widening Gap for Cities: Shortfalls in Funding for Pensions and Retiree Health Care
“Besides pensions, many localities also have promised health care, life insurance, and other non-pension benefits to their retirees, but few have started saving to cover these long-term costs. These unfunded liabilities loom even larger than for pensions … As of fiscal year 2009, the cities in this report had promised at least $118 billion more than they had in hand to cover retiree health care benefits. Wide disparities exist in how prepared cities are to fulfill their pension obligations … Cities have more in common when it comes to gaps in funding for retiree health care and other non-pension benefits. As of fiscal year 2009 … Only Los Angeles and Denver had even half of the money needed.” (Pew Center on the States)

 

Sacramento City Manager Details Unfunded Retiree Healthcare Liability
“Most worrisome … is $440 million in retiree medical benefits that the city has no plan to fund besides annual payments of $11 million from the already battered general fund budget, which funds core city services such as police protection, park maintenance and fire personnel. The total unfunded liability stemming from medical benefits has grown by $60 million in the past five years.” (Sacramento Bee)

 

Michigan Cities Have $12.7B In Retiree Health Costs
“Michigan cities and townships that provide health care for retired public workers face nearly $13 billion in unfunded costs … with half setting aside no money to cope with a bill gobbling up more of their budgets…. [Detroit] is not alone in grappling with how to pay promised health benefits to retirees. More than 300 cities, townships and villages — home to two-thirds of state residents — face a combined $12.7 billion in unfunded liabilities in the next 30 years.” (CBS Detroit)

 

Quote of the Quarter:

 

“Our business in life is not to get ahead of others, but to get ahead of ourselves — to break our own records, to outstrip our yesterday by our today.”

Stewart B. Johnson (British artist known for his figurative work)

 

Senior Star Third Quarter 2012

QUOTATION OF THE QUARTER

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 http://www.benefitspro.com/2012/05/10/retired-couples-may-need-240000-for-health-careroom 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.” (WPRI.com)

 

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.

http://benefitslink.com/links/20111002-088294.html


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

09/30/2011

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.

http://benefitslink.com/links/20110930-088275.html


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

08/16/2011

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.

http://benefitslink.com/links/20110816-087273.html


Employers Adjust Retiree Drug Plans As Tax Break Ends

08/15/2011

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.

http://benefitslink.com/links/20110815-087241.html


Top Reasons to Change Your GASB 45 Valuation Schedule

07/12/2011

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.

http://benefitslink.com/links/20110712-086614.html