The Board of Trustees and staff of the Ohio Public Employees Retirement System invest a great deal of time and effort to preserve the pension plan and provide access to health care coverage for retirees.
These efforts have been developing on separate but collaborative paths, which now are converging.
First, pension legislation is being debated in hearings in the Ohio House this summer, after the Ohio Senate unanimously approved Senate Bill 343 in May. This legislation would alter the pension benefit structure for current members in part by raising retirement ages, changing the terms of the COLA, altering the benefit formula and increasing the final average salary determination. We are working with the legislature in hopes that they pass the law in 2012.
While the pension legislation has been working its way through the General Assembly, the OPERS Board needed to consider significant changes to the health care plan, changes that could affect many current and future retirees. The Board is interested in member feedback this summer (you will find a link to the health care survey here), and will make a final determination in the fall on all aspects of health care coverage.
There is no option on whether to act or not to act. The financial and demographic challenges we currently face simply will not allow us to maintain our current level of coverage. The pension bill has been pending for more than two years, causing the fund to diminish the employer contribution into the health care fund. If we do nothing, the OPERS health care trust fund could be exhausted in as early as eight years. At that point, access to coverage would be available only for the coverage required under Ohio law.
Meanwhile, we are preparing to implement more immediate changes to the OPERS Retiree Health Plan, which we began communicating in July. In 2013, the plan will offer one level of coverage for our non-Medicare participants.
Why is OPERS offering one health care plan instead of three? First, we have about 90,000 retired members on our non-Medicare health care plan. An overwhelming majority of participants – nearly 85 percent – are signed up for the enhanced plan. The new plan offers no increase in monthly premiums for a majority of participants.
These changes are not part of pension legislation or the implementation of the long-term health care preservation plan. They simply represent the maintenance changes our Board makes annually to the plan so we can continue to offer affordable coverage.
Affected members received letters in July explaining the basics. We will soon be mailing the annual open enrollment packet and “Special Health Care Bulletin,” which will explain the changes in greater depth. (Open enrollment for the plan will be held from Oct. 1-31.)
The following are some of the 2013 plan design changes for non-Medicare enrollees:
- One plan offered
- An $850 in-network deductible for medical care
- A $2,500 in-network, out-of-pocket maximum
- Lower office visit copayments to encourage participants to see their doctor before problems arise
- One hundred percent coverage for generic medications used to treat common chronic conditions such as high blood pressure and high cholesterol
Multiple plans contribute to a greater chance of adverse selection. That means the healthiest people tend to pick plans with less coverage, and those with chronic illnesses tend to pick the more comprehensive plans. This drives up the cost for everyone by going against general insurance principles in which everyone is in one pool, thereby spreading the costs equally among those with good health and bad health.
Cost is another consideration. Currently, members who enroll in the less expensive Intermediate or Basic plans, depending upon their allowance amount, receive the difference between their monthly allowance and the monthly cost of their chosen plan deposited into their Retiree Medical Account (RMA).
RMA dollars can be used to cover IRS-eligible medical expenses including those incurred in future years. At the current rate of spending, with no changes to the plan, the OPERS health care fund is predicted to run out of money in 8-14 years.
Change is seldom easy. However, the OPERS Board is making them, including the move to a single health care plan, to provide increased efficiencies resulting in plan cost savings that benefit everyone.