Trustees OK increases in health care allowances

HRA base amount headed to $400 monthly in 2025 for Medicare retirees

By Michael Pramik, Ohio Public Employees Retirement System

April 11, 2024 – The OPERS Board of Trustees approved an increase in the Health Reimbursement Arrangement base allowance for Medicare retirees at its March meeting. The Board also voted to maintain the Pre-Medicare allowance at the current level.

The current base allowance of $350 per month for Medicare retirees will increase to $400 beginning in January and is expected to remain at that level through 2030. The base allowance for Pre-Medicare retirees is currently $1,200 per month and was scheduled to reduce to $1,000 per month in January. Instead, the Pre-Medicare base allowance will remain at $1,200 per month through 2030. The HRA increases are part of a plan to periodically evaluate the base health care allowances based on funding availability.

Trustees considered several approaches to increase the base allowances in light of the current costs of coverage for retirees. The approved periodic-increase plan increases health care buying power for Medicare retirees, provides plan stability for all retirees and follows the current structured allowance approach all retirees are familiar with.

This increase in HRA allowance levels will occur despite the system not having sufficient employer contributions to fund health care. However, the favorable investment returns and overall plan structure have allowed the health care fund to remain strong. While these allowance levels are currently expected to continue through 2030, the HRA allowance is monitored relative to the health care costs and funding. Future changes in the HRA allowance level could be considered earlier than 2031 depending on funding levels.

The goal of the HRA program is to cover a portion of the retiree’s medical and drug plan premiums. OPERS introduced the HRA for Medicare retirees in 2016 and for Pre-Medicare retirees in 2022. Retirees receive varying percentages of the base allowances depending on their years of qualifying service credit and the age at retirement. They can be reimbursed for paid premiums and out-of-pocket medical expenses with funds contained in their accounts.

Michael Pramik

Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.