Is "keeping the insurance you have" your choice?
Retirement reversal
Retired public employees may face higher health care costs, fewer benefits under proposal by cash-strapped Sonoma County
By Bleys W. Rose
The Press Democrat
February 5, 2008
After four decades of promising Sonoma County public employees generous health benefits upon retirement, the county now is warning thousands of current employees and retirees they face precedent-setting reductions.
A proposal by county administrators that would effectively force many retirees to pay more for their health plans will be presented today to county supervisors.
In addition, the administration proposes to dramatically alter health benefits for new hires by, in the future, not funding anything upon retirement.
The decision could have implications for government employees across the county, from cities to school districts, as they confront mounting health insurance bills for retirees.
The shift in thinking about the way governments view obligations to pay future retirement benefits comes about because the private, independent Governmental Accounting Standards Board in July 2004 ruled public agencies from states to city governments to school districts needed to assess the value of their promises and explain how they plan to pay for them.
Details on how much more retirees will pay still must be negotiated with unions as contracts come up for renewal. The most notable is the Service Employees International Union, which represents 3,000 county workers and whose contract expires in June.
“We really don’t know if this proposal sets the pattern for what we can expect to see at the bargaining table, but our feeling is that they will want to stuff it down our throats,” said Tom Drumm, SEIU’s work site organizer for county employees.
http://www1.pressdemocrat.com/article/20080205/NEWS/802050310/0/NEWS01
And…
Public Employee Post-Employment Benefits Commission (California)
Funding Pensions and Retiree Health Care for Public Employees
On December 28, 2006, Governor Arnold Schwarzenegger established the Public Employee Post-Employment Benefits Commission to propose ways for addressing unfunded post-employment benefits. The first of the Commission’s three assigned missions is to: “Identify the full amount of post-employment health care and dental benefits for which California governments are liable and which remain unfunded.” (Health and dental benefits are “other post-employment benefits” or OPEB.)
Key findings:
- California’s public employers reported a combined unfunded OPEB liability of at least $118 billion as their most recent actuarial valuations.
- Pay-as-you-go continues to be the funding strategy used by those agencies that offer OPEB benefits.
- The total amount that public employers are currently paying or setting aside for future payments is at most $3.5 billion on an annual basis.
Recommendation 19:
Public employers should provide timely notification to both active and retired employees when proposing a change in retiree health care benefits. This notification should be provided in a time frame that reasonably allows affected employees and retirees to understand the impact of the benefit change, to review other options available to them, and to comment to the employer on the proposed changes.
Recommendation 32:
Health plan sponsors should identify individuals who are Medicare-eligible and inform them of the need to enroll in Medicare in a timely manner. Employers should provide those individuals with information on penalties which result from delayed enrollment in Medicare.
Full report (332 pages):
http://www.pebc.ca.gov/images/files/final/080107_PEBCReport2007.pdf
Comment:
By Don McCanne, MD
Quick! How many of you, under age 85, have the same health insurance plan that you had twenty years ago? None?
OK. Then how many of you changed plans simply because the private insurance market offered new plans with improved benefits and lower premiums? None?
Why did you change? Did your employer change the health benefit program offered to employees? Did your employer increase your share of the premium to a level that you could no longer afford it? Did your employer terminate the program? Did you change jobs and lose the coverage you had? Did you lose coverage because you reached an age that bumped you off of your parents’ plan? Did you become self-employed but found that you could not afford the premium for individual coverage? Or was coverage denied because of a pre-existing disorder? If you did have coverage in the individual market, did the insurer increase premiums to a level that you could no longer afford? Or did the insurer simply withdraw that product from the market? When you did change coverage for reasons not really under your control, did the new plan have better benefits with lower costs than your prior plan?
What is the obvious conclusion? Health insurance coverage on a continual basis is practically non-exisent in the private insurance market. In almost all of the instances listed, the insured individual was not granted the option of “keeping the insurance you have.”
Everyone knows that the most stable coverage that exists is that offered to government employees. The life-time health benefit package offered is one of the most important reasons that individuals seek employment in the government sector. But that is beginning to change.
The experience in Sonoma County is presented above as only a single example of the challenges faced by government entities in financing health benefits for their employees. You have no doubt read many other reports of other reductions in government employer-sponsored benefits.
As we discuss options for comprehensive health financing reform, retired government employees are amongst the most vocal in wanting the option of keeping the coverage they have. Those who are smug about their coverage should read the report of the Public Employee Post-Employment Benefits Commission. It is quite sobering.
And what about employees in the private sector? The auto industry has long been noted for having the most comprehensive benefit packages available. How have they responded? They converted their programs into VEBAs (Voluntary Employees’ Beneficiary Association) and turned the control over to the union. The problem is that these VEBAs are underfunded upfront. What will happen to retiree benefits once it is obvious that the funds will soon be depleted? And keep in mind that the auto industry has had the best that the private sector has to offer. Do you believe that the retired auto workers will want to “keep the insurance you have” when there are no funds to back it up?
Today’s message is not simply about underfunding of promised health benefits. It is about where we are headed in our efforts to reform health care financing.
Most polls on health care reform continue to ask many of the same questions as they have over the past couple of decades, but there is one new question. The pollsters are now asking if you support reform that would allow you “to keep the insurance you have.” For healthier individuals who believe that they have good insurance, this concept polls very well. In fact, the other questions in the polls are now tailored to reinforce this simple concept.
Large political coalitions are forming to spread this gospel. They are rejecting those who call for a national health program, stating that the policy debate is over, and now it is all about unity (behind this concept).
This movement has really gained traction. It is likely that the next president of the United States will enter office having campaigned on the promise of allowing you to keep the insurance you have.
The horrendous tactical error is that they are walking away from the policy dialogue when that is precisely what we now need to have. When our very best health programs, those provided by the government and the auto industry, are being threatened, we know that the lesser plans that most of us have will be shredded in an attempt to control insurance costs, by further reducing benefits and increasing cost sharing. And externalities, such as those listed above, will make it highly unlikely that we would even have the choice of keeping the same insurance we have.
“Oh wait,” they say, “you can buy the government Medicare-like plan that is more comprehensive and less expensive than private coverage.”
BS. Adverse selection would cause premiums in the government program to skyrocket (death spiral), and nobody could afford it.
We do need a national health program that provides lifetime comprehensive benefits for everyone, while being funded equitably. But that has been removed from the agenda of the keep-the-insurance-you-have coalitions, and that is precisely why their claim that we now have unity is a blatant fraud. That is why those of us who really do care about effective reform insist that we move forward with an honest dialogue on policy.
Yes. The progressives have once again called back up to duty our infamous circular firing squad. Blam! Blam!