The Public Employee Benefits Program on Thursday threw out the unpopular changes they made in handling Medicare retirees for the coming plan year, going back to the way things are this year.
Governor's Chief of Staff Mike Hillerby and PEBP Director Woody Thorne told the Senate Finance Committee that will still mean increases in what Medicare-eligible retirees pay for health benefits this coming year, but eliminate the increases last week's complicated "de-commingling" proposal would have had for everyone else covered by the health plan.
Hillerby said instead of shifting costs to all those other participants to reduce increases for Medicare-eligible retirees, the state will subsidize their premiums out of reserves "to get them to the same rates they would have had."
That will cost the state about $4.8 million over the next biennium.
He told the committee the executive branch will conduct a thorough study of the plan over the next two years to figure out how to fix the situation permanently.
The furor was set off this year when PEBP participants received packets for the coming year saying their total out-of-pocket cost for a Medicare-eligible retiree plus spouse would be $510 a month. This year's cost was just $78 a month plus the $78 per person to cover Medicare Part B - a total of $234 for a couple.
Thorne said, however, this year's premium was artificially low because the plan was subsidizing all participants to reduce a huge surplus in reserves.
"The true comparison is to 2004, not this year," he said.
The total out of pocket cost for those retired couples in 2004 was $312 a month, including Part B.
PEBP officials and lawmakers developed a compromise in which Medicare retirees were again separated from the rest of participants, reducing out of pocket costs for that couple to $388 a month including Medicare Part B.
But that plan resulted in an out-of-pocket increase to active participants both in 2006 and 2007 of at least $20 a month, not counting inflation in health costs.
Under the proposal adopted Thursday night, Medicare eligible retiree with spouse would pay $391 a month including Medicare Part B - just $3 more than last week's compromise.
Thorne said, however, the change eliminates the increases for all other classes of participants.
"The benefit is it does not change anybody else's rates in the plan," Hillerby told the committee.
They have to implement the changes as soon as possible since the plan participants are already in open enrollment for the 2006 plan year, which begins July 1.
- Contact reporter Geoff Dornan at email@example.com or 687-8750.