Lab Retirees Upset over Health Care Changes
By Independent News
Retirees of the Lawrence Livermore National Laboratory are caught up in the latest trend in medical coverage, "defined contributions."
Under the new program, the Lab is moving retirees from a group policy to individual policies.
Several retirees, who preferred not to be quoted, noted they are seeking legal advice. In addition, they are exploring other options, such as contacting Congressional representatives, in an effort to have questions and concerns answered.
Those covered by Medicare or Blue Cross type plans say that they are finding that they will have to spend more out of pocket for the same coverage they received last year.
Others, who have been part of Kaiser, find themselves up in the air. The latest information is that Kaiser may or may not be available in 2009 to retirees.
At an open forum where the changes were discussed, Lab spokesman Paul Rosenkoetter was asked why retirees couldn’t just be reinstated into the plans enjoyed by the other U. C, retirees. He answered, “It would cost $13,000,000. That is an unacceptable expense."
Retiree Bob Schock is one of those impacted by Kaiser. Schock said one of the concerns is the lack of information with regard to what is happening with health care plans. He noted that at meetings where health plans were discussed, those with Kaiser plans were led to believe they shouldn't worry. Now, they are hearing something different.
"There is concern that those of us with ongoing medical issues will have to find some other organization to deal with (other than Kaiser). That's the worry," said Schock.
Those on Medicare or other medical plans have other issues. Defined contributions allow employers to shift the cost of rising health care premiums onto recipients. Under the program, an employer lays out a limited pot of money, called Health Retirement Accounts (HRA). The recipient uses it to purchase health care insurance on the open market and to cover co-payments, deductibles and other health care expenses. Any unused money rolls over into the next year. Any costs over the amount provided are paid by the retiree.
The account funds are provided on a tax free basis. HRA funds can be used to pay the monthly costs for plans and to reimburse for co-payers. However, funds retirees are entitled to can run out before the end of the year if there were a lot of costs early in the year.
Extend Health Inc. has been hired by the Lab to handle the new program. The firm acts as a health insurance broker. Andrea Comporato, vice president of sales for Extend Health, argued that both the Lab and retirees will save money. There are more choices for health care, she pointed out.
Under the new system, each person (and spouse) with 20 years of service or more at the Lab receives $2400 placed into a health care reimbursement account. The money, according to some retirees, is not enough to provide the same coverage they currently enjoy. Nor will it cover future increases in health care coverage as retirees age.
Susan Steinberg, the spouse of a retiree, provided several examples. In 2008, Lab retirees on Medicare received reimbursement for their Medicare B premiums. In 2009, they will receive no reimbursement. Premiums are $96 per month, so this is an automatic out-of-pocket expense of $1,156.80
She stated, "Last year, many retirees, including myself, chose a Medicare supplement from Blue Cross. It included both the 20% of medical bills that Medicare doesn’t pay, plus most prescription costs. This plan was free to U.C. retirees as part of their group coverage. In 2009, retirees will pay much more to buy a comparable policy individually – in my case nearly $1600. To add insult to injury, we will need to purchase a separate prescription policy. A comparable plan will add a cost of $600."
Steinberg estimates that her 2009 expenses for medical policies will change from zero to $3,356.80.
The change in procedure also makes policy holders vulnerable, according to Steinberg. For example, if a person were to sign up for a Medigap plan, and then decide to switch to another coverage, the new provider could refuse to accept the individual or require a 90-day waiting period before coverage kicks in. She added, "Worst of all, retirees will now face annual premium raises with each birthday, unlike all other U.C. retirees, who remain under the group plan protection. As we age and develop more medical problems, we are also at risk of being dropped by our current plans in future years."
Comporato stated that Medicare Supplemental rates are based on age. "The rates are very competitive." Comporato added, "When people sign up during open enrollment, there is no waiting period."
The biggest hit many retirees will face is the “donut hole." The term "donut hole" refers to a "coverage gap" within the defined standard benefit under the Medicare Part D prescription drug program. Under the defined standard benefit package there is a gap in coverage between the initial coverage limit and the catastrophic coverage threshold. Within this gap, the beneficiary pays 100% of the cost of prescription drugs before catastrophic coverage kicks in.
Under the new plan, the Lab will reimburse retirees up to $4350 annually for prescription drugs to close the gap. Payment would be prorated for the year based on the month a retiree reaches the gap. Instead of being reimbursed with a check, the cost will be deducted from the account. Any reimbursement for drugs in the “donut hole” are taxable to the retiree.
"In theory, we are UC retirees," said Steinberg. "However, we are not receiving the same treatment as other UC retirees."
Lynda Seaver, a spokesperson for the Lab, said that Lab retirees are considered to be UC retirees only when it relates to their pensions. The health care coverage was switched to LLNS (Lawrence Livermore National Security, LLC).
At the same time, retirees from Los Alamos National Laboratory remain UC employees for both health care and pension plans.
Schock said that the management contract for the Lab contains a provision that LLNS would manage the health plans, not UC. "During meetings where the contract was discussed, they kept assuring us that would be to our benefit," he stated.
Health care management was first subcontracted to Hewett Associates, which in turn subcontracted to Extend Health. Schock said there were questions asked about how health care costs would be reduced when there would be three different entities involved, each taking an administrative fee. "How could they do better than UC, which is a not-for-profit entity negotiating for coverage for roughly 100,000 individuals?" asks Schock.
On the Lab retirees website there are several questions raised. One is why remaining under a UC medical plan was not an option. Saying it's too expensive is not a sufficient answer retires claim. "Many retirees would still like to have the UC medical plans as an option even if it will cost them more."