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Report on Retiree Health Insurance by the 2013 – 2014 Salary and Benefits
Committee
Committee Members: Jessica Chapman (Co-chair), Colleen Manley (Co-chair), Brian Chezum, Joe Erlichman, Debra Mousaw, and Paula Sturge
Resource Individuals: Lisa Cania, Kathryn Mullaney, and Joseph Manory
Executive Summary
The Salary and Benefits Committee conducted a review on the topic of health insurance benefits for retirees. In late 2013, data were collected from peer institutions on their policies regarding retiree health insurance coverage. The data suggest that St. Lawrence’s current policy on retiree health insurance benefits is in line with similarly resourced institutions in our peer group. In March 2014 the committee conducted a survey of the retirees; from a pool of approximately 65 individuals for whom we had contact information, 24 individuals completed some portion of the survey. The survey indicated that, overall, the respondents generally find their Medicare plans easy to use and they tend to rate their satisfaction as neutral or better.
Introduction
For 10 years, and until January 2011, St. Lawrence had been self-insured for exempt employee (faculty and administrators) and retiree health care. Specifically in terms of retiree health insurance, Medicare was the primary health insurance provider and the University shared the cost of a supplemental insurance plan with the retirees. In self-insured plans, the employer collects premiums from individuals enrolled in the health plan and takes responsibility for paying health care claims. Because of a large number of serious illnesses in the second half of 2010 among insured participants (employees, dependents, and retirees), and with projections for 2011 estimating similar expenses, the University’s budget for health insurance would have had to increase by $1 million, from $3 million to $4 million. Participant costs also would have increased by at least 25%. The University budget did not have those resources to spend without dramatically changing the student experience, nor did the University wish to have premium increases be as large as they would need to be. They were forced to quickly explore alternative insurance options between late August and early October of 2010, with a decision necessary by mid-October. The decision was made to shift to a fully-insured program through Excellus for current exempt employees. Additionally, cost-sharing of a supplemental plan for retirees age 65 and over was eliminated and instead the University endorsed a $0 premium Medicare Advantage plan. We note that the University continues to assist with health insurance costs for individuals retiring before the age of 65 (as they are not eligible for Medicare). Beginning in January 2014, the University will make a one-time $1000 contribution to a Health Retirement Account (HRA) at the time of retirement for exempt employees who meet the eligibility requirements; these funds can be accessed at age 65 and can be used to reimburse for medical purposes only.
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In response to the discourse that appeared on the Faculty listserv in the fall semester, the 2013 – 2014 Salary and Benefits Committee conducted a review of the issue of health insurance coverage for retirees. We approached this issue from two perspectives. First, we collected information on retiree health insurance coverage among our peer institutions. Second, we conducted a survey of St. Lawrence retirees on their experiences, satisfaction, and expenses with Medicare. We summarize our findings in this report.
Survey of Retiree Health Insurance Plans in the NCG and USCG
In late 2013, the Salary and Benefits Committee collected data from our peer institutions on their retiree health insurance policies. Our former comparison group was the New Comparison Group (NCG). Of the 25 schools in the NCG,
• 7 have no retiree health insurance coverage (28%)
• 7 have frozen their plans (28%)
o Frozen means that they are allowing no new participants in the retiree
health insurance program
• 6 have defined contribution plans (24%)
o In a defined contribution plan, the employer offers a set dollar amount
towards the monthly premium of a supplement plan.
• 5 have traditional indemnity plans (20%)
o In traditional indemnity plans, the employer covers retirees on a Medicare
Supplement plan and benefits are coordinated with Medicare.
Figure 1: Total resources (in millions) for 2013 versus retiree health insurance coverage for the NCG. The sample sizes for each group are indicated in parentheses on the x-axis. The red horizontal line represents the total
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A natural question is about how the schools in these four groups differ. Figure 1 compares the total resources (in millions) for 2013 for these groups within the NCG. In 2013, St. Lawrence had less total resources than all of the schools with Defined Contribution plans. Additionally, the total resources for St. Lawrence were below the median (50th percentile) for the schools that have frozen their plans. The 2013 total resources for St. Lawrence falls below the 25th percentile for both the schools with no retiree health insurance coverage and those with traditional indemnity plans.
Our current comparison group is the University Salary Comparison Group (USCG); note that 15 institutions are in both the NCG and USCG. Of the 23 schools in the USCG,
• 5 have no retiree health insurance coverage (21.7%)
• 4 have frozen their plans (17.4%)
• 5 have defined contribution plans (21.7%)
• 9 have traditional indemnity plans (39.1%)
Figure 2 compares the total resources (in millions) for 2013 for these groups within the USCG. While the total resources for St. Lawrence fall in the top 25% of total resources for schools without retiree health insurance coverage, they fall roughly at or below the 25th percentile for the other three groups (schools with defined contribution, schools that have frozen their plans, and schools with a traditional indemnity plan).
Figure 2: Total resources (in millions) for 2013 versus retiree health insurance coverage for the USCG. The sample sizes for each group are indicated in parentheses on the x-axis. The red horizontal line represents the total
resources (in millions) for St. Lawrence in 2013.
Both Figures 1 and 2 suggest that St. Lawrence’s current policy for retiree health insurance is in line with similarly resourced institutions.
4 Survey of Retirees on Medicare Expenses and Satisfaction
The Salary and Benefits Committee designed a survey which they administered to the University’s retirees, via the Retiree Listserv, to assess satisfaction with their health insurance plans, as well as to gain insight into the expenses associated with health care for retirees. Our survey asks retirees about the choices they have made among the various Medicare options. For convenience, the two main options are briefly summarized in Table B1 in Appendix B; these main options are Original Medicare (Part A and Part B) or a Medicare Advantage Plan (Part C). Within each of these main categories, there are many options from which individuals can choose. More detailed descriptions about the various coverage options can be found at medicare.gov. The retirees were given approximately two weeks to complete the survey. Of a pool of approximately 65 individuals for whom we have contact information, 24 individuals completed at least some portion of the survey.
The questions on the survey can be considered to be in two broad categories. One category of questions was intended to identify which coverage options retirees are choosing, how much they spend on coverage, and their satisfaction with the specific coverage option they have chosen. The second category of questions was intended to understand retirees’ health care expenses and needs. In this report, we provide summaries of the numerical and multiple choice questions.
Summary of Coverage Options and Satisfaction
A summary of the coverage choices for the respondents is provided in Table 1; note that all retirees individuals enrolled in any “supplementary” plan (either Medicare Advantage or a Medicare Supplement) are also enrolled in Part A and Part B. There is typically no monthly premium associated with Medicare Part A, and the typical monthly premium for Medicare Part B is approximately $105 ($1,260 for the year).
In 2013, two of the respondents have opted for Medicare Supplement plans without enrolling in prescription drug plans (Part D). Their monthly premiums were $178 and $180, and their satisfaction ratings were “very satisfied” (5) and “neutral” (3), respectively.
Of the ten individuals who used a Medicare Advantage Plan in 2013, nine had no monthly premium. The one individual who did have a premium paid approximately $100 per month ($1,200 for the year). Eight of the ten individuals have prescription drug coverage included as part of their Medicare Advantage Plan. Figure 3 displays the satisfaction ratings for respondents with the Medicare Advantage Plan; the ratings for all ten individuals ranged from neutral (3) to very satisfied (5).
Plan Type Count
Medicare Advantage Plan 10
Medicare Supplement with Part D (Drug Coverage) 11 Medicare Supplement with no Part D 2
Alternative Coverage 1
Table 1: Summary of health insurance coverage choices for individuals who completed the survey. Note that examples of alternative coverage include coverage under a spouse’s plan or plans for retired military personnel.
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Figure 3: Summary of satisfaction rating with Medicare Advantage Plan
Eleven respondents used a Medicare Supplement Plan with Part D prescription drug coverage. Since individuals choose their Medicare Supplement and Part D plans separately, we ask about those plan choices separately.
Figure 4: (Left) Distribution of the monthly premiums for respondents who used a Medicare Supplement Plan in 2013, excluding the two unusual premiums ($0 and $400). (Right) Summary of satisfaction with Medicare
Supplement Plan.
There were two individuals who had “unusual” monthly premiums for their Medicare Supplement Plan compared to the rest of the respondents (one was $0 and the other $400). Including these two responses, the average monthly premium is $158.89 (standard deviation $99.48) and the median monthly premium is $175.75, with the middle 50% of these respondents having monthly premiums between $120.50 and $176.83. Excluding these two observations, the average monthly premium is $149.75 (standard deviation $43.05) and the median monthly premium is $175.75, with the middle 50% of these respondents having monthly premiums between $125 and $176.65. The boxplot in the left panel of Figure 4 displays the monthly premiums excluding the two unusual premiums. The right panel of Figure 4 summarizes the satisfaction ratings for the Medicare Supplement Plan (for individuals
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who have the supplement plan and prescription drug coverage). All respondents indicated that they were either satisfied or very satisfied with their Medicare Supplement Plan.
The average monthly premium for Medicare Part D prescription drug coverage is $27.75 (standard deviation $15.75). The median monthly premium for Medicare Part D is $29, with the middle 50% of respondents having monthly premiums between $19.50 and $43. The left panel of Figure 5 displays the distribution of Medicare Part D monthly premiums, while the right panel summarizes the satisfaction with Medicare Part D. One of the eleven individuals expressed dissatisfaction with the Medicare Part D plan; specifically, in the written comments they expressed dissatisfaction with the donut hole1 (i.e., coverage gap) associated with Medicare prescription drug coverage. Two individuals rated their satisfaction as neutral, while seven were either satisfied or very satisfied. We note that one individual did not rate their satisfaction with their Medicare Part D prescription drug coverage.
Figure 5: (Left) Distribution of the monthly premiums for respondents who used Medicare Part D (prescription drug coverage) in addition to their supplement plan. (Right) Summary of satisfaction with Medicare Part D.
Within each of these coverage options, there are numerous plans from which individuals can choose. The annual deductibles and annual out-of-pocket maximums vary from plan to plan. Eighteen individuals responded to questions about their annual deductible and annual out-of-pocket maximums. Eight individuals had no deductible, five were unsure if they had a deductible, and the remaining five individuals reported very different deductibles ($150, $300, $320, $3000, and $15,800). Further, seven individuals reported having no annual out-of-pocket maximum, four were unsure if they had an annual out-of-pocket maximum, and the remaining seven individuals reported annual out-of-pocket maximums ranging from $1,500 to $8,800 (for out-of-network expenses).
We specifically asked the retirees about their satisfaction with how their Medicare plan handled any major medical expenses that they encountered. The responses are summarized in Figure 6. The single “dissatisfied” (2) rating corresponds to an individual with the Medicare Advantage Plan, though
1 From medicare.gov: Most Medicare Prescription Drug plans have a coverage gap (the “donut hole”). This means that there is a temporary limit on what the drug plan will cover for prescription drugs. The coverage gap begins when an individual and their drug plan have spent a specified amount on covered drugs. For more details see http://www.medicare.gov/part-d/costs/coverage-gap/part-d-coverage-gap.html.
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there was no indication in the written responses about the reason for this dissatisfaction. One of the 4’s (“satisfied”) corresponds to an individual with the Medicare Advantage Plan and the other to an individual with the Medicare Supplement Plan with Part D. We note that eight respondents left this question blank, possibly because they did not encounter any major medical expenses in 2013.
Figure 6: Summary of satisfaction with how Medicare plan handled major medical expenses.
In addition to asking the retirees about their satisfaction with how their Medicare plan handled any major medical expenses they encountered, we also asked about how easy it was to use their Medicare plan to get 1) the care, tests, and treatments they needed and 2) prescriptions drugs. Figure 7 summarizes the responses for the former, and Figure 8 the latter. In both cases, the vast majority of respondents indicated that it was either “usually” easy or “always” easy to get the care and prescriptions they needed.
Figure 7: Ratings of ease of getting health care, tests, and treatments using Medicare
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Figure 8: Ratings of ease of getting prescription drugs using Medicare
The survey concluded by asking respondents to rate their overall satisfaction with their Medicare plan, and the responses are summarized in Figure 9. All individuals who responded rate their satisfaction as “neutral” (3) or higher. The “neutral” ratings correspond to individuals with the Medicare Supplement with Part D prescription drug coverage (2 individuals) and Medicare Supplement only (1 individual).
Figure 9: Overall satisfaction with plan Summary of Health Care Needs and Expenses
We asked the retirees to estimate their annual medical expenses, and Figure 10 summarizes those responses. We note that these estimated expenses exclude monthly premiums and prescription drug costs. The left panel displays the overall distribution of estimated annual medical expenses, with descriptive statistics provided in Table 2. The right panel of Figure 10 displays the distribution of estimated annual medical expenses by coverage option; in these boxplots, the width corresponds to the number of individuals in the group. With the exception one individual in the Medicare Supplement with
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Part D prescription drug coverage group, most individuals spent less than $2000 on medical expenses in 2013.
Min Q1 Median Q3 Max Mean Std. Dev. N $0.00 $212.50 $502.60 $1122.00 $7500.00 $978.40 $1648.81 20
Table 2: Summary of estimated annual medical expenses, excluding premiums and prescription drug costs.
Figure 10: (Left) Distribution of estimated annual medical expenses, excluding premiums and prescription drug costs. (Right) Distribution of estimated annual medical expenses, by coverage option (widths of the boxes
correspond to the number of individuals in each group).
Separate from medical expenses, we asked the respondents to estimate their annual prescription drug expenses (excluding any premiums). The left panel of Figure 11 displays the distribution of estimated annual prescription drug expenses for the respondents, with numerical summaries provided in Table 3. The right panel of Figure 11 considers the responses by coverage option. Not surprisingly, the individuals without prescription drug coverage (Supplement Only) tend to have the most prescription drug expenses.
Min Q1 Median Q3 Max Mean Std. Dev. N $0.00 $225.70 $415.00 $948.20 $3000.00 $679.00 $719.02 20
Table 3: Summary of estimated annual prescription drug expenses, excluding premiums.
In the survey, we specifically asked retirees about the Medicare donut hole. Of the 20 individuals that responded to the question, 3 individuals indicated that they spent enough on prescription drugs and prescription drug premiums to enter the donut hole. The donut hole will continue to shrink each year, and it should be eliminated by 20202.
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Figure 11: (Left) Distribution of estimated annual prescription drug expenses, excluding premiums. (Right) Distribution of estimated annual prescription drug expenses, by coverage option (widths of the boxes correspond to
the number of individuals in each group).
Finally, we consider the percent of annual income that retirees spend on medical expenses. According to the IRS, individuals who are age 65 or over (or have a spouse age 65 or over) can take the itemized deductions on their income tax return if their annual medical expenses exceed 7.5% of their adjusted gross income. A list of expenses that can be included in the itemized medical tax deductions can be found on the IRS website (http://www.irs.gov/taxtopics/tc502.html). Table 4 indicates that over 40% of the respondents either took the itemized deduction on their 2012 income taxes or are planning to take the deduction on their 2013 income taxes.
Yes No Not Sure 2013 (Planning) 10 10 4 2012 (Actual) 10 14 --- Table 4: Summarizes how many respondents either plan to (2013) or did (2012) take the itemized
income tax deduction on tax return Summary of Open-Ended Survey Comments
When asked to comment on their medical expenses, some respondents indicated that they were currently satisfied (e.g., “so far so good”), but nervous about what their expenses would be if they encountered serious illnesses. Those respondents who did have more expenses (including hospitalizations) expressed that they have been satisfied with the coverage provided by Medicare (e.g., “every medical bill that was approved by Medicare was fully paid by the combination of Original Medicare and my Medigap plan”). Some individuals expressed concerns about coverage while traveling outside of the United States.
Some of the most negative comments on the survey are about prescription drug costs. Respondents comment that drug tiers can be confusing and that they dislike the donut hole associated with Medicare. Other negative comments are about the timing of the elimination of retiree health insurance benefits by St. Lawrence. Some respondents comment that this change came at a “very
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inopportune time” and they felt “panicked” as they had only a few weeks to make a major decision about their health insurance coverage. Consequently, some felt “ill informed” about the different Medicare options and made sub-optimal choices for their health care coverage needs.
Conclusion
From our survey of peer institutions, we find that St. Lawrence’s current policy regarding retiree health insurance is in line with similarly resourced schools in our comparison group. The data collected from peer institutions indicate that 5 of the 23 schools in our current comparison group (the USCG) have no health insurance benefits for retirees and 4 of the 23 schools have frozen their health insurance plans so that no new retirees are covered.
From the survey of the retirees, we find that they are largely satisfied with Medicare (at least among the individuals who responded). Negative comments tend to be isolated to two topics: prescription drug costs and the timing of the elimination of retiree health insurance benefits. We note that, according to Medicare, the donut hole (source of the most common negative comments on the topic of prescription drug costs) is supposed to be shrinking each year, and should be eliminated by 2020. The elimination of retiree health insurance benefits, and the timing of the announcement of this change, are regrettable, but they seem to have been unavoidable.
In 2010 when supplemental insurance was cost shared with the University through POMCO, the monthly premium paid by retirees for supplement insurance was $144 (note that this is in addition to the monthly Part B premium). Had retirees remained on the University's plan they would have seen their rates increase from $143.39 in 2010 to $206.52 in 2014, which exceeds what many survey respondents are currently paying as the monthly premium for their supplemental insurance. This assumes that SLU would have applied the same rate increases to the retiree premiums as we did to the active employee premiums.
It is also important to note that the health insurance and medical care cost landscape is complicated. There is no single option that works best for all individuals. We encourage retirees and individuals nearing retirement to attend the information sessions that Human Resources organizes with Medicare experts.
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Appendix A: Retiree Health Insurance Policies for the USCG and NCG
USCG NCG
Institution Policy Institution Policy
Allegheny None Allegheny None
Bucknell Traditional Bates None
College of Holy Cross Defined Contribution Bucknell Traditional College of Wooster Frozen College of Holy Cross Defined Contribution
Colgate Defined Contribution College of Wooster Frozen Connecticut College Defined Contribution Carleton None
Denison Frozen Colby Frozen
Dickinson None Colgate Defined Contribution
Drew Traditional Connecticut College Defined Contribution
Franklin & Marshall Traditional Denison Frozen
Gettysburg Traditional Dickinson None
Hobart & William Smith None Drew Traditional
Kenyon Traditional Gettysburg Traditional
Lafayette Traditional Hamilton Traditional
Muhlenberg Defined Contribution Hobart & William Smith None
Oberlin Traditional Kalamazoo Frozen
Skidmore Frozen Kenyon Traditional
St. Michael’s None Macalaster None
Trinity College Frozen Middlebury None
Union Traditional Muhlenberg Defined Contribution
Ursinus Defined Contribution Ohio Wesleyan Frozen
Wesleyan Traditional Skidmore Frozen
Wheaton (MA) None Trinity College Frozen
Vassar Defined Contribution Wheaton (IL) Defined Contribution Table A1: Summary of retiree health insurance policies for institutions in the USCG and NCG Table A1 summaries the policies on retiree health insurance for the NCG (our former
comparison group) and the USCG (our current comparison group). The four different types of policies are
• Traditional Indeminity
o Employer covers retirees on a Medicare Supplement plan and benefits are coordinated
with Medicare.
• Defined Contribution
o Employer offers a set dollar amount towards the monthly premium of a supplement
plan.
• Frozen
o Institution is allowing no new participants in the retiree health insurance program.
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Appendix B: Overview of Medicare Coverage Options
Original Medicare (Part A and Part B) Medicare Advantage Plan (Part C)
• Medicare provides Hospital Insurance (Part A) and Medical Insurance (Part B)
• Choose from doctors, hospitals, and other providers that accept Medicare
• Usually pay a premium for Part B (usually no premium for Part A)
• If you want prescription drug coverage, you must choose and join a Medicare Prescription Drug Plan (Part D). These plans are run by private companies approved by Medicare, and there is generally a monthly premium.
• Medicare Supplemental Insurance (Medigap) policies are available to fill in any gaps in Original Medicare coverage. Costs for Medigap plans vary by policy and company
• Private insurance companies approved by Medicare provide Part A (Hospital) and Part B (Medical) coverage
• Need to use plan doctors, hospitals, or other providers (otherwise you pay more or all of the costs)
• Many plans have no premium
• Prescription drug coverage (Part D) is often included with this option. If it is not, it can be added on. Table B1: Summary of Medicare coverage options.
More detailed descriptions about the various coverage options can be found at medicare.gov. Appendix C: Health Care Needs for St. Lawrence Retirees
In addition to the questions summarized above, the survey investigated the health care needs of St. Lawerence retirees. We felt that this information could be used by Human Resources to help counsel exempt employees as they plan for retirement and need to choose which Medicare option is right for them. Figure C1 and Table C1 summarize the approximate number of physician visits per year for retirees.
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Min Q1 Median Q3 Max Mean Std. Dev. N 2 4 8 10.5 39 9.63 8.29 23
Table C1: Summary of approximate number of physician visits per year
Maintenance prescriptions are any prescriptions that are taken routinely. Figure C2 and Table C2 summarize the number of maintenance and non-maintenance prescriptions for retirees.
Figure C2: Approximate number of maintenance (left) and non-maintenance (right) prescriptions per year
Min Q1 Median Q3 Max Mean Std. Dev. N Maintenance Prescriptions 0 2.875 4 5 15 4.396 3.24 24 Non-Maintenance Prescriptions 0 0.75 2.25 4 10 2.625 2.379 24 Table C2: Summary of approximate number of maintenance and non-maintenance prescriptions per year
