Will Ohio STRS retirees be 'used as pawns so that the state could save a little bit on its OPEB liability'?

From John Curry, May 12, 2009

In retrospect, Perdue said he questions whether the switch to Advantra Freedom [a Medicare Advantage program] justified the burden placed on retirees, some of whom saw increases in out-of-pocket costs, and some who had to find new physicians because their doctors refused to accept Medicare Advantage plans.

"In a way, they were used as pawns so the state could save a little bit on its OPEB liability," he said.

OPEB, or Other Post Employment Benefits, is a federally mandated calculation of financial liabilities to pay health insurance and other nonpension expenses for future retirees. PEIA's OPEB liability currently exceeds $4 billion.

WVGAZETTE.COM, May 12, 2009

PEIA looks to raise $30 million per year to cover retirees

By Phil Kabler
Staff writer

CHARLESTON, W.Va. -- When the Public Employees Insurance Agency Finance Board holds an emergency meeting Thursday, board members will try to figure out how to raise an additional $24 million to $30 million a year to cover looming increases in health-care costs for 35,000 retirees.

The Finance Board scheduled the meeting to discuss options regarding the dissolution of the state's contract with Coventry Health Systems to provide Medicare Advantage coverage to retired state and public school employees.

PEIA Executive Director Ted Cheatham confirmed Tuesday that he had negotiated an agreement with the Maryland-based health insurer to continue providing Advantra Freedom coverage through Dec. 31.

"It gives us a little more time to look at options," Cheatham said.

After that, PEIA will either have to find another Medicare Advantage plan provider, or bring the retirees back into PEIA.

Cheatham conceded that finding another provider may be a long shot, since the Obama administration has announced it will cut federal reimbursement rates for all Medicare Advantage plans in 2010.

"I'm not sure another provider is going to be out there, but it would be remiss not to look," he said.

Cheatham said bringing retirees back under PEIA is always an option, but brings an estimated $24 million to $30 million in additional costs to the agency.

That money could come from legislative appropriations, increases in retiree premiums, increases in active employee premiums, reduction in benefits -- or any combination thereof, he said.

"I don't know the answer. That's why we need to talk to the Finance Board," Cheatham said.

Cheatham said the board realized all along that Medicare Advantage would be only a temporary fix, but thought the plan would survive at least through June 2010.

"This isn't a true surprise. It just comes about six months sooner than we planned for it to occur," he said.

From its inception in July 2007 through December, Cheatham said the Medicare Advantage plan will have saved the state $104 million on retiree health-care costs.

House Health and Human Resources Chairman Don Perdue, D-Wayne, said elimination of Advantra Freedom poses some significant financial issues for the state at a time when the Legislature is struggling to cut the state budget by about $200 million a year.

"We need answers about how much we're going to have to come up with additionally, and where it's going to come from," he said.

In retrospect, Perdue said he questions whether the switch to Advantra Freedom justified the burden placed on retirees, some of whom saw increases in out-of-pocket costs, and some who had to find new physicians because their doctors refused to accept Medicare Advantage plans.

"In a way, they were used as pawns so the state could save a little bit on its OPEB liability," he said.

OPEB, or Other Post Employment Benefits, is a federally mandated calculation of financial liabilities to pay health insurance and other nonpension expenses for future retirees. PEIA's OPEB liability currently exceeds $4 billion.

Reach Phil Kabler at ph...@wvgazette.com or 304-348-1220.
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