Insurance

Update on Illinois Pension Reform

For updated information on this subject please read our latest blog post. This year has seen a flurry of lawsuits related to Illinois Pension Reform, including previous changes made to the State Retiree Health Insurance.  Many of the cases are still in process, but here is an update on what we know:

Pension Reform

In late 2013, Illinois General Assembly passed a bill aimed at reforming the pension systems for most Illinois public employees and Governor Pat Quinn signed the bill into law.  This bill reduced future benefit increases for current retirees and decreased expected benefits for those not yet retired.  Lawsuits quickly followed questioning the constitutionality of this law.  The law was slated to go into effect as of June 1, 2014, but was suspended pending resolution of these lawsuits.  This means that SURS and other State Retirement Systems are operating under the rules as they existed before pension reform was passed.

You can see my summary of the pension reform in two prior blog posts from December 6th and December 23rd.  You can also view a SURS press release regarding the halting of pension reform here.

Health Insurance

Before the pension reform discussed above, changes were made in 2012 requiring State Retirees to contribute towards the cost of their health insurance by a  2% deduction from their pension (1% for retirees enrolled in Medicare).  Like pension reform, lawsuits were filed challenging this law.  The opinion of many experts at the time of passage was that Retiree Health insurance was a separate benefit from pension benefits and therefore not constitutionally guaranteed.  This was further backed by an initial court ruling.  Since that time, there has been more action by the courts.

First, the Illinois Supreme Court overturned the lower court's decision by ruling that Retiree Health insurance is in fact protected by the same constitutional provisions that protect pensions.  Then, shortly after, another ruling halted the July 2014 planned increase in premium contributions to be made by pensioners.  Finally, a ruling this week determined that the state may no longer deduct health insurance premiums from retirees' pensions.

You can read more about this change here.

Implications

It is still too early to make substantial planning decisions.  Immediately, retirees can expect their pension benefit to increase in the next month or two as health care deductions are halted.  It is also possible that previously deducted premiums will be refunded.  For retirees who previously deducted premiums paid as an Medical Expenses under their Itemized Deductions on their tax returns, they may have to claim refunds as income.

Additionally, some retirees opted out of state insurance in favor of alternative Medicare Supplemental, Medicare Advantage or other policies.  This might sway those retirees to return to the state plan during open enrollment for 2015.

Longer term the State's position on pension reform looks more weak, but this is a complex legal matter.  I expect we are a long way from any final resolution.

Insurance changes for Illinois State Retiree Health Insurance

The following is information regarding recent changes to Illinois State Retiree Health Insurance. These changes only apply to those who are enrolled in Medicare.  If you are affected by this change, you should be receiving a letter from CMS regarding the proposed changes to the SURS health insurance plan this week.  Note: if you are covering a dependent, you must both be enrolled in Medicare for this change to affect you.  If only one of you is enrolled in Medicare, then you will keep your existing coverage and May benefit choice period. Here is a summary of what we know:

Important! You must make a decision and enroll (postmarked) by December 13, 2013There is no default choice.  If you do not enroll, you will only have Medicare Parts A and B coverage which is very limited and does not include prescription drug coverage.    New state coverage will start February 1st and run through December 31st of 2014.    In future years, your open enrollment period for health insurance will be the same as the Medicare Fall enrollment period.  You will note this has changed from May, as in past years, to fall enrollment for this year and future years.  This is also the time to add or drop dependents, add, drop or change Optional life insurance coverage, and add or drop dental coverage.  

Coverage Summary

Every county in the state has different choices of plan.  Consult the map in the materials you receive, or follow this link and view page 8

In Champaign County, you have two choices of plans: UnitedHealthcare (UHC) PPO and Coventry Advantra HMO.

With the UHC plan, you can see any willing provider as long as the provider is in the Medicare program.  You should note there is no difference for in-network and out-of-network coverage levels, as with most PPO plans.  After a $100 deductible, you pay 10% of charges for services up to the $1,300 annual out-of-pocket maximum, then the plan covers 100%.

With the Coventry Advantra HMO plan, you must choose a primary care physician from within their network of providers, and use only in-network providers except for emergency care.  There are copays, and the annual out-of-pocket maximum is $3000.  There is a chart on page 11 of the Trail booklet comparing the costs for the two plans.

All SURS annuitants who are enrolled in Medicare Parts A&B (and SURS annuitants with Medicare enrolled dependents) will be required to enroll in a Medicare Advantage plan if they want to be covered by the SURS health insurance.  These plans include prescription drug coverage (MA-PD plans; MA equals Medicare Advantage, including Part A and Part B coverage; PD equals Prescription Drug), so you do NOT have to enroll in a Medicare Part D plan.

Caution! Be careful when enrolling as you may also be receiving mailed offers from private Medigap insurance companies.  These options do not qualify for State coverage.  To enroll in the state plan, your forms must have the “Total Retiree Advantage Illinois” logo (Your TRAIL to Better Health).  Here is the logo:

TRAIL

 

Vision, dental and life insurance benefit plans are not changing, but you must enroll in one of the State-sponsored plans to continue access to existing vision coverage.  Life insurance and dental, if elected, continue automatically.

Carle Patients: It appears that if you want to stay with Carle doctors, you need to choose the UnitedHealthcare PPO.

The Coventry Advantra website will be available on November 1st.  At that time, you can look there for their providers in Champaign County.

Other Notes:

For community college retirees, you are in the College Insurance Program (CIP); if your SURS is from a State University or State of Illinois Department, you are in the State Insurance Program.  This is important, because prices are different for each program.

You could opt-out of state coverage and shop for an individual Medigap or Medicare Advantage coverage policy.  You would lose any subsidy from SURS state coverage if you make this election.  This could make sense if (1) premiums on a private policy are smaller than your 2014 2% of pension contribution (those with large pensions) or (2) you would rather pay a higher premium and continue on a Health Alliance Medicare plan.

If you are in the State Insurance program and you opt-out, you would have the option to enroll in the State-sponsored plan during the next open enrollment with coverage beginning January 2015.

If you are in the College Insurance program (CIP), opt-out provisions are different; you would want to verify them with CMS.

Complete information for: CIP – The Trail

Complete information for: State Insurance – The Trail

As always, please contact us if you have any questions or would like clarification.