SEPTEMBER 2013 VOICE: In its second annual report on out-of-pocket costs (OPC), the state’s Group Insurance Commission (GIC) has found that the non-premium costs borne by retirees and employees actually dropped 3.8% between FY11-12.

The $77 million savings lowered the average OPC to $1,030 per enrollee. OPC includes copayments and deductibles paid when accessing health insurance benefits. It does not include insurance premiums and the cost of over the counter drugs that are not covered by insurance.

With the exclusion of those retirees insured through a Medicare Advantage plan, all retirees and active employees participating in the GIC, from both the state and local levels, were included in the study. In total, nearly 400,000 enrollees receive their health insurance benefits through the state-run GIC.

When added together, the total healthcare expenditures in FY12 totaled $2.066 billion. This represents a 44.4% increase over five years, when healthcare expenses totaled $1.431 billion in FY08.

The GIC’s study also brings attention to the fact that retirees and employees have taken on a larger share of the overall healthcare expenditure over the past five years. In FY08, enrollees shouldered approximately 22.9% of the total medical expenditures. By FY12, the enrollees’ total share had risen to 26.3% of total medical cost. GIC enrollees spent $186 million in FY12 in co-pays and deductibles.

While out-of-pocket costs have remained, on average, at less than 10% of the total share of costs, today’s enrollees and retirees are paying a larger share of the insurance premium. Those retiring from the state in 2008 paid 15% of the monthly premium. However, in 2009 the law changed requiring new retirees (on or after 2/1/10) to contribute 20%.  Active state employees, hired on or after July 1, 2003, now contribute 25% of their insurance premium, while those employees hired before contribute 20%.

Pre-July 1, 1994 state retirees contribute 10% of their insurance premium and have been held harmless from premium contribution increases. Contribution rates, paid by municipal retirees and employees, are set by each individual city and town, but cannot be higher than 50/50.

“Over the past five years alone there has been nearly a $600 million increase in total medical spending under the GIC plan. While this increase is far less than the private sector, as well as many municipal plans, it still represents a sharp increase in spending,” says Association Legislative Liaison Shawn Duhamel. “The GIC walks a delicate balance between keeping the state’s costs down and overburdening retirees living on fixed incomes.

“To her credit, Dolores Mitchell (GIC Executive Director) has firmly held the line on further OPC increases. As she has said, retirees and employees cannot afford to pay more, and current costs are in-line with those of large private sector employers.”

Cost Drivers

According to the GIC, the decrease in out-of-pocket costs between FY11-12 is largely attributable to the GIC’s early implementation of the Federal Affordable Care Act (ACA), commonly known as Obamacare. Certain provisions within the ACA reduced or eliminated out-of-pocket costs associated with some wellness and preventative care services.

In addition, the GIC also changed its policy regarding copays for inpatient hospital stays, which now limit the number of copayments charged to the sickest members.

Of the 170,000 families insured through the GIC, 90% have annual OPC of $2,400 or less. However, some 1,386 families have OPC that exceed $5,000. Another 39 families reportedly have OPC over $10,000.

The report cites several reasons for the unusually high OPC levels for some families. In nearly every case, families had at least one member who was seriously ill. Large family size was also a factor, with 14.1% of families having 5 members or more.

Other factors driving the higher than average costs is the use of out-of-network providers, as well as selecting OME or indemnity plan coverage without CIC.

“The GIC and its insurers have been reaching out to those families with higher than average costs. Some have been put into a special case management, while others have had their claims reprocessed,” said Association Insurance Coordinator Cheryl Stillman. “One important point to remember is that retirees need to pay close attention to what plan they are enrolling in and make sure that it covers the services they need covered.

“If you choose a limited network plan based on price, then see out-of-network providers, you are going to incur a lot of extra costs.”

“One of the proposals that we keep coming back to is to limit or cap the amount of out-of-pocket costs paid by any individual retiree, employee or their family. No one should face financial hardship because of an illness or injury,” continued Duhamel. “Between monthly premiums, copayments and deductibles, costs can really add up very quickly. That is something we must keep in mind.”