Wednesday, February 18, 2009
RETIREE MEDICAL COST INCREASES
This letter is written to identify BMS retirees who may have experienced the same astounding increase in retiree Medical Plan contributions over the past two years that I have. If so, are you doing anythig about it? Would you be interested in getting together to explore options? Do you have information that you could share with others? Please post to this site.
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Putting retirees in a separate group because their claims experience is higher than non retirees is age discrimination
ReplyDeleteI also had to stop the insurance and luckily had other options due to the high cost. My monthly went for 150ish to over 900 per month for a family of 3. I know of others who also experienced this. I retired in June of 07
ReplyDeleteRetired in 08. Single coverage went up 400 percent in 09. If BMS is subsidizing what I pay by an additional 573 dollars a month, something isn't right. I don't use the insurance that much but am afraid not to have it. I have no claims and haven't had any for years. If the percent increases aren't brought under control it will consume my pension.
ReplyDeleteGo with Amerihealth HMO. It's available in NJ but not sure of where else. It's also very highly rated. It's just as good as those expensive ones but at a fraction of the cost. ~$200/mo for a family of 3.
ReplyDeleteWhy doesn't BMS just give retirees an option for the $573 in "cash" to buy their own Health Insurance on the open market? BMY would get what they want....accurate accounting of healthcare costs of retirees.... and retirees would have a chance to select lower cost insurance.
ReplyDeleteChecking to see if I can post a comment
ReplyDeleteI am very interested in this subject. I am curious to see how this blog works to educate and perhaps mobilize interested parties on issues that impact BMS Retirees.
ReplyDeleteHistory: On Feb 12 1990 BMS issued a policy bulletin ( Executive Bulletin No. VII) that set the stage for holding down escalating health care benefits for retirees. In that Executive Staff Bulletin the company essentially established a policy that would cap future health benefits for retirees at 200% of 1992 rates. It established the formula using the rule of 85 (age plus # years of service) to determine the maximum capped benefit the company would ever pay as cost sharing towards the cost of retiree health plan options. At that time retirees who met the rule of 85 were provided a cost sharing benefit (subsidy) equal to 95% of the entire cost to the company for their health benefit. The policy also provided firm numbers for pre and post medicare capped benefits the company was prepared to pay in sharing the costs of future health plan costs. The company stated that in the future it would provide a capped maximum of $6,782/retiree/year and $6,100 cost sharing subsidy/year/spouse or dependent (pre Medicare) which means that the company's cost was $3,391/year /retiree in 1992 for the "Standard" health care plan. Furthermore, the 1993 company policy stated that once the cost of health care plans to retirees exceeded the capped amount, retirees would be responsible for all additional costs. The BMS plan becomes secondary to Medicare and capped subsidies change at that time. The formula stays the same but the caps drop substantially post Medicare. For sake of clarity I will just focus on pre Medicare for this blog.
Over the years the official HR guidelines from BMS have adjusted the max capped subsidy for spouse and dependents to be the same as retirees at $6,782/year.
The issue: BMS retirees have witnessed the reaching and exceeding of the cap within the last several years because monthly costs to retirees for health coverage by BMS have skyrocketed.
So what's the big deal? We all should have known it was going to happen someday.
The big deal is that some things don't add up.
Retirees are offered essentially two of the same plans and benefits as active employees yet the costs to the company for policies are nearly twice as expensive to retirees as active employees. It is obvious that the company has carved out the retirees from the rest of the company as a separate higher risk group based on age. Additionally, the annual increases of the costs of the United Healthcare policies for BMS retirees have recently been running nearly 20%/year compared to <10%/year being seen with active employees identical plans.
By doing the math one can approximate the actual cost/year/person the company agrees to with UHC for health care plans. For 2009 retiree plans the "Basic" plan cost by UHC is approximately $10,900/person/year and the Network Plus cost is 13,340/person/year. BMS shares a substantial portion of these costs by subsidizing retirees and spouses /dependents at a rate of approximately $7,000/year/person (Rule of 85 met and cost capped formula). However, a retiree and spouse now are required to pay anything over their $14,000 cost sharing subsidy which for 2009 "Network Plus" plan means about 1,057/month or $12,684/year just for premiums. So that means that the price the company pays to UHC for retiree health care plans has increased by approximately 90% in the last 4 years.
One can shop private plans outside the BMS UHC plans and find plans in >65 year old age brackets that provide very similar health and pharmacy benefits as the BMS plans for thousands of dollars a year/person less than what BMS pays UHC. It is still nearly impossible in 2009 to find private insurance with equivalent benefits that will cost a retiree the same or less than what they would pay for the BMS plans. However, it is highly probable that in 1-2 more years at the current rate of cost escallation with the BMS policies that the BMS policy would cost retirees more than equivalent private insurance in spite of the fact that retirees are receiving as much as $7,000/year cost sharing subsidy benefit from BMS for those BMS policies.
So the bottom line is that BMS is paying WAY TOO MUCH to UHC for the retiree health plans. In fact, BMS has absolutely no financial incentive to pay reasonable rates for the retiree policies because it will never pay more than it did several years ago when the cap was reached. Where BMS does have a real financial interest is in keeping down the costs of active employee policies. Retirees now are on the hook to cover all increases in the costs of health insurance offered by the company. In reality, the company has a clear financial incentive to promote escalation of retiree health costs. Retirees will act in their own best financial interests and opt not to take BMS health insurance when the BMS costs exceed that of obtaining equivalent coverage from a commercial plan offered outside the company selected plan. BMS then is not required to pay the retiree or dependent any subsidy at all and as a result saves the company $7,000/person just in cost sharing subsidies not paid.
I would hope that this issue is just an oversight by the company. To think otherwise would be very unsavory for a company operating under a Corporate Integrity Agreement (CIA) intent on establishing commendable corporate core values and trying to redeem it's reputation and public image.
This issue is easily remedied in several ways. First, the company could bargain and shop wisely and as firmly for reasonably priced retiree plans as they do for the active employee plans. They could be as much of an advocate for the retiree as an active employee in holding down health plan costs.
It would seem that another solution would be even more attractive financially, ethically and morally to the company. The company could decide in 2010 to not offer any health plans at all for retirees but would still pay the annual cost sharing benefit earned by retirees under the policy established in 1993 and still in force today directly to retirees once/year. Just imagine the cost savings the company could incur by not having to negotiate/advertise/post details and maintain a current HR web site, administer and manage health care plans for retirees. Likewise, imagine the earned benefit cost sharing check provided annually by BMS now being used by retirees to purchase commercial insurance that best fits their individual needs. Simple, fair and less cost to BMS. Seems like a no-brainer to me. I am interested in reading thoughts from others concerning my comments.
It is difficult for direct comparisons of health plans as there are no set standard plans. All have various copays, deductibles, drug benefits, maximums etc. However, in internet comparison shopping for the closest UHC plan offering similar benefits for same family size and age, it would appear that I can purchase a UHC plan over the internet for about $4000 less per year than BMS is paying for similar coverage. So where is the pricing power BMS should be able to weild in negotiating contracts for employee health care?
ReplyDeleteIt appears the comments by woolfeel2 are right on. It is actually to the company's advantage in negotiations with UHC to allow retiree health care costs to rise disproportionately while bargaining for minimal increases to active employees. Company expenses are fixed for retiree health care coverage so large price increases have no effect on the bottom line. In fact they benefit if it results in retirees dropping out and searching for health insurance elsewhere.
Looks like we are all feeling the same pain. The question is what, if anything, can be done. I agree corporate and retiree interests would probably best be served if cost sharing benefits were paid directly to retirees and they were able to shop for a health plan that best suited their needs.
I believe this is happening to many people and we are victims of the system...because of our lack of unity. A class action lawsuit might be just the action we need to remove some of the burden from the people who gave so many years of their lives to a company that is now taking advantage of them.
ReplyDeleteI think a class action suit is a good idea. It
ReplyDeleteshould be done soon. It needs to get attention
in the media, While the subject is hot,Is Bristol the only one doing it!!!
The following is a letter I sent to the Human Resources VP concerning this matter. I have coverage through Aetna POS II, but have the same issues as UHC coverage.
ReplyDeleteDr. Anthony McBride
Senior VP, Human Resources
Bristol-Myers Squibb Company
345 Park Avenue
New York, NY 10154 February 11, 2009
Dear Dr. McBride:
I write this letter having exhausted all recourse through the HR Service Center and the Global Benefits Department within the Company. My inquiries have concerned the retiree Medical Plan contribution increases for AETNA, CHOICE POS II that began in 2007 and continue up to the present documented with the enclosed correspondence. I am appealing to you as Plan Administrator in your fiduciary role to provide explanation, documentation and justification for the greater than 1200% increase in my Medical Plan contribution over the past three years. Let me cite a few key points that I find difficult to understand without greater clarification and documentation from the Company.
The AETNA Medical Plan is self-funded with expenses paid by the Company and employee and retiree contributions. Beginning in 1994, the company capped its contribution for retiree coverage at $6,782/participant/yr. This cap was invoked when retiree and active employee combined experience was used to calculate participant cost. Beginning in 2008, the employee and retiree subpopulations were separated for pricing purposes resulting in the first phase of increases referred to above. There was no change in the Company cap, thus the cost calculation adjustment severely disadvantaged the retiree population which by comparison to the active participant pool is older with a greater claim experience. I would like justification for this change. As a retiree I anticipated medical cost increases, but I did not anticipate corporate abandonment along with age discrimination.
The cost increase for retirees in 2009 will be $4013.04 for two party coverage, or approximately $2006.52 for each retiree participant in the plan. Based on the most recent Form 5500 data for year 2007, there are 943 retirees in the plan which translates to a $1,892,148.30 increased cost burden to retirees. Estimated total plan expense increase over 2008 based upon a 5.4% rise in plan cost, again the most recent data derived from the 2007 Summary Annual Report, would be estimated at $2,010,758. These numbers suggest that 95% of cost increases will be funded by 8.8% of plan participants which are all retirees. As a cost sharing participant in the plan, I need to see the actuarial data and documentation that support these cost calculations. Further, if the estimated cost increase were shared equally by all plan participants, each participant would experience a $189/yr increase in 2009 contribution or $15.75/month. Contrast that amount with the $336.43/month increase for my wife and me.
As Plan Administrator in your fiduciary role you are charged with a duty to look out for the interest of plan participants and I am appealing to you to look into this situation. I ask you to address my concerns and thank you in advance for a prompt response.
I have a BMS response that I will post tomorrow.
Any thoughts on the governments ideas for healthcare & how maybe it might help us?
ReplyDeleteHello,
ReplyDeleteNeed Help,
Was looking for the reply you were going to post?
Thanks
Here is the reply, sorry I had trouble with my scanner. Since getting the response from BMS I have contacted the Department of Labor making a formal complaint. I hope the DoL can get me the data I requested from BMS.
ReplyDeleteNote in the attached response that it implies having retirees in a separate pool was common practice for calculating contribution and that this was applied to the Aetna plan beginning in 2007.
Bristol-Myers Squibb Company P.O. Box 4500 Princeton, NJ 08543-4500 609-897-2000
February 23, 2009
Mr. T
Wilmington, DE 19803
Re: Your Inquiry Regarding Retiree Coverage
Dear Mr. T
Your February 11, 2009 letter to Anthony McBride regarding the increases in
your contributions for coverage under the Aetna Choice POS II program has
been referred to me for review and response. You once again requested
actuarial data to justify this increase in contribution.
. ,
As stated in my previous response to you, dated January 29, 2009, the actuarial
data that you are requesting is not made available to Plan participants except to
the extent that it has already been provided. To date you have been provided
with the Summary Annual Reports and 5500 filings that detail the total costs for
Bristol-Myers Squibb Company employee benefit plans. You have also been
provided with a calculation of your own contributions based on the retiree
contribution formula for 2007-2009 and the calculations for several alternative
plans.
You have requested the actuarial data that was used to project costs for each of
the years 2007-2009. This information is not available to Plan participants
except to the extent that financial data has already been provided. Please allow
me to provide instead a more detailed explanation of the recent increases
As I noted in the January 29 letter (attached for your reference) for Plan years
2007 and earlier, contributions for the Aetna Plan were based on the combined
experience of active and retired participants. This caused the retiree
contributions to be artificially low, as active employees' experience is better than
that of retirees. For all other self-funded plans, retiree contributions were based
solely on the retiree experience. Therefore, for plan years 2008 and after, the
Aetna contributions were based on retiree experience alone, making the
calculation more consistent with other similarly situated retirees.
This resulted in significant increases for the Aetna retiree contribution beginning
in 2008. The main reason for this increase is the fact that the 2007 contributions
were artificially low relative to other self-funded retiree plans. Had the 2007
contribution rates been set based on retiree experience alone, they would have
been higher, resulting in a lower rate of increase in future years. This would not
have affected the current contributions, however, as they are now based on
retiree experience, consistent with the contribution pricing for other plans.
As also stated in the January 29 letter, you have been provided with the
contribution rates for alternative plans offered to similarly situated Bristol-Myers
Squibb retirees. If the contribution rate for the Aetna option is still unacceptable,
you may want to consider an alternative plan either offered under the Bristol-
Myers Squibb program or through the individual health insurance market.
We have provided the calculations and financial data that we are obligated to
provide to participants on several occasions. This letter represents our final
correspondence on this issue.
Sincerely,
Mary Ann Czarcinski
Associate Director - Employee Benefits
Cc: Anthony McBride
BMY is eliminating the Pension Plan and the next step will certainly be inactment of the clause posted at the bottom of all Retiree Medical Benefits documents.... "BMY Reserves the Right to eliminate company sponsored medical benefits".
ReplyDelete'Wolfeel' has it right. Costs via BMY will become so high that you will have to leave the BMY offering. Sorry state for pre-existing condition patients, ie, cancer. BMY cares about their Customer's patients, they just don't care about their employees as patients!
Of course this will all be mute as soon as Obama has a National Health Plan in place. BMY will end retiree Med-Bens and force them into that!
BMY doesn't care anymore about keeping those 35 year olds who are doing a great job for them! In fact, why SHOULD that 35 year stay? No Pension, No Retiree Medical Benefits, and low pay.... Make you money by changing jobs every few years (just like the Marketing Dept!)...
Glad I'm not 35!
Interesting information from Need Help. Don't think anything illegal about putting retiree in a carved out plan by age. Most private plans are tiered by age/risk as McBride' office suggested. Will be interested to see reply DOL to the formal complaint.
ReplyDeleteI do think that a couple of things do have merit for a complaint. (1) the retirees now footing the bill for their carved out expensive medical coverage helped fund retiree coverage for all the years they worked for BMS by paying more for active medical benefits while employed when everyone was lumped into one basket. Now the rules change and they no longer get any relief from active employee to keep costs at a reasonable level. (2) The company line up to McBride's office response letter explaining the reason for the exceptional increases in costs for retiree in the last couple of years has been that the cap has been reached. No disclosure of the carve out change has ever been mentioned to my knowledge. This seems like an obvious breech of full discloure. (3) The fact remains that the cost of the coverage options to retirees are way out of line. Similar plans can be obtained privately for about 4,000/yr/person less than the BMS plans. The company seems intent in pricing it out of range so that retirees opt out of the BMS plans resulting in BMS not having to pay $6,782/person/year of earned medical benefit. Is the company also sacrificing the retirees to leverage more favorable rates for active employee insurance from UHC and Aetna?
To the point regarding full discloser, in the BMS response letter I posted above it states in the forth paragraph "...contributions for the Aetna Plan were based on the combined experience of active and retired participants. This caused the retiree contribution to be artificially low, as active employeyees' experience is better than that of retiree experience. Therefore, for plan years 2008 and after, the Aetna contributions were based on retiree experience alone, making the calculation more consistent with other similary situated retirees." This implies that the other plans such as athe UHC plan was already carved out, yet the numbers don't support it. Cost for the UHC or Aetna plans have been comparable which is way the entire retiree population is up in arms over the increase, not just the Aetna plan aprticipants.
ReplyDeleteUnder DOL HIPPA regulations (http://www.dol.gov/ebsa/pdf/CAGHIPAA.pdf)companies are not allowed to discriminate against participants based upon Health Factors. The heath factors are:
health status;
medical condition, including both physical and mental illnesses;
claims experience;
receipt of health care;
medical history;
genetic information;
evidence of insurability; and
disability.
In the document cited above it is stated "Distinctions among groups of similarly situated participants in a health plan
must be based on bona-fide employment-based classifications consistent with
the employer’s usual business practice. Distinctions cannot be based on any of
the health factors noted earlier." This would include claims experience which the company is using as the basis for carving out the retirees. Also in the cited document it states "In any case, a plan cannot create or modify a classification directed at
individual participants or beneficiaries based on one or more of the health factors."
Again this would mean that BMS cannot carve us out or modify the plan because our claims experience is higher.
In the response letter of February 23, 2009 that I posted and cited in this post, BMS claims that retirees were already carved out and refers to making calculations more consisent with other similarly situtated retirees. Determining whether this is the case is critical. BMS has indicated that benefits to retirees would be fixed, but never to my knowledge indicated that retirees were a separate poplulation under the health care plans provided. We need to determine if BMS has modified the plans based upon claims experience being higher for retirees. If they have, I feel we have a case for a class action suit.
I am still trying to get the actuarial data from BMS by having the DOL pursue it directly. No response to date.
Any response yet?
ReplyDeleteI spoke with the DOL yesterday to follow-up on their contact with BMS. I was told that there is nothing that DOL can do to get the information I requested. It seems that DOL did not do much to pursue the contact I gave them for additional info. It was also suggested that I contat Aetna directly for the information, or take legal action as an option. I am going to make one more request of the DOL, this time to the Benefits Security Administration to request a copy of the plan annual report. I don't know if this will provide any more information than I alreay have, but I feel it is worth a try. Thanks for staying with me on this, I'm really worried what BMS is going to do to us this fall when the new rates come out.
ReplyDeleteStill here just waiting to see what wiil happens to our benefits if government plan gets passed.
ReplyDeleteI sent a letter off earlier this week to the Benefits Security Administration explaining our situation with BMS. I hope I get a response that is sympathetic to our plight otherwise we will be at the mercy of BMS and we'll each be making individual decisions to meet our needs.
ReplyDeleteWith what I heard from contacts still working there with cost cutting I hope they don't look to us as a place where they also can cut costs further.
ReplyDeleteIs this group still active? If so,I have a question:
ReplyDeleteIf you opt out of BMS health care and chose to go with Medicare and a standard supplement plan will you get the company contribution as a subsidy? (I've heard that some people do, but not all.)
If the group is not active, there's a discussion developing at
www.cafepharma.com/boards/showthread.php?p=4681800#post4681800
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ReplyDelete