This fall, tens of thousands of public employee retirees received an unwelcome notice that renewal rates for Medicare Advantage plans through their state pension system would be reduced.
Two of the three plans offered are expected to see significant price increases in 2025. The premium price of one plan has increased by 130%, and another has jumped more than 200%. The premium price remains unchanged for the third plan.
“When I talked to them, they said, ‘You should be prepared for a little bit of shock,'” said Bill Heicher, former Eagle district wildlife manager. “Well, my goodness.”
Even with subsidies for his years of work in state government, Mr. Heicher and his wife’s plan has increased by $394 a month to $583.
This is the first time in three years that many members of the Colorado Public Employees Retirement Association (PERA) have seen their health insurance premiums increase. And that explains the problem, said Andrew Ross, the pension’s executive director and CEO.
In 2021, PERA made a big splash when it added UnitedHealthcare’s Medicare Advantage plans to its 2022 offerings. Not only did United offer lower rates than 2021 premiums, they also locked in those rates for three years.
Now that the deal is in place, Ross said PERA’s 2025 rates will need to reflect “what’s happening across the market.”
“Unfortunately, there is no magic wand that will lower your premiums,” Ross said.
Medicare Advantage plans are essentially enhanced versions of Medicare coverage that function similarly to traditional health insurance contracts. This includes premiums, copays, coverage benefits and limits, and your designated network of health care providers.
PERA, like many other public pensions, has provided medical coverage to its beneficiaries for decades. Currently, approximately 64,000 people, including public sector retirees and their partners and dependents, are enrolled in Medicare plans through PERA.
This pension also provides health insurance to retirees who have not yet reached the Medicare-eligible age of 65. About 7,000 people are covered by their insurance, and although these plans cost much more than Medicare plans, they generally do not see significant increases in premiums.
Ross said PERA is looking to offer its members a health insurance plan with “more comprehensive” benefits. This means, in an actuarial sense, that there is a higher return. But next year’s Medicare plans will cost even more money.
The increases will be included in two UnitedHealthcare plans. One of United’s plans starts at $152 a month in premiums in 2024 and jumps to $349 a month in 2025. Another United Airlines plan will increase in price from $52 per month to $169 per month.
PERA also offers Medicare Advantage plans through Kaiser Permanente. This plan remains stable at $170 per month.
Retirees can receive subsidies from PERA to reduce their premiums. The subsidy is $5.75 per month for each year of service, up to a maximum of $115.
For reference, unsubsidized premiums for a 40-year-old buying insurance on his own in Colorado. Average about $460 per month.
PERA members may opt out of their pension plans and take advantage of cheaper Medicare Advantage plans available on the open market. However, these plans may not offer the same level of benefits or access to the same doctors.
Heicher, a former wildlife manager, said he considered that and also considered switching to a cheaper plan through PERA. But with added copays and increased deductibles, those plans ended up not being cheaper, he said. Additionally, living in a relatively rural area means that the network of doctors that work with some plans may not be as strong.
Therefore, he gave up on paying high fees.
“Property taxes, groceries, transportation, everything else is going up as well,” he says. “Like everyone else, you have to live within your means, and that means doing nothing.”
“I don’t know how we’re going to do it. Let’s make sure we save.”
Mr. Ross said he had heard from many PERA members about the interest rate increases and expressed empathy for their plight.
“We truly feel the pain of our members,” he said. “We understand that disruption to retirees is difficult.”
Coupled with other changes in PERA that reduce benefits to members, many state retirees are struggling, Heicher said. And he wondered whether younger generations would see the value in serving the state, especially since state government jobs still pay less than those in the private sector.
“It’s really depressing,” he said. “It’s the accumulation of everything that really brings a lot of us down.”
