Throughout the long debate over health reform, the president told us if we liked the insurance we had, we could keep it.' No government would come between us and our health coverage!' Just two weeks ago, the Secretary of Health and Human Services Kathleen Sebelius reinforced that point in a talk at the National Press Club, saying that the new law 'makes sure that every American who has an insurance policy gets real security by creating common sense rules of the road that require insurance companies to treat you fairly.'
The secretary did not talk about employers who buy most of the coverage in this country and insure most Americans.' She did not say that employers must treat their workers and retirees fairly.' In fact, the new law imposes few restrictions on employers.
When employers decide to change coverage or drop workers or retirees (which they do), coverage they once thought was secure as the Rock of Gibraltar suddenly vanishes.' The case of Roberta Bouvette-Bakhshai, age 55, shows what happens when employers change the rules of the insurance game.' It is a cautionary tale for everyone, especially retirees, who rely on their health benefits from a former employer.
In 2006, Bouvette-Bakhshai left her position as an art director for a subsidiary for Reed Elsevier, a large publisher of science and medical information. For years she had suffered from M.S., and the time came to quit working.' Then her husband lost his job. But fortunately her employer provided medical coverage for both her and her husband. She also eventually qualified for Social Security disability benefits and Medicare. Her coverage from Reed Elsevier supplemented her Medicare coverage and most importantly had very good prescription drug coverage.' Each month Bouvette-Bakhshai's drug expenses reach about $4600 before insurance pays its share.' That amount is not unusual for people with her disease.
The family thought they'd be fine in the health insurance department.' That is until a letter arrived in September telling them that the company had decided to cancel health coverage for dependents of former employees who, like Bouvette-Bakhshai, were receiving long-term disability benefits.' Reed Elsevier said while it would continue to offer medical coverage to former employees receiving disability benefits, 'given the significant increases in healthcare costs,' the company 'must add limits to the coverage to control costs, balance the diverse benefits needs of our employee population and align with the best practices of other companies of our size.'
Her husband's coverage ended the first of the year, and he is now on COBRA paying a monthly premium of $410.' When COBRA benefits stop in 2011, he will be on his own to buy insurance in the individual market.' Changes mandated by the reform law that might help him in the future will still be a long way off.' He is just 60, too young for Medicare.
Bouvette-Bakshai is luckier; she has coverage from her former employer until July 31, 2012.' At that point, she will have to find a Medicare supplement policy along with a Part D prescription drug plan or a Medicare Advantage plan--if they still exist.' Her main concern will be paying for drug coverage, and she may be helped as the coverage gap known as the donut hole gradually closes.' But it won't fully close until ten years from now.' She knows she may not have as good a deal as she has now.' She told me 'one of the reasons I took this job was that they offered excellent benefits.'
When Reed Elsevier first told Bouvette-Bakhshai that she could have retiree medical coverage, the bottom of the letter contained some fine print.' It said the company had the sole right to modify, revoke, suspend, terminate, or change the plan terms at any time without notice.' In other words, the company could increase or decrease the benefits or the amounts that she had to pay for the premium or any cost sharing.' Reed Elsevier made no promises that the coverage for her or her husband would continue.' No guarantees.
'Every retiree plan has this kind of language,' says Paul Fronstin, a benefit specialist at the Employee Benefit Research Institute (EBRI) in Washington D.C.' 'They all reserve the right to make changes.' Employees need to know this.' They may feel safe when they leave their job but that coverage may not last forever.'
WHAT YOU CAN DO
If you have retiree benefits, it's wise to assume that these benefits could disappear or change at any time, and it's an even better idea to have a Plan B in mind.
- A good first step is to check with your former employer's benefits manger and find out exactly what the company can and cannot do and when it can make changes.' Is it at the end of the plan year, in the middle, or every other year?' If you are younger than age 65, are you eligible for COBRA if coverage ends?' Are your dependents?
- If you're 65 or are disabled and eligible for Medicare benefits, Medicare is your primary insurer, and your company's plan acts as a supplement; it may be one that has good drug benefits you don't want to lose. You'll have to scout the hundreds of offerings for Part D benefits listed on the website of the Centers for Medicare and Medicaid Services (www.Medicare.gov).' It's a daunting task but knowing your options will make it easier if your employer dumps your coverage.
- It's also smart to begin planning for increasing costs for your Medicare supplement options.' 'People are going to pay higher premiums or have more cost sharing,' predicted Frank Cestare, an actuary at Milliman, a consulting actuarial firm.
- Younger retirees who no longer have employer coverage may have serious problems obtaining new insurance.' At some point, they may have to venture into the perilous individual insurance market where prices are high, coverage unavailable if they are sick, and relief from health reform is years away.