The University of Maine System is expecting to generate $2.5 million in annual savings through a change in health insurance coverage for retired employees that it says will expand benefits and provide more flexibility, despite recent concerns raised by former employees and lawmakers about the change.
In a letter to state lawmakers Wednesday, system Chancellor Dannel Malloy said no U Maine System retiree or their spouse will lose health care benefits as the system prepares to change from a group benefits plan to a Medicare exchange.
“The actions we are taking will greatly expand the benefits available to our retirees even as they permit UMS to manage its limited public resources more efficiently,” Malloy said. “We are fully committed to our retirees and will simply not allow this transition to result in any retiree losing supplemental coverage.”
The letter goes on to say that the health insurance change is expected to generate $2.5 million in annual savings, which comes amid flat state appropriations for the UMaine System in the coming fiscal year and $80 million in unplanned pandemic-related expenses and lost revenues since March, offset by just $8.5 million in federal coronavirus relief aid.
“While the transition to the exchange was driven primarily by a desire to expand choice for our retirees and maintain their benefits without undue burden to them, it is similarly important that we be prudent stewards of the constrained public resources available to us in our operations,” Malloy said.
The response Wednesday follows a Board of Trustees meeting this week during which several retired employees raised concerns about the health insurance changes. More than 60 lawmakers also weighed in on the issue this week, sending a letter to the chancellor asking for the system to reconsider its decision.
The lawmakers and retirees raised concerns about the change being done without input from or communication with the retirees or unions, the impact of moving to a system where retirees would have to file for reimbursement of health care costs after paying upfront and having to navigate and choose a new health care plan amid the coronavirus pandemic.
“Everyone knew immediately what this really meant,” said Nancy Gish, a former English professor who retired from the University of Southern Maine in 2015. “In the five years since I’ve retired I’ve never had to pay up front and then try to get someone on the phone to reimburse me. As other people have pointed out, most faculty don’t have that kind of savings and money.”
Gish, 78, said she and other retirees received materials from Aon, the insurance broker the system is using to administer the Medicare exchange, about the change in health care insurance last month but the change was not negotiated with the university’s unions. The current faculty contract says that as of September 2017 individual health premiums under the retiree policy for all Medicare-eligible members will be a single contribution rate of 20 percent.
The Associated Faculties of the Universities of Maine, which has faculty unions across the system, and other Maine Education Association units have filed grievances over the change. Carol Corcoran, the system’s chief human resources officer, said retirees are not covered by unions and the system was not obligated to negotiate the change but is happy to speak with former employees or the unions and answer questions.
“I feel we are being not only betrayed on the grounds of negotiations, which never took place, but there’s just a general misunderstanding and dismissive attitude towards what it means to have made this choice in life (to teach),” Gish said. “I feel somewhat guilty. I know many people are facing pre-existing conditions and there are people who will lose insurance entirely.”
The lawmakers, including the Senate president, the majority leaders in both the House and Senate, and the co-chairs of the Committee on Education and Cultural Affairs, expressed similar concerns in their letter to the chancellor this week.
“The COVID-19 pandemic has deeply affected all Mainers,” the lawmakers said. “It has forced us all to make tough economic decisions for our families and small businesses. It has also put municipalities and the entire state in a difficult financial position.
“But that is no excuse for pulling the rug out from nearly 2,900 Mainers who have been employed by the University of Maine System, who put in the work and earned their benefits. Forcing retirees, who were promised a lifetime of coverage, to change the health care benefits that they bargained for and to switch providers with little notice in the middle of a pandemic simply isn’t right.”
One of the concerns raised by lawmakers and retirees is that the change would force retirees to have to rush to join the Aon exchange by the end of the year and if they do not they would forfeit their right to the university-funded reimbursement account for 2021 and beyond. In addition, they said many retirees could not afford to pay expenses out-of-pocket and then wait to be reimbursed.
Malloy, in his letter Thursday, said that while the current group plan expires Dec. 31 and retirees have been encouraged to select their new preferred plan by then, enrollment will not close until Feb. 28.
“I share your concern that some of our retirees may select a plan for which the first month’s premium payment is due before the UMS-funded HRA is available to reimburse them,” Malloy said. “While this is a highly regulated area, Vice Chancellor for Finance and Administration Ryan Low and his team are exploring how UMS can assist our retirees and their spouses in making this initial month’s payment without tax penalty. I will let you know when we have a plan for addressing this matter.”
The primary reason for the change, Malloy wrote, was due to escalating costs of the group plan and the desire to sustain and expand benefits. Under the HRA plan, the system will contribute $2,100 annually for each retiree and $800 for each eligible spouse to allow them to purchase customized coverage to supplement their core Medicare benefits.
Malloy said the amount will be indexed in future years and that plan costs will be far more competitive and in many cases less than the current group plan through Aetna due to a larger cohort of seniors and retirees in the exchange pool. He said the options available through Aon include more than 100 insurers and there is a comparable Aetna plan for retirees who wish to stick with the same provider.
However, David Jones, who taught at the University of Maine Presque Isle for 10 years and then at USM for another 17 before retiring in 2016, said he will be unable to get coverage through USAA, an insurance group serving military members and veterans.
“(We were told) we would be covered for life upon retirement and assured we would receive health insurance as part of our retirement package,” said Jones, 71. “That was one of the major benefits my wife and I were looking forward to, that we would have health insurance and wouldn’t have to worry about that.”
Speaking before the release of the chancellor’s letter Wednesday, Jones said he had questions about the $2,900 reimbursement, whether it will be enough to cover health insurance costs and whether the university will increase that amount over time.
“One of the things you have to do is have to keep receipts of how much you’ve paid and get reimbursed from these companies,” he said. “Right now I don’t have to worry about that. I just pay my co-pay and that’s it.”
Jones, who recently moved from Maine to Oregon, said being 3,000 miles away and trying to figure out the changes has added to his stress. “It seems wrong,” he said. “It seems very disrespectful. I put in 27 years into the University of Maine system. I received professor emeritus status and received all these teaching awards and to have this laid upon us in retirement is mind-boggling.”