Some retired state employees in NC will see Medicare premium increases. What to expect.

Premiums will increase next year for some retired state employees and their dependents under the State Health Plan’s Medicare Advantage plans following a vote by the plan’s board of trustees on Thursday.

This increase is due to financial challenges faced by the plan, including an unexpected increase in Medicare Advantage payments the plan needs to account for, according to plan staff.

“This is not the place that we thought we would be when we signed this contract several years ago with Humana,” which holds the contract for these Medicare Advantage plans, said State Treasurer Dale Folwell.

Increases under these Medicare Advantage plans “precipitated the need for this not to be a zero cost to the taxpayers,” Folwell said. “We’re going to be making sure that we pursue that in every way possible.”

Asked if the State Health Plan was considering rebidding the Medicare Advantage contract, Sam Watts, the State Health Plan director, said the plan was working on a procurement process and drafting documents as part of that process.

Humana was awarded the contract effective January 2021 for three years with an optional two-year extension.

All board members who voted approved the change in premiums. Melanie Bush, who is deputy Medicaid director for the state Department of Health and Human Services, abstained from the vote.

Breakdown of premium increase

The vote increases premiums for dependents — children, spouses and other family members — on Humana’s Medicare Advantage Base Plan.

It also approved increases under this base plan for full or half contributory retirees (or members who pay for a portion or all of their coverage). There will also be changes in costs under the Enhanced Medicare Advantage Plan.

According to documents presented during the board meeting, premium changes for those under these Medicare plans break down as follows:

Medicare Advantage Base:

▪ Retiree only: The cost will remain at zero dollars.

▪ Retiree plus a child or children: The cost will jump from $4 to $37

▪ Retiree plus spouse: The cost will jump from $4 to $37

▪ Retiree plus family: The cost will jump from $8 to $74

Medicare Enhanced:

▪ Retiree only: The cost will drop from $73 to $67

▪ Retiree plus a child or children: The cost will jump from $146 to $167

▪ Retiree plus spouse: The cost will jump from $146 to $167

▪ Retiree plus family: The cost will jump from $219 to $267

How will it affect retirees?

Insurance premiums are taken out of pension benefits, and the average benefit is $1,800, according to a State Health Plan document shared with The News & Observer.

People affected will feel the increase, said Tim O’Connell, the executive director of the North Carolina Retired Governmental Employees’ Association.

“When an increase in another area of their life, such as health care, comes in, it definitely impacts(retirees) because the other parts of their budget are fixed,” O’Connell told The N&O in April. Before the vote on Thursday, the board had previously met to discuss the premium increase.

So, while these changes might not “sound like much, if you’ve not had a cost of living adjustment – a true cost of living adjustment – in a decade, then you’re paying for this change with the same dollars, the value of a dollar back in 2013, 2014,” he said.

Under the state’s budget passed last year, retired state employees will receive a one time 4% cost-of-living adjustment (COLA). A COLA is meant to help retirement benefits keep up with the inflation rate.

Humana’s role

State Health Plan staff members said Humana had offered a zero-dollar premium to the State Health Plan for all years, barring significant federal regulation changes. The plan pays Humana, which in turn pays claims.

The federal Inflation Reduction Act in 2022 implemented changes that Humana has said require increased costs, the staff members said. Humana increased the Medicare Advantage Base Plan premium from $0 to $33.

This will impact about 4,200 contributing retirees and 22,000 dependents, the staff members reported. The Plan will cover the cost for retirees who are fully covered.

For retired state employees who are eligible for these retirement benefits, the General Assembly puts money into a fund to pay the premiums.

How the Medicare Advantage Plan works

Upon retirement, people can choose between the original federal-run Medicare program or select a Medicare Advantage plan, the private insurance alternative.

Under Medicare Advantage plans, enrollees still pay other Medicare premiums.

Some North Carolina state employees who have retired are eligible to enroll in the Medicare Advantage plans offered by the State Health Plan.

Employees, if they have enough service to qualify, pay zero dollars for themselves.

To be eligible for these state health benefits at no cost, a retiree must have completed at least five years of service and have been hired before Oct. 1, 2006.

After that date, retirees must have completed at least 20 years of service to be eligible for coverage at no cost.

Those state employees who don’t meet either of these criteria — depending on their years of service and when they were hired — could be eligible for coverage but would need to pay half or all of the plan’s premium, according to an SHP fact sheet. Those hired after Jan. 1, 2021, are not eligible for State Health Plan benefits.

The federal government also offers Medicare Advantage plans through its Marketplace.

Financial woes, despite cuts to weight loss drugs

Without the premium increase and other efforts, the health plan would lose nearly a quarter of a billion dollars in 2025 and could be over $1 billion in the negative by the end of 2027, according to SHP staff calculations.

The plan said a confluence of factors was causing these financial woes, including underfunding in the state’s budget, by $240 million less than needed.

Folwell has also said lawmakers still owe the plan for $313 million in COVID-related expenses. In a letter dated Monday and shared with The N&O, Folwell asked the top legislative leaders, House Speaker Tim Moore and Senate leader Phil Berger, for the state to reimburse those expenses.

The funds to reimburse the plan “could come from the $5.4 billion the General Assembly received from the federal government for” COVID-19 related expenses of which “as we understand it less than, $2 billion has been dispersed,” Folwell wrote. A state COVID-19 funding dashboard updated Thursday shows $2.3 billion disbursed.

Financial issues come despite cutting access to popular GLP-1 weight loss drugs like Wegovy and Saxenda.

Bush questioned why more proactive action was not taken to avoid raising premiums, such as requesting a funding adjustment for the plan during the legislative short session.

“You took two major actions this year: You did GLP-1s and you’re raising rates on state employees because of the Humana thing,” Bush said. “But there’s no other talk about how we’re managing state health care costs.”

Watts said during short legislative sessions like this year’s, the plan does not typically request such adjustments, and that the plan also faces scheduling differences between when the budget passes and when the plan needs to finalize rates. Folwell called on staff to look into requesting adjustments during this short session despite the complications.

Over 700,000 state employees, retirees and their family get their health care through the State Health Plan.

NC Reality Check is an N&O series holding those in power accountable and shining a light on public issues that affect the Triangle or North Carolina. Have a suggestion for a future story? Email realitycheck@newsobserver.com