Results of CORRE's Survey of

ORNL/Extend Health Insurance Plans Chosen by Post-65 Retirees

August 2012

1.  General

Total number of responders                             161

Number responders opting out                         10

Number valid participants                                151

-Retirees                                                                90

-Spouses                                                                52

-Surviving Spouses                                               4

-Retiree/Spouses                                                  5

Number Selecting Dental Plan                        38

Number Selecting Vision Plan                         19

Average age of valid participants                    74.5

2.  Distribution Among Companies and Plans

Company              Plan                 Enrollees        Average Premium

AARP                   F                          103                          $188.44

N                            30                           $129.99

Humana               F                              15                          $187.47

F($2K Ded.)            1                            $99.62

C                                1                           $226.67

Sterling                F                                 1                          $228.25

3.  Inconsistent Application of the “Marriage Discount”

 The so-called “marriage discount” provides a 5% discount when both husband and wife enroll in AARP plans.  Many retirees reported that some Extend advisors were aware of this discount and applied it, while many other retirees reported that Extend advisors were not aware of the discount and denied it.  We believe that a large number of enrollees did not receive the discount and are paying higher premiums than warranted.  Of the 55 couples participating in the CORRE survey, it appears that at least 19 did not receive the AARP discount.

4.  Discrimination Against Older Retirees

 ORNL’s new health insurance program inherently places the greater burden on older retirees.  The AARP basic rate schedule, for example, is graded by year up to age 70.5, and fixed for enrollees older than 70.5.  However, the basic rate for older enrollees can be adjusted upward on an individual basis, depending on the health of the individual.  The average premium is strikingly higher for retirees in the older category.  They are the very ones who can least afford it.  The following data pertain to the consolidated population of surveyed enrollees.  Similar data result if generated by company or by insurance plan.

Enrollees                    Age Group                 Average Premium

32                                           65-70                                   $148.51

119                                         71 & up                                 $184.25

5.  Plan F is the Leader

Plan F was selected by a vast majority, 79%, of the participants in the CORRE survey.  Plan N was selected by 20%.  Of the 30 people selecting Plan N, 27 were in the 71 & up age group.  One retiree selected Humana Plan C;  all others using Humana selected Plan F.  Comments of the survey participants suggest the following:

-Many people opted for Plan F over Plan N because there is little difference in cost when out-of-pocket expenses are considered

-Many people opted for Plan F to avoid the hassle of out-of-pocket costs

-Many people opted for Plan F, believing that they can change to Plan N later

-Many people thought that Extend representatives pushed Plan F

6.  ORNL Pays Less;  Retirees Pay More

ORNL enjoys a reduction in its share of the cost of retiree health insurance from $160 per month per individual to $141.67 per month per individual under the new program, and the cost is capped at $500 per year.  Accordingly, ORNL incurs a savings in cost of approximately $750K per year under the new plan.

Plan N is considered to be closest in benefits to the UHC plan that formerly served ORNL retirees.  The average premium for survey participants who selected Plan N is $129.99.  The monthly cost totals $188.32 when $100 is added for MEDCO and $41.67 is subtracted as ORNL’s contribution to the Health Reimbursement Account.  This constitutes an increase in monthly premiums of 18%.  Out-of-pocket costs are not considered in this comparison; we believe they are comparable in the two plans.

Plan F is considered to provide the most complete and most convenient coverage, at a higher premium.  There are no out-of-pocket costs under Plan F.  The average monthly premium for survey participants who selected Plan F is $184.83.  Adding MEDCO cost and subtracting the $41.67 HRA contribution brings the net premium to $243.16 per month, an increase of 52% above the UHC premium.  Extend estimated out-of-pocket costs under UHC to be $651 per year ($54.25 per month) based on a survey of clients in this area.  Intuitively, this estimate seems high, but assuming that figure is accurate, the average monthly cost of the UHC plan becomes $214.25.  Thus, those who selected Plan F incurred an average monthly cost increase of 13.5% when compared with the UHC cost.

The conclusion is clear.  The change in ORNL’s health insurance plan for over-65 retirees has resulted in cost increases for retirees and/or spouses averaging 13 to 18%.  ORNL benefits financially by the change but does so at the expense of its post-65 retirees.

7.  Cost Sharing is Near 50:50

Dr. Mason’s January 18, 2012, notice to the ORNL Staff stated that “…UT-Battelle will continue to subsidize the cost of Medicare supplement plans and prescription drugs.  The subsidy will represent approximately 50% of the cost of the average plan.”  The average premium of all 151 participants in this survey is $176.67, which yields an  average cost of $276.67 when $100 is added for prescription drug coverage.  A subsidy based on 50:50 cost sharing would equal $138.34, which corresponds to ORNL’s current subsidy of $141.67.

8.  Considerations

 a.  Many retirees expressed anger at ORNL for adopting a retiree health insurance program that imposes higher expenses on retirees, when the last general adjustment to pensions was given more than ten years ago (2001) and limited to retirees who retired prior to April 1998.

 b.  Clearly, discrimination against older retirees is inherent in ORNL’s new health insurance program.  Increased cost accruing to older retirees could be countered by scaling the HRA contribution according to retiree age.

c.  ORNL shared its Medicare Part D Prescription Drug rebate with retirees on a 50:50 basis under the previous retiree health insurance program.  CORRE expects ORNL to continue to share the rebate in an equitable manner.

d.  CORRE understands that ORNL held sizable reserve funding under the previous retiree health insurance program, which was administered by UHC and self-financed by ORNL.  The CORRE membership is entitled to know how those funds will be distributed and shared with retirees.