Michigan Blue Shield Blue Cross approved a plan to convert its retiree health insurance plan to a defined contribution plan that will allow it to budget health care costs more accurately and offer more flexible options to its retirees, Crain’s has learned.
The changes affect participants who retired after January 1, 1993 – approximately 3,200 retirees – and 4,138 expected future retirees, with the exception of unionized employees who will continue to receive current benefits until the expiration of their term. convention.
As part of the Blue Cross plan, retirees will receive a pre-funded health reimbursement account that they will use to purchase individual health insurance through Towers Watson OneExchange Private network.
For retirees under 65, Blue Cross will pay up to $ 20,000 annually for a family and those 65 and over will receive up to $ 5,000 per year. Funding will be based on seniority, age and job classification and will take into account expected medical inflation.
“Many companies have already moved to defined contribution plans from defined benefit plans,” said Andy Hetzel, vice president of corporate communications at Blue Cross, in an interview with Crain’s. “This makes our health care costs more predictable and manageable. Health care (benefits) for retirees is a long-term proposition and is unpredictable due to the growth in health care costs.”
The changes to retiree medical benefits are part of a larger “strategic business transformation” effort that aims to reduce administrative costs by $ 300 million over three years and increase revenues. Last year, Blue Cross said it lost $ 68 million in net income from all of its operations in 2015, its first loss in at least five years.
Over the past few years, increases in Blue Cross healthcare costs for retirees under 65 have ranged from 7% to 8%, with retirees over 65 experiencing an annual increase of 10%, mostly due to rising prescription drug costs, Hetzel said.
“We have taken steps over the years to minimize costs over the years,” Hetzel said. “This is another step in making (our budget) much more predictable.”
Some 516 retirees are not affected because they retired before 1993 and will remain in the Blue Cross group health insurance plan. But 3,200 retirees will switch to the defined contribution model on January 1. From October 1, they will select an individual health plan through the Towers Watson Private Exchange.
In 2007, Blue Cross ended retiree health care for newly hired non-union employees. Newly hired union employees lost medical benefits for retirees in 2009.
Hetzel said 4,138 active employees are eligible for retiree medical benefits when they retire. Another 4,238 employees are not eligible for retirement benefits, he said.
Blue cross, Blue care network and related subsidiaries employ around 7,900 workers in total.
Not all employees are satisfied with the changes announced by Blue Cross.