This fall, my former employer (University of California) notified me that, for the first time in my memory, out-of-state retirees would no longer be covered by UC group health insurance. Instead, UC will give a Health Reimbursement Account, a sum of money to use for insurance premiums and other health expenses. UC hired an outside firm to decide our insurance needs to connect us to the best insurance plan in our area.
I will pay less out-of-pocket under the new plan than I now do, thanks to the level of funds in my HRA. I also have more options in terms of insurance plans. (I selected AARP medical and prescription plans.)
The catch? My former employer had a long-standing practice: if you ever relinquish your health insurance benefits, you will no longer be eligible to receive them in retirement. The new policy is that moving out-of-state means that you have relinquished your participation in group insurance, although we were never told that at the time. In fact, I don’t remember seeing that new policy in any of the 2013 enrollment documents. I found out because I asked.
Apparently, my Arizona primary residence now acts as if I have renounced my group health insurance. SO…even if I move back to California, I will no longer be eligible for UC group insurance. I assume that the HRA funds will still apply.
My take on all this
: I don’t know if my former employer is saving money by this new practice, but it is certainly possible. Employers who sponsor health insurance have more expenses than just the premiums. They must also pay for a benefits staff to administer the programs. The more employees and retirees, the larger the staff. The more insurance programs offered, the larger the staff. Employers may also pay for outside contractors to process claims. Smaller employers also pay insurance brokers in addition to internal staff and/or outside contractors.
My best guess on the future of health care: Medicare for everybody. The insurance companies can sell their supplementary plans, as they do now.