Retirees will pay more for insurance in 2010

Public school retirees will pay a new $10 monthly premium for prescription drug coverage beginning Jan. 1, 2010. Also, the prescription program will be run by an out-of-state drug benefit company.

The Michigan Public School Employees Retirement System (MPSERS) board recently approved the changes, which were recommended by the state Office of Retirement Services.

“Passing on added costs to retirees will create significant problems for those retirees with small and fixed pensions,” said Chuck Agerstrand, MEA’s retirement consultant.

MEA did not support the new premium, which officials said would help the state cover a projected $62 million gap in the retirement program in 2010. By charging each retiree $10 a month, the state expects to raise $24 million next year. In 2011, the monthly prescription premium will increase to $12.

The new costs are on top of monthly premiums that range from about $24 to $175, depending on the type of plan. The average retiree receives an annual pension totaling about $21,500.

A recent MEA-commissioned survey found that previous increases in co-pays or deductibles for insurance coverage have strained household budgets; 20 percent of those surveyed described the strain as “serious.”

Faced with limited budgets and increased costs, retirees sometimes ration their prescription medications. In MEA’s survey, 11 percent of retirees reported that they currently engage in pill splitting.

Many questions remain unanswered about the state’s decision to contract with Catalyst RX, a pharmacy benefit management company based in Maryland. It is unknown, for example, whether retirees will receive a new prescription drug card. MEA recommends that all questions be directed to the state Office of Retirement Services, 800-381-5111.

In addition to prescription drug changes, the MPSERS board approved some other benefit changes at its Oct. 22 meeting.

Most of the remaining money to fill the $62 million gap in the retirement program will come from a switch from Medicare Advantage for retirees 65 and older to a return to a Medicare supplement program. The practical impact on an individual retiree of this change will likely be minimal, if any, Agerstrand said. Blue Cross Blue Shield of Michigan administers the health program for public school retirees now and will continue to do so in 2010.

The MPSERS board also decided to not pay the difference between the cost of generic drugs and brand name drugs when a generic substitute is available. Medicare recently informed MPSERS that it would eliminate reference pricing on Jan. 1, which is a plan provision that pays the cost difference between a non-formulary brand drug and a generic drug.

Continuing to provide such coverage would have cost MPSERS an additional $6 million annually.

Updated: May 11, 2009 1:21 PM