Explaining the path to pre-65 health subsidies

Dear Fellow Employee:

Many of you have repeatedly told me that restoring the health insurance subsidy for pre-65 retirees should be a priority of the city. Based on your comments, I charged Alex Smith, our chief of human resources, to explore doing just that.

Good news: Chief Smith found an option that many states (such as Louisiana, Ohio, Rhode Island, and Nevada) have used -- a private exchange. The private exchange is not the Affordable Care Act or “Obamacare” public exchange -- it’s simply access to private insurance with companies like Cigna. Cigna is willing to insure all retirees, including the pre-65 retirees, and the city could contribute to the cost. This is only for retirees.

Here’s a comparison, using a 58-year-old woman who encounters a $5,000 hospitalization cost under the current city plan and a selected Cigna plan in the private exchange:

	2017 Premier Plan	2017 Private Exchange Cigna Connect 2500 Choice
Annual premium	$9,680.52	$9,516
Yearly out-of-pocket max	$3,000	$5,000
Yearly city subsidy (HRA)	$0	$3,500
Net annual cost	$12,680.52	$11,016

As you can see, the private exchange plan saves this retiree $1,664.52 in this example. Any costs this retiree has after the out-of-pocket maximum are covered at 100 percent. (And as with our current insurance, preventative care is covered at 100 percent.)

 

Now, let's take a pre-65 family plan. This is a married pre-65 retiree with no dependent children: 

	2017 Premier Plan	2017 Private Exchange Cigna Connect 2500 Choice
Annual premium	$19,361.04	$16,899.36
Yearly out-of-pocket max	$7,000	$13,100
Yearly city subsidy (HRA)	$0	$7,000
Net annual cost	$26,361.04	$24,999.36

 

Just as with our previous example, the retiree saves money in the private exchange -- $1,361.68. And just as with the previous example, any costs this retiree has after the out-of-pocket maximum are covered at 100 percent. (And just as with our current insurance, preventative care is covered at 100 percent.)

Post-65 retirees use Medicare as their primary insurance and the city’s insurance as supplemental. You can find more detailed comparisons for them in the entire presentations, which we’ve posted here. 

Let’s put all of this in a nutshell: The private exchange is the only realistic option to save pre-65 subsidies. The trade-off would be that all retirees would pay a higher deductible.

These are the facts, and I wanted to make sure you heard them from me.

Yours,