Thinking about health benefits in retirement
HEALTH BENEFITS UPDATE
As the Chapter 78
deadline approaches for
payments for health
benefits into retirement,
it is time to have a frank
conversation on the
issue.
Our members have to
KEVIN C.
realize the true cost of
LYONS
“early retiree” benefits.
In private plans these
benefits may be the same cost of the
benefits you are now earning, but in
many plans, such as the state plan, they
can be as much as 30 percent more,
depending on the way your plan is risk
pooled.
Risk pooling is actually the most
accurate method of assigning costs to
members depending on the group’s utilization of the benefit. In the state plan,
there are two sides – the local employer
(municipal and county) and state
employees. They are both separated
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FEBRUARY 2016
into active, pre-Medicare (any retiree
younger than 65) and post-Medicare
retirees. Early retirees are always the
biggest cost to the plan due to their age
and the lack of a subsidy from
Medicare.
It is imperative that you know your
Medicare status before your retirement. Anyone employed after the late
1980s contributes to Medicare (about
2 percent now) and will not have an
issue into retirement. If you are not
contributing, you may get caught with
a bill of more than $500 a month after
age 65.
If your employer has adopted Chapter 88, you will be reimbursed for the
Medicare contributions. Please check
to see if your town has a record of that
chapter being adopted as it is permissive legislation and is not mandated.
The long and short of it is that
retiree health benefits are expensive
until Medicare kicks in. Until the fed-
eral government fixes the system, we
are all taxed to pay for a broken and
convoluted system. We are relegated
to 2-percent raises while medical
inflation is 8 percent to 12 percent and
prescription drugs are increasing at 14
percent to 18 percent. Always remember that we are consumers and have
to manage the costs on our own
behalf. d