Gov. John deJongh Jr. signed insurance renewal contracts as recommended by the Government Employees Services Commission/Health Insurance Board this week, locking in new rates and coverage for the 2013 fiscal year.
The new plan will raise the premium health insurance rates for the 6,873 retirees covered by the program to better reflect their share of coverage, as compared to the 8,301 active government employees who have been paying more of the overall burden over the past years, according to a statement from Government House.
The new Medical and Prescription Drug plan with Connecticut General Life Insurance Company (CIGNA) will raise premiums for retirees younger than 65 years by more than 42 percent for both individuals and families, and those with covered families above the age of 65 will see a slightly higher increase, according to Government House.
Retirees 65 years and older – those who are eligible for Medicare – will see increases of roughly 64 percent in their premiums. Active government employees by contrast will experience a premium rate increase of 1.6 percent.
“We recognize these premium rate increases are substantial; however, based on the trend in increasing medical rates and claims experience, these revised premiums also reflect the true cost for each group of employees covered in the medical plan. The retiree grouping based on their insurance claims experiences will experience the larger increase,” deJongh wrote in a letter notifying the Legislature of his action.
“But it is also this same group who will have more options because of the newly implemented national health care legislation and increased options provided by Medicare and Medi-Gap policies," he continued.
DeJongh said the Trustees of the Health Insurance Board had a difficult assignment in negotiating these renewal contracts, "but given the combined impact of increasing costs and our overall territorial claims experience, we would appear to not have had a lot of options in order to ensure continued coverage for our employees and their dependents. The key objective was met, which was to ensure that even in these most challenging times that we maintained insurance coverage.”
Nationwide, health insurance premiums increased by an average of 9 percent in 2011 and are projected to increase another 4 percent this year, according to Government House. The V.I. Government was fortunate not to see an increase in premium costs for 2012, but the current system, with its uneven distribution of claims, was projected to experience a double-digit increase for 2013.
In calendar year 2011, active government employees received more than $69 million in claims made to CIGNA, but paid more than $91 million in premiums – a difference of almost $22 million. At the same time, retirees over the age of 65 paid just over $12 million in premiums, but collected almost $18 million in claims. Retirees under the age of 65 paid almost $17 million, and collected more than $18 million in claims.
According to deJongh, those uneven figures drove the decision of the Health Insurance Board, when renewing the government plans, to align premium rates to the actual claims cost of each respective category.
Some other options do exist for retirees to achieve costs savings, deJongh said. For example, if Medicare-eligible retirees determine those increases are indeed cost prohibitive, they can opt out of the CIGNA plan, since Medicare is their primary insurance, or obtain a Medi-Gap policy to fill the gap left by the Medicare traditional plans.
Pre-65 retirees “should strongly consider remaining with CIGNA coverage as it still represents a lower cost compared to other national policies available, even inclusive of the higher rates,” deJongh said.
The governor also renewed dental coverage with CIGNA, the vision contract with Standard Insurance Company, and life insurance with Aetna Inc.
This year, unlike in past years, the Health Insurance Board told the governor they could not make any substantial changes to lessen cost increases due to the risk of losing the “grandfather” status the plan currently maintains under The Patient Protection and Affordable Care Act, according to Government House.