William Nietmann

NAURA Benefits Representative

Though at any age health care can be a vexing issue, as we age, vexation is compounded. Our ailments increasingly preoccupy us. We speak of costs - of failing bodies, of dementia, a broken American health care system (see the 30 page Time Magazine expose' titled "Bitter Pill: Why Medical Bills Are Killing Us," March 4, 2013), of the cost of insurance itself which is suppose to help cover the costs of health care. The sales pitch of the insurance industry is "peace of mind." It's false advertising. The cost of insurance itself worries us. Yet without it, the cost of health care can suffocate us with an insurmountable financial burden.

Separation from NAU by retirement will introduce you to the daunting task of making health insurance decisions. Here are three questions people ask on the topic of buying insurance.

(1) I'm retiring from NAU prior to age 65, the eligibility date for Medicare. What options do I have concerning health insurance?

In one way or another, upon retiring you'll be joining the private market and pay "full freight" for your medical insurance. You can stick with NAU or other State of Arizona health insurance plans or buy a policy on the open market. Whatever you decide, it will cost you.

Stick with the state, and you'll receive the group benefits of a state policy and pay the group insurance rate. Heretofore the state has lowered the cost to you by substantially subsidizing this premium. Now, in round numbers, your cost will be in the neighborhood of $500-$600 per person per month. In an imaginable case of having to pay for you and a spouse, the (around) $1,200 per month could be a deal-breaker. For various reasons, a significant number of people remain in the NAU Blue Cross/Blue Shield (NAU/BC/BS) plan. These include familiarity with the plan and convenience of not transferring out, the full scope and low co-pays and deductibles associated with the plan, and a drug formulary which is far more complete than most of those available in the private sector. The biggest reason for not sticking with NAU/BC/BS is the cost. Many retirees cannot afford the premium, and many of those who can don't want to pay that much in any case. They opt to jump out.

The jump into the private market is not easy. First of all, both you and your spouse will have to buy an individual policy. There are wide array of policies, each with co-pays, deductibles, excludibles, and under current law, lifetime maximum limits. In the "imaginable case," you and your spouse will pick plans which determine your independent monthly premiums (or prices which determine the extent of your benefits). Thus, a healthy spouse might pick a high deductible policy not costing very much and prudently put $8,000 in a medical "kitty" to cover the deductibles built into your low premium insurance policy. The unhealthy spouse could opt for a medically expensive plan which will cover "preexisting conditions" (assuming a company is found which will insure this person) for a $2,000 (or maybe more) per month premium. The less you expect from your insurance, the less it will cost, and vice versa. In both cases, expect a health evaluation.

This scene will be revised by the Affordable Care Act (ACA) (ObamaCare) which begins on January 1, 2014. The advent of the ACA will expunge many limitations now imposed by private market plans. It will ban waiting periods that exceed 90 days, annual dollar limits on essential health benefits, and preexisting conditions (regardless of age) which can put health insurance out of reach. See: http://www.hhs.gov/healthcare/rights/index.html

The "open enrollment" date for ACA is October 1, 2013. Unhappily at this moment, the picture seems muddy regarding the detail of signing up for health insurance. One can read that states are struggling to have a trained telephone staff on hand to answer questions, or that web page enrollment procedures lag in readiness for the open enrollment date; or on a happier note, one can read about the 7 million people who are expected to enroll in the marketplaces by next year and will be pleased with the experience.

What is clear is that the markets will transform the way individuals buy private health insurance1; and with laws in place to provide oversight of the insurers, consumerx will be able to exercise greater control over in the administration of their policies. There will be increasing transparency and competition in the market place. For example, as with Medicare (see below), plans offered at each level (Bronze, Silver, Gold Platinum) will be comparable with one another. As well, for those with modest incomes making them unable to afford the cost of monthly premiums, a system of subsidies may come into play which will provide the needed assistance to help pay for their health care. Your job is to do the research necessary to pick the right insurance plan from among competing carriers. This research should include both picking the right product and providing for its financing. There's much to learn. Become informed about how ACA works: www.hhs.gov/healthcare/rights/index.html

(2) I'm about to retire. How do I enroll in Medicare, and what Medicare insurance options open to me?

You are eligible for Medicare when you turn 65. You can sign up during the seven month period beginning three months before the month you turn 65 and ending three months after the month you turn 65. If you don't sign up for Part A and/or Part B when you were first eligible, you can sign up during the General Enrollment Period between January 1 and March 31 each year. There are penalties for late enrollment, however. For more information go to: medicare.gov Medicare Eligibility.

Before I start with an overview of Medicare, take note of the excellent help available at the above cited Medicare website. It contains a wealth of enrollment and insurance plan information as well as information to help with evaluating doctors and hospitals. Go to "Medicare.gov" for a complete listing of deadlines, eligibilities, and the cost of various plans. Once you are no long connected with NAU there will be health insurance rules to follow in becoming enrolled for either Medicare or (shortly) ACA. Here's an overview of the possibilities you will explore.

Medicare is divided into four parts. Thus, you have four segments of health insurance about which you will to make a decision. Part A covers hospital costs. Happily, the premium for hospital costs has already been paid in conjunction with your Social Security payments over the years. With the exceptions spelled out in the Medicare website dealing with people never enrolled in the Social Security program, you'll not be paying premiums for Part A. Basically, it covers 80% of costs in hospitals accepting Medicare, which means that you pay the rest of the hospital bill. More about this in a moment.

Part B is insurance for physician-related costs. As a second major aspect of medical costs, you are required to have Part B. In fact, there are penalties for not buying it. Subject to rules about people making over $85,000 for singles and For 2013 the premium is $104.90 per month, this deducted from your social security check; and as with most insurance, for there is a $146 yearly deductible to be paid on the doctors' bills. As well, there are co-pays in addition to the cost of Medicare Plan B itself. Deductibles and co-pays are standard stuff in the insurance business. If you additionally buy a Medigap policy, it will pay some or all of these costs not covered by Plan B. . . . so . . . you go to the hospital and a doctor attends you. Medicare will pay a part of their bills, and you will pay a deductible and any co-pays out of your pocket, that is, unless you are covered by other insurance you can buy on line or at the office of a local insurance agent. There are other considerations. For example if the taxable income of a single person is above $85,000 or$170,000 for joint income of a married couple, you'll pay a bit more for your Medicare Insurance. See the Medicare website for details.

Next is Plan C. It is the invention of the insurance industry and Medicare administration which bundles Medicare Plans A&B and usually Plan D into what is called the "Advantage Plan." We'll get to that after an introduction to Part D of Medicare.

Part D is the prescription insurance plan. Potentially drug therapies can be the most expensive part of health care. The cost of insurance covering this possibility depends on the therapy. The Medicare website is your best resource for investigating and choosing a Plan D. Each insurance company will specify its own formulary. A "formulary" is the list of drugs the insurance company will help pay for. For instance, some companies will help pay for Viagra, other companies will not. Prepare a list of your medications then on the site look for "Prescription Drug Plan" to narrow down the companies you might consider being suitable for your needs. You can expect to have deductibles and co-pays with most Plan Ds. A usual procedure is for the Plan D company to begin paying for your drugs once your deductible amount is reached. There still could be copays, depending on the particular drug. Check the disclaimers for "experimental" (this determined by the insurance company) drug treatment. These types drugs could be "off the chart" in terms of costs and happily by stipulation, not in the insurance company's list of responsibilities, either.

Three buckets of medical costs--Plans A, B, and D-- and one tub in which to throw them all: Plan C. Plan C, the heavily advertised "Medicare Advantage Plan." Advantage plans conveniently bundle everything together, an "advantage" of convenience for you (and for the insurance company as well, as it spreads risk and, accordingly, improves margins). You still have to choose among numerous Advantage plans, and the Medicare website will spell out the details of various plans, their costs, deductions, and co-pays, and the extent of their drug coverage (a few plans may not offer drug coverage).

The degree of satisfaction with any particular plan by its users can be found in the Medicare website. Some companies have a higher rate of consumer satisfaction than others. One disadvantages of an Advantage plan is that its geographical is regional, not national. Should you travel out of your region and need medical care, you may have to pay any medical bills you incur and then jump through hoops and hurdles to recoup the funds you spent from the Advantage Plan insurance company you bought your plan from. You will be reimbursed at the ratesrelevant to your region, as I understand this. However, emergency medical attention is exempt from this restriction. The plans will pay for emergency treatment.

People who don't sign up for an Advantage Plan will point to its regional limitation as a reason to look back to go back to so-called "traditional" Medicare and investigate its supplemental insurance to Medicare, called a Medigap Plan, or (obviously) a "Supplemental Plan." Should they do this, they still have to buy a Plan D prescription plan. Buyers of these plans will speak of a sense of transparency present in this step by step procedure. They know what they're getting. Here's why.

Go to Medicare.gov and click on "Supplements and Other Insurance." Here you will find plans given an alphabetic designation, A through N (omitting H, I, J). What the plan covers and estimated annual costs are provided in a chart. Keep in mind that each policy within the group called "A," or all called "B," and so on through . . . N are identical. Plan F, for example, is the most complete of all the Supplemental policies and all Plan Fs are alike. Only the prices within each grouping can differ. These prices are calculated by the specific insurance companies who offer the insurance. (They, too, are looking after their "margins" while competing with one another for your business.) What this means is that you will have to trust your insurance agent or a website which evaluates insurances companies to decide which company will serve you best.

So, Medicare Plans A and B are your primary insurers, and the Medigap policy is your secondary insurer. It covers costs involved with co-pays and deductibles as spelled out in the website which not covered by Medicare A and B. As well, you are required to buy a prescription plan, Plan D. Your insurance agent will take an inventory of your needs and suggest plans with prices which will meet your needs. Although some companies offer a slight discount for two plans (viz., you and your spouse) bought from them, , it could also be that in the best interest of you both, you each may end up with different insurers.

As it turns out, roughly speaking Advantage plans and Medigap plans are priced in the same neighborhoods for equivalent plans and services. The Advantage Plan is convenient; Supplemental plans allow for national coverage and a more tailored selection process. Your job is to figure out where you get the most for the least.

(3) The question still remains, what insurance should I choose?

Here are the choices which will confront you: NAU/BC/BS, an ASRS plan, or a plan bought in the private market. This question won't be easier to answer after you start receiving all the insurance information which will cross your desk during the upcoming "Enrollment Period," which typically is around October 15 to December 7. (People already enrolled with Medicare can only change their Medicare health plan and prescription drug coverage for 2014 during this period. There are special case exceptions.)

During late August, probably September, but even perhaps in early October, two state agencies will send you health insurance information for next year, 2014. One will come from the Arizona State Retirement System (ASRS) and the other from the Arizona Department Of Administration (ADOA). Though in general they overlap each other, they are independent of one another. Each sought insurance bids and then negotiated the policies you read about in the brochures. There are minor differences including pricing and scope of coverage in the policies offered by the two agencies. Only ADOA offers the NAU health insurance policy underwritten by Blue Shield/Blue Cross (NAU/BC/BS). Along with the rest of the state employees you can also look at policies likely offered by companies other than NAU/BC/BS. (Last year United Health Care provided policies in both agencies with trivial differences.)

The reason for NAU uniqueness is due to a legislative decision several decades ago which allowed NAU employees, who have no easy access to Health Maintenance Organizations (HMO), to buy insurance for the system of Preferred Providers Organization (PPO), which is the way medicine is practiced in Flagstaff. Usually HMO providers cost less than medicine practiced by a preferred provider system. So, if you were to move to the Valley for your retirement, you may want to look at policies restricted to HMOs. (One national survey has HMOs among the best providers of health care.) But keep the following in mind: should you drop the NAU/BC/BS health insurance plan, there is only one way you can reenter it - you MUST perennially buy and keep at least one policy from ADOA. This policy will usually be the Delta Dental Plan. A reason you may want to return to the NAU plan would focus on the costs of drug treatments. (And in time, Obamacare may even be able to resolve this issue.)

So what should you do? You will talk with both pre and post - Medicare retirees who wouldn't jump out of NAU/BC/BS because it is widely accepted, thorough-going, and also wide ranging in its prescription coverage. The "donut" hole in prescription coverage doesn't exist; but . . . there is the cost. Other retirees move away from NAU vowing that their Advantage Plan works just fine and the company they bought it from pays promptly without hassle. Still others think that their Medigap supplemental plans fit them to a "T" and they rejoice in saving several thousand dollars per year over what NAU/BC/BS costs and like the thought that the cost of buy individual policies isn't being compromised by costs hidden by "convenience."

Why does NAU/BC/BS cost so much? It is a group plan. This means that BC/BS calculates the actuarial probabilities of NAU medical costs each year and offers a negotiated contract to all current and retired personnel at a price which covers the costs, overhead, and contingencies for this group. However, for Medicare retirees, the NAU/BC/BS premiums do not recognize our Medicare contribution as being our primary insurer. After all, they say, Medicare is not a feature of the NAU group plan. Thus both Advantage plans and Medigap plus Prescription plans are less expensive in most cases, the notable exception being the people who require extraordinarily expensive drugs. These people may indeed be better off with NAU/BC/BS. Otherwise, it is worthwhile to check out the lay of the land outside NAU.