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How Can Connecticut Public Entities Save on Retiree Benefit Solutions in FY2022?

After the year we've had, you won't be shocked to find that lowering costs is still a number one priority going into FY2022 for public entities.

As we work with our public entity customers to plan ahead for the new year, one of the most common questions we've been asked of recently is:

Is there anything we can do to save money and reduce OPEB liability on our retiree benefit solutions without changing anything within our collective bargaining contracts?”

The short answer is: yes. What many entities may fail to realize though is the complexity of developing a solution and how much the landscape has changed over the last few years in this space. It requires a consultant skilled at both financial analysis and product availability as well as an understanding on the impact of Retiree Drug Subsidy (RDS) versus Employer Group Waiver Plan (EGWP) to costs and OPEB liability. Lastly, it commonly becomes just another project that gets sidelined to other competing priorities. But, the savings are worth it.

When asked this question, the situations we often run into are:

  • A self-insured public entity who has their Medicare-eligible retirees in a Medicare Supplement Plan who have not accessed the most advantageous funding to the program, compared RDS versus EGWP, done an RFP and looked alternative solutions (E.G. Medicare Advantage) or alternative carriers
  • A public entity who still has some or all of their retirees, whether under or over 65, still on their health plan and has not explored options because they only have a few members in this category
  • A fully-insured public entity who has their employees on a fully-insured group Medicare supplement and has not explored alternative options in the past 2+ years

Recently, we have seen examples of retiree financial analyses return savings results over 30%. One Connecticut public entity saw a 33% savings on overall retiree costs by exploring alternative funding options, converting from RDS to EGWP, changing vendor partners and retiree product alignments all while not changing anything within the collective bargaining contracts, while another Connecticut public entity saved up to 50% on the fully-insured premium the employee was paying (100% employee expense) by converting from a Medicare Supplement to Medicare Advantage which expanded benefits at a lower cost.

Here are some things to consider & questions to ask yourself when looking at ways to lower costs on the retiree benefits side and if it's time to do an analysis for your public entity.

Do you know...

  1. If any part of your population has not paid into Medicare (E.G. a teacher hired prior to March 31, 1986) and what the cost/OPEB implications of putting them on your retiree solution or an alternative retiree solution would be to your district?
  2. If the post-65 retiree population is still enrolled on your medical plan, have you looked at the cost implications to moving them over to an alternative solution like a Medicare Supplement or Medicare Advantage?
  3. If your population is enrolled on a Medicare Supplement plan, have you looked at the cost implications of moving to Medicare Advantage?
  4. Do you know the cost implications of Retiree Drug Subsidy (RDS) versus Employer Group Waiver Plans (EGWP)?
  5. If you have a significant population in this post-65 bucket has your entity looked at the cost implications of self-insured versus fully-insured vs. a combination of funding (E.G. fully-insured Medicare Advantage medical and self-insured prescription drug plan)?

To learn more about retiree healthcare solutions and understand what impact it could have on your entities’ budgeted costs and OPEB liability, please reach out to your OneDigital Connecticut Consultant.

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