The story has finally hit home for retirees of the Newark Star-Ledger.
In late September, the benefits administrator for Advance Publications, which owns the paper, sent a letter to retirees notifying them that they would no longer be covered by a company-sponsored group retiree plan. In its place, Advance informed them it was “pleased to offer a new solution” – a smorgasbord of health insurance options available through something called the Mercer Marketplace 365, an insurance exchange – and they would be given a subsidy to help pay premiums and out-of-pocket expenses.
Ex-employees were stunned. One of them, Anne-Marie Cottone, who had taken a buyout in 2008 after 35 years at the paper, said she now would have to pay for health-care coverage, and “in some cases, this will force people into Obamacare if they aren’t eligible yet for Medicare.” She said the move was particularly galling to employees like her who took a buyout from the paper, at least in part on the promise of continuing health-care coverage. “The company told us that we would be given health benefits for life, for ourselves and dependents if we agreed to retire and start drawing our pensions one year after the buyout,” she said. Since employees were eligible for full pensions at age 65, that meant people like Cottone, who was only 58 at the time of the offer, would receive a reduced benefit for the rest of her life.
The company had threatened to sell the paper if 200 employees did not take the proposed buyout and a new agreement was not reached with unionized employees.
Those taking the buyout who were not considered retirees were promised continuation of medical benefits for one year. Those retiring and taking their pensions, according to the terms of the deal, believed they would be getting lifetime benefits, although Cottone told me she had nothing in writing “that I can find,” which would confirm that expectation. She says she considered the prospect of lifetime health benefits a trade-off for taking early retirement and leaving some of her pension benefits on the table. “We all seemed to have understood we had health benefits for life. It sounds a bit much to say we were expecting to be taken care of, but we were expecting to be taking care of.” And for eight years they were.
Then came the September surprise.
Although Star-Ledger retirees may have been blindsided by September’s letter, they shouldn’t have been. Employers in all industries have been dropping retiree health benefits since the early 1990s, says Paul Fronstin, the director of health research at the Employee Benefit Research Institute, a private, non-profit, nonpartisan organization that conducts studies and provides research on employer benefits and is funded by a diverse group of employers, insurers, benefit consultants, unions, consumer groups, and healthcare providers. “What’s happening now is they are not dropping benefits. They are changing benefits.” There are no federal protections for retiree benefits as there are for certain kinds of pension plans.
In every industry, places that have had retiree benefits in the past have mostly eliminated them. If an employer has the ability to end them, they’ve done so, at least for future retirees.
The new health insurance arrangements confronting Star-Ledger retirees are part of a sweeping national trend to shift more of the cost of medical care from employers to current workers and to retirees either through higher premiums or scaling back benefits. According to Anthony Napoli, a local representative at the NewsGuild of New York, “In every industry, places that have had retiree benefits in the past have mostly eliminated them.” Napoli added, “If an employer has the ability to end them, they’ve done so, at least for future retirees.”
Star-Ledger retirees are, in fact, lucky. They will still receive health benefits although they will now have to pay a portion of the cost, and for some retirees coverage may not be as good; for others it might be better. Fronstin explained that Advance is offering retired employees what’s called a private exchange, which is similar to Obamacare’s state insurance exchanges, where people select policies insurers sell. The sales pitch is that when they buy a policy through the Mercer Marketplace 365, they can choose a plan that works for them taking into account a combination of premiums, deductibles, coinsurance, copay and networks. Usually there are shopping tools that help them make decisions, and Mercer’s website promotes access to a healthcare concierge and opportunities for second opinions.
Employers, though, are the biggest winners. By shifting the rising costs of healthcare to current and retired employees, they save gobs of money over time. Mercer’s website advertises an average first-year cost savings of nine percent, almost $1,000 per eligible employee cost savings.
The financing vehicle for the new coverage is a health reimbursement account. Advance said it is providing a subsidy through the account, and retirees will be responsible for paying premiums directly to the insurer they choose as well as any other out-of-pocket expenses the new insurance calls for. The amount employers contribute “is completely up to them,” says Fronstin. It could be $1,000 or $900 annually, or it could be different for a family than a single person.
The catch is that retirees could end up paying a lot more for their premiums as time goes on. The employer’s premium subsidy might be sufficient now, but it may not increase much or at all in future years, and rising premiums may be tough at a time when income diminishes.
As Star-Ledger retirees have learned, nothing is forever in the world of healthcare. The era of good benefits with little out-of-pocket expense is over. That means paying close attention to the fine print whenever you’re asked to agree to changes in health insurance, pensions, or any other benefit. Try to get promises in writing, though Fronstin says that’s often unlikely. Above all, ask lots of questions. How the employer’s contribution will change over time is an important one.
Journalists know how to ask questions. Insurance is hard even for the experts. We know how to find sources for our stories. Now we have to find them to explain how this new arrangement will work for us, what the terms mean, what strings are attached. The lesson from the Star-Ledger retirees is that we have to learn to do that for ourselves.