Hunting for new health plans

Hunting for new health plans

Retirees losing GM coverage look for affordable alternatives

Christina Rogers / The Detroit News

Healthy General Motors Corp. retirees faced with choosing a health insurance plan will likely find affordable coverage, but those with serious medical needs could outspend the $300-a-month pension increase the automaker is giving them in exchange for cutting their medical benefits.

Ford Motor Co. and Chrysler LLC retirees who encountered a similar predicament last year, along with benefits experts, say it all depends on the type of plan the GM retirees select and whether they have significant prescription demands.

"A lot of us were able to find affordable plans on the open market," said Chuck Austin, 66, president pro tem of the National Chrysler Retirement Organization, which has about 450 members. "If you're healthy, it's fine, but if you're not, you're looking at taking on some additional costs."

In cutting health benefits for some 97,400 salaried retirees, GM follows the lead of Ford and Chrysler, which ended coverage for their retirees 65 or older in the last two years and replaced it with an annual stipend that could be used to buy supplemental health care. While GM hasn't specified the savings from nixing its retiree health benefits, the cuts are part of a larger effort to slash $1.5 billion in costs related to salaried employees.

GM is the last of Detroit's Big Three to go this cost-savings route. In the previous two cases, retirees worried they wouldn't be able to afford coverage comparable to what they got from their former employer.

But the reality, some Ford and Chrysler retirees say, isn't nearly as bad as many feared.

"The first year is really the worst because you're set adrift," said Joe Phillips, a 70-year-old Chrysler retiree who now lives in Rochester. "The most difficult part was finding insurance, because you have to evaluate all these plans."

The key to selecting coverage, these retirees say, is to take stock of your lifestyle and medical requirements, and then find a plan that suits you.

"Do you travel a lot or will you require stints in the nursing home?" Phillips advised GM retirees to ask themselves.

"It your health is poor, you may want to get better coverage," said Phillips, who is also the acting president of the National Chrysler Retirement Organization. "If it's good, you may want to take a gamble. You can go for the less costly policy that covers less."

Medicare may not be enough

With the $1,805 yearly stipend now doled out by Chrysler, Phillips, who is battling a cancerous tumor in his kidney, has bought several plans to augment his basic Medicare coverage, totaling about $2,865 a year in premium costs.

Besides paying $96.40 a month for basic Medicare once covered by Chrysler, he's paying $73.34 a month for a supplemental plan from Blue Cross Blue Shield of Michigan, plus $36 a month in dental and $33 monthly for prescription drug coverage. He spends $245 a year on eyewear.

"I have done a lot of research, and I'm a lot more comfortable now," Phillips said.

Austin, who spent 44 years at Chrysler, said GM retirees may also want to pay close attention to prescription drug coverage.

Medicare prescription plans typically cover a narrower selection of drugs with higher co-payments, he said.

They also have what is known in the industry as a "doughnut hole," an arrangement in which a policyholder pays the full amount of the drug after costs hit a certain amount.

Once that out-of-pocket expense reaches another set amount, the insurer resumes coverage -- hence the hole or gap in coverage.

"If you're not healthy and have a lot of medications, that's where it gets to be a lot," he said.

Chrysler retiree Paul Peters, 82, of Wixom urged GM retirees to shop around and compare plans. He uses the $1,805 he gets from Chrysler to pay for his wife's health insurance. His benefits are covered through a previous marriage.

With that yearly stipend, he's purchased a top-tier, fee-for-service plan from Blue Cross for $239 a month, or about $2,868 a year, which includes drug benefits and covers treatment at any doctor or hospital that accepts the plan.

"It isn't enough to cover the whole cost, but we're glad to have it," Peters said, noting his wife takes nine medications and has had numerous heart surgeries. "We're pretty well covered as we were before," he said.

GM's plan to increase retiree pension payments by $300 a month -- or $3,600 a year -- is more generous than those now offered by Ford, which gave its retirees $1,800 a year, and Chrysler, which initially provided a $1,750 annual stipend for medical expenses before increasing it 3 percent to $1,805 this year.

Unlike the two stipends, however, the pension increase is taxed according to the retiree's income, so the yearly increase could be less than $3,600.

GM salaried retirees now receive full coverage for vision, dental, medical, prescriptions and extend care with monthly premiums for some medical plans, from $60 a month for an individual to $170 monthly for a family, said company spokeswoman Michelle Bunker.

Coverage ends Jan. 1

As of Jan. 1, those retirees will have to buy their own insurance, including basic Medicare Part B, which covers doctor's visits.

Insurers, however, can't refuse retirees or set premiums based on their medical conditions, Bunker added. The automaker hasn't decided yet whether it will adjust the pension increase for inflation or rising health care costs.

GM has hired Extend Health, a San Francisco company, to help its retirees choose a health plan.

Extend Health CEO Bryce Williams said pricing for such coverage varies widely, from Medicare Advantage policies that cost zero in monthly premiums but have extremely high co-payments to Medigap plans that cost upward of $180 a month but provide rich benefits and require lower out-of-pocket expenditures.

"With that subsidy, they are going to be able to get a great value," Williams said, noting the company works with about 40 insurers offering 600 plan configurations.

Extend Health won't have pricing for 2009 plans until mid-October. It will offer some upgrades over last year's service, such as moving up the Medicare enrollment date to Oct. 15 and staffing the phone lines with licensed insurance agents who can sell plans directly to callers.

The company has also doubled the number of support staff so retirees will work with one insurance agent, rather than a new one each time they call, Williams said.

Supplemental coverage helps

Buying supplemental coverage typically helps lower out-of-pocket expenses for seniors who would otherwise face steep deductibles and co-payments under the basic Medicare plan, said Richard Johnson, a retirement expert for the Urban Institute, a research firm in Washington, D.C.

He said about two-thirds of Medicare enrollees buy supplemental coverage, but the market is bound to grow as more employers trim retiree health coverage.

About 8 percent of private sector employers offered retiree health benefits in 2003, down from 11.6 percent in 1997, according to the Urban Institute.

The $300 in extra pension for GM retirees likely will cover their supplemental costs right now, but Johnson questioned whether that might change as health care costs continue to increase.

For instance, basic Medicare, which covers doctor's visits, runs a premium of $96.40 a month, and that rate typically increases each year, Johnson said.

"This is another sign that retirement is financially more and more risky for older Americans," Johnson said. "People just can't rely on the government or their employer to take care of them right after they stop working."