UK Retiree Health Benefits Update:
Letter to Retirees
August 31, 2006
Dear University of Kentucky Retiree or Surviving Retiree Spouse:
As you may know, a special committee made up of UK employees and retirees recently completed a two-year review of health benefits offered to University retirees. This review was undertaken by the University to examine the impacts of new funding requirements and rising health care costs, with the hope of preserving a retiree health benefit. Upon completing its review in December 2005, the committee issued a report, including recommended changes to retiree health benefits. I am pleased to inform you that our administration has adopted the committee’s recommended changes to retiree health benefits, along with an additional enhancement recommended by the University community. We commend the committee for helping our institution arrive at what we feel is the best possible solution.
The pending changes effectively keep and, in many ways, improve retiree health benefits, especially for Medicare-eligible retirees. Please read the enclosed ”What I Need to Know…” information sheet for important information regarding the changes for Medicare-eligible retirees and retirees under age 65. Please also note the following:
Express Scripts Will Continue to Administer Prescription Benefit
Current MEDICARE-ELIGIBLE retirees will remain on a prescription plan administered by Express Scripts. Changes which took effect July 1, 2006 will continue. AS A RESULT, MEDICARE-ELIGIBLE RETIREES WILL NOT NEED TO ENROLL IN MEDICARE PART D. Doing so could cause a loss of coverage in the UK retiree health plan.
Enhancements to Your UK Retiree Health Plan
The University’s Medicare Carveout Plan will be changed to Humana’s “Group Medicare Preferred-Fee-for-Service” Medicare Advantage plan in January 2007. This plan eliminates the $500 plan deductible, which is part of the UK Medicare Carveout, and under the new plan, covered medical services are available for a flat copayment instead of percent charges. Retirees on this plan will receive free gym memberships to their local YMCAs and/or other gyms as a part of the program. See the enclosed “What I Need to Know…” sheet (for Medicare-eligible retirees) for more details.
These changes are, at the administration’s urging, designed to avoid adverse financial impacts on retirees who may be more likely to find themselves living on a fixed income and employees who may retire soon. Moreover, the revised retiree health benefits plan reflects the University’s commitment to its employees. As an institution, we will begin committing millions of additional dollars each year to fund future retiree health benefits. Under the plan being implemented in 2007, the University will set aside approximately $14.2 million annually (to fund current and future retiree health benefits). In the first year alone, this represents a funding increase by the University of more than 50 percent. While planned changes call for a significantly expanded funding on the part of the University, it also means that current and future retirees will eventually pay a higher share of the monthly health plan premium. At the same time, we have worked hard to ensure plan premiums remain as low as possible.
Below, we have provided some brief background on the Retiree Health Benefits Committee’s findings, as well as information on how the approved changes will impact your experience with the UK retiree health plan. I encourage you to review this letter, and I also invite you to join us for one of two information sessions in September (see pages 3-4 of this letter for details).
How Will the Retiree Health Plan Changes Affect You?
Retiree health benefit changes will affect the following groups in different ways. Continue below for details on how changes will affect you.
1) Employees retired as of July 1, 2007:
Current retirees fall into two categories based on Medicare eligibility (see below).
Employees Retired as of July 1, 2007 Under Age 65 (Not Yet Eligible for Medicare)
Considered EARLY retirees (under age 65, not eligible for Medicare), this group will pay a monthly amount equal to 10% of the individual early retiree premium cost to the University, which is estimated to be at $60 per month beginning in July 2007 for UK-HMO members. The University will pay the remaining 90% of the early retiree premium cost.
Employees Retired as of July 1, 2007 at Age 65 or Over (Medicare-eligible)
MEDICARE-ELIGIBLE retirees will continue paying $25 per month for the next several years, while the University pays the remaining cost. When the premium’s total cost to the University reaches or exceeds $250 per month, this group will then pay 10% of the total MEDICARE-ELIGIBLE monthly premium, which will be adjusted annually in January. From that point on, the University will pay the remaining 90% of the Medicare-eligible premium cost.
2) Employees eligible to retire as of July 1, 2007:
Benefits for employees eligible to retire as July 1, 2007 are exactly the same as those in group 1 above who are already retired on this date.
3) Employees not eligible to retire as of July 1, 2007:
Current employees NOT ELIGIBLE TO RETIRE as of July 1, 2007 fall into two categories based on Medicare eligibility (see below).
Employees Retiring After July 1, 2007 Under Age 65 (Not Yet Eligible for Medicare)
Retirees in this group (considered EARLY retirees) will pay a percentage of the early retiree group health plan premium’s total cost to the University. Retirees’ monthly premiums will be based on age at retirement and years of regular full-time service. Upon reaching age 65, all retirees in this group will pay 10% (or $25 per month, whichever is higher) of the MEDICARE-ELIGIBLE retiree rate, which is the same rate current Medicare-eligible retirees pay.
Employees Retiring After July 1, 2007 at Age 65 or Over (Medicare-eligible)
Employees in this group will pay 10% (or $25 per month, whichever is higher) of the individual premium cost to the University, which is the same rate and percentage that current MEDICARE-ELIGIBLE retirees and employees eligible to retire as of July 1, 2007 will pay.
4) Employees hired January 1, 2006 or later:
Employees HIRED ON OR AFTER January 1, 2006 will have “access only” coverage, meaning they may participate in the plans when eligible to retire, but pay 100% of the monthly group premium rate.
Learn More from Upcoming Events, Web Site and Enclosed Information
Listed below is a schedule of upcoming forums conducted by Mike Tearney, chair of the Retiree Health Benefits Committee. These events will allow retirees to learn more and ask questions about pending changes. Representatives from UK Human Resources, Humana, UK PharmacistCARE, UK Health & Wellness Program and UK Elder Care will be there to provide resources to retirees about their programs. I encourage you to attend one of these meetings if possible.
Retiree Health Benefit Information Session Dates, Times and Locations
Thursday, September 7 ; 2:00 P.M. Springs Inn, Lexington, KY
Monday, September 11 10:00 A.M. Springs Inn, Lexington, KY
You may obtain additional information at the Retiree Health Benefits Committee Web site or you may call the Employee Benefits Office at (859) 257-9519, press 3, then 1 for customer service. The enclosed “What I Need to Know…” sheet offers more information regarding plan changes.
Thank you for time and consideration regarding this matter. We appreciate your support for a revised retiree health benefit designed to be sustainable well into the future. We are pleased that the coming changes will seek to preserve – and even enhance – UK’s retiree health benefit, including a full array of treatment, physician choice and wellness options.
Executive Vice President for Finance and Administration