News: Quick Takes

New Medicare Advantage contract ends premiums for state retirees without adding costs to taxpayers

State retirees and their dependents beginning next year won’t pay premiums on Medicare Advantage plans.

The State Health Plan awarded Humana a new contract that will save taxpayers $590 million over three years. The savings will allow the State Health Plan to erase retirees’ monthly premiums for Medicare Advantage plans, State Treasurer Dale Folwell announced in a news conference Tuesday, March 10.

 “This is a new offering, at no cost to state taxpayers,” Folwell said. “Premium-free to the member, premium-free to the dependent, premium-free to the spouse, at no cost to the taxpayer.”

Members now pay $1,344 to cover their spouses and $2,688 to cover their families per year. The new contract will axe monthly premiums, but the savings won’t restrict members’ freedom to choose their doctors, nor will it change their benefits, Folwell said.

“This is an awesome benefit,” said Benny Brigman, State Employees Association of N.C. Retiree Council chairman. “Many of them are at a point where they are having to choose between putting food on the table and health care. … Their quality of life is going to change because there’s going to be no premiums. It’s going to put money back in the household.”

The change will affect the vast majority of state retirees who qualify for Medicare. Some 155,000 retirees are enrolled in the privately managed Medicare Advantage plan.

“We can’t wait to get started,” said Tim Synder, Humana Group Medicare senior vice president. “This isn’t about us, this is about your retirees, and we work really hard everyday to make sure that they have the best benefits they can enjoy in their retirement,” 

Folwell credits the savings to the competitive bidding process. Three other insurers bid for the contract, including Aetna, Blue Cross Blue Shield N.C., and Sierra Health and Life, a subsidiary of United Healthcare. 

 “It’s just the latest example of taking advantage of our largeness,” Folwell said. “It’s a big number … as we try to keep these plans sustainable and accessible not just for this generation of public service workers but for the next as well.”

United Healthcare had held the contract for the Medicare Advantage plan. 

“That’s why you do competition and not just outsourcing,” said Joe Coletti, John Locke Foundation senior fellow. “If you outsource to a single company, they just become an outgrowth of government. You’ve just changed who the monopoly provider is. But this example makes clear that you actually have to put the contract out for bid to get the advantages of competitive bidding.”

The contract with Humana expires in 2023, when the treasurer plans to review Humana’s performance. The State Health Plan will then decide whether to extend the current contract or to restart the bidding process.