Reduction of Medicare premiums reimbursed to retirees in NYSHIP, the NY State Health Insurance Program for State and Local Government proposed

Reduction of Medicare premiums reimbursed to retirees in NYSHIP, the NY State Health Insurance Program for State and Local Government proposed
Source: The NYS Legislative Retrieval Service - Assembly 9706-B

NYPPL notes the introduction of Assembly 9706-B, Part U, a measure that proposes an amendment to Civil Service Law §167-a that is draconian in nature and ignores completely the underlying reasons why §167-a was proposed and enacted into law in 1966.

A brief history lesson concerning the enactment of §167-a may be illuminating.

Many years ago Thomas McCracken, the then director of the Department of Civil Service’s health insurance unit, realized that the State could obtain substantial benefits in terms of a reduction in the employer’s contributions to the New York State Health Insurance Program for State and Local Government [NYSHIP] if individuals and the dependents of such individuals that were Medicare eligible retirees were to designate Medicare as their primary insurer.

Mr. McCracken was instrumental in the drafting and adoption of §167-a to this end. He also successfully advocated modifying NYSHIP's health insurance contracts to “exclude” from State health insurance coverage those benefits otherwise available to Medicare eligible retirees and their dependents under Medicare. The reason for this: Medicare premiums were less than the premium costs that would have been otherwise required were the State to continue to provide these benefits under NYSHIP.

In developing the plan, Mr. McCracken realized that, in effect, “excluding” such coverage in the NYSHIP contracts for health insurance mandated that the Medicare eligible retirees designate Medicare as their primary insurer or lose a significant portion of their health insurance coverage.

However, to maintain their same level of health insurance benefits, the Medicare eligible retiree would be required to pay the Medicare premium otherwise required for Medicare as well as their full employee contribution required for NYSHIP. Hence the amendment of the Civil Service Law to provide for the reimbursement of Medicare premiums to the Medicare eligible retirees set out in §167-a.

As an illustration, if the employee contribution for individual coverage in NYSHIP was $xxx per year, the Medicare eligible retiree would be required to pay $xxx for his or her NYSHIP participation and, in addition, pay $yyy per year for Medicare premiums. However, the Medicare eligible retiree would get the same level of health insurance otherwise available to the non-Medicare eligible individual under NYSHIP but would be required to pay more for the coverage.

To eliminate this adverse impact on Medicare eligible retirees, §167-a was enacted in order to provide for the reimbursement of Medicare premiums to Medicare eligible retirees, thus, once again, limiting their cost for health insurance to the $xxx per year that was required of active State workers and non-Medicare eligibles in NYSHIP while NYSHIP reaped substantial financial savings to the benefit of the State and NYSHIP’s participating employers.

Any action to reduce or impair the full reimbursement of Medicare premiums to Medicare eligible retirees as proposed by the drafters of Assembly 9706-B would result in the Medicare eligible retiree being required to pay more for the same level of health insurance benefits enjoyed by active employees and non-Medicare eligible individuals in NYSHIP, notwithstanding the fact that Medicare is providing benefits to Medicare eligible retirees that would otherwise be borne by NYSHIP thereby resulting in a significant reduced costs to the State and participating employers.

Simply stated, but for the Medicare eligible retirees participating in Medicare, the State’s and participating employer’s contribution for NYSHIP enrollees, active and retired, would be greater.

As to any argument that the State health insurance premiums need not be identical for active State employees and State Medicare eligible retirees, Civil Service Law §167, “Contributions,” demonstrates that the legislative intent was that such premiums be identical, regardless of employment or retirement status.

As evidence of this legislative intent, §167, in pertinent part, provides that “Nine-tenths of the cost of premium or subscription charges for the coverage of state employees and retired state employees retiring on or after January first, nineteen hundred eighty-three who are enrolled in the statewide and supplementary health insurance plans shall be paid by the state.” Accordingly, reimbursing the Medicare eligible retiree less than the full cost of his or her Medicare premium would be inconsistent with this legislative mandate that premiums for active employees and Medicare eligible retirees be identical.

To the same end, §167, in pertinent part, provides: “Three-quarters of the cost of premium or subscription charges for the coverage of dependents of such state employees and retired state employees shall be paid by the state.” Again, this intent of the legislative would be frustrated were the Medicare eligible retiree not reimbursed the full cost of Medicare eligible dependent Medicare premiums.

Clearly, §167 expresses the legislative intent that the premiums to be paid for health insurance were to be identical for active State employees, State retirees and State Medicare eligible retirees and their respective dependents.

Further, this is true with respect to “the premium or subscription charges for the coverage of each state employee or retired state employee who is enrolled in an optional benefit plan and for the dependents of such state employee or retired state employee.” §167 provides that such individuals are entitled to “the same dollar amount which would be paid by the state for the premium or subscription charges for the coverage of such state employee or retired state employee and his or her dependents if he or she were enrolled in the statewide and the supplementary health insurance plans, but not in excess of the premium or subscription charges for the coverage of such state employee or retired state employee and his or her dependents under such optional benefit plan.”

As to others in the State’s health insurance plan, §167 provides that “employees of the state colleges of agriculture, home economics, industrial labor relations, and veterinary medicine, the state agricultural experiment station at Geneva, and any other institution or agency under the management and control of Cornell University as the representative of the board of trustees of the state university of New York, and employees of the state college of ceramics under the management and control of Alfred university as the representative of the board of trustees of the state university of New York, shall be deemed to be state employees whose salaries or compensation are paid directly by the state.”

On a related point, there seems to be a perception on the part of some that §167-a distinguishes between Medicare Part A, Medicare Part B, etc. Clearly such is not the case. §167-a speaks to reimbursement of “Medicare premium charges” generically, not in terms of reimbursement of the cost of any part or subdivision of the Federal Old-age, Survivors and Disability Insurance Program and provides for the reimbursement of “an amount equal to the premium charge for such supplementary medical insurance benefits for such active or retired employee and his or her dependants.”

One can only hope that Medicare eligible retirees and their Medicare eligible dependents participating in NYSHIP are not faced with a situation whereby the proponents of this legislation are saying “don’t confuse us with the facts, our minds are made up!”