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April 29, 2002 Local
Chairpersons Dear Sister and
Brothers: This is in response
to the many phone calls and e-mails this office has received concerning
the recent premium increase announced by UPREHS relative to Disability
Coverage under Plan U-65. While I am not on the Board of Directors of UPREHS, I did
attend the General Chairmen’s meeting prior to the Board’s meeting
in March, and will set forth my understanding of the necessity of the
Board’s actions. At the end of fiscal
year 2001, there were 43,750 members in UPREHS, which breaks down as
follows: 17,464 active
members (40%), 14,392 Medicare members (33%), 976 U-65 members (2%),
10,303 dependents (23%), plus 615 other members belonged to the 60/30
and 61/30 Plans which are being combined into a 60/30 Plus Plan. Over the last 3 years, UPREHS has lost approximately $33 million; the loss in fiscal year 2001 was $7,265,053, and can be broken down as follows:
As can be seen,
approximately 90 percent of the loss in fiscal year 2001 is attributed
to 2 percent of the members enrolled under the U-65 Plan.
In the past, UPREHS has been able to cover loses in the U-65 Plan
(and others) by a positive cash inflow from the active plan; however,
that is no longer true with the active plan losing money as well.
The problem, and I do not see any relief in the immediate future,
is that the cost of medical care, led by prescription drugs, is
increasing at approximately 15 to 20 percent a year. Following is a
comparison of disability plans between UPREHS effective July 1, 2002,
and the National Plan under United Health, which is raising dues
effective June 1, 2002.
*With the imposition of the $150,000 cap, every affected member
participating in the U-65 plan will start at $0, and the cap is subject
to a yearly increase based upon the percentage of increase of
medical cost to the consumer price index.
Additionally, the raise in premiums effective July 1 was not
limited to disability members under the U-65 Plan. Active members’
premiums will be increased from $35 to $45 per month, and the premiums
for Medicare members will increase from $151 to $165 per month (versus
$265 per month for United Health Plan D).
I understand better than most what it means to live under a fixed
income as I was raised by my grandparents during their Social Security
years, and I understand premium increases are extremely hard to meet
when a person has to budget a limited and fixed amount of money per
month. However, to do
nothing would put UPREHS out of business.
If that happens, and it very well could, the actives would be
picked up under the National Plan; however, retires and disability
members would be devastated and left to seek the best coverage they
could find and afford.
The action by the UPREHS Board of Directors to increase premiums
is not a long-term fix as long as health care costs continue to increase
yearly at the current rate. This
is a problem that is national in scope and universal to the entire
health insurance industry.
You should also be aware that the action of the Board of
Directors was not limited to increasing premiums.
The Board is also attempting to negotiate an increase in the
“dues offset formula” which compensates hospital associations for
the cost of providing employee medical care and is based upon the cost
of the National Plan to provide such coverage.
The extent to which the dues offset formula has not keep pace to
rising health cost can approximately be determined by comparing the 2002
adult COBRA ratio (before administrative costs) of $367.18 against the
2002 dues offset of $266.92, for a difference of $100.26 per month less
to hospital associations. While I know that
this response does not address the many concerns over rising premiums,
nor should it, I hope that it does provide insight into why the Board of
Directors took the action that it did.
Fraternally,
Dean L Hazlett
General Chairman |
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