Eversource shifting thousands of retirees to private health insurance
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Eversource Energy will remove 14,440 retirees from its health care plan in the New Year and will instead offer to reimburse them for buying private insurance, a switch being made by a growing number of big companies to curb costs.
The electricity and natural gas company, the largest in New England, said the move will save $30 million a year in health costs and will benefit its retirees by offering a greater choice of plans through a new private insurance exchange. Eversource spokeswoman Caroline Pretyman said the service, called OneExchange, also may be able to get better deals on health plans because of its greater purchasing power.
“Health care costs are increasing. With more buying power, exchanges like OneExchange can more easily absorb health care cost increases on a larger scale,” Pretyman said.
The effect of the change on retirees will vary, as some of the former workers were already paying for the coverage provided by Eversource, while others received the company plan for free. Meanwhile, OneExchange offers hundreds of different plans that range in price, deductible amounts, and coverage limits.
But the union that represents some of the retirees predicted some members will end up paying significantly higher out-of-pocket expenses that will exceed Eversource’s reimbursement. It also criticized Eversource for making the change in a year that saw the retirement of its longtime chief executive, Thomas May, with a compensation package that included $23 million in accrued retirement benefits.
“If the company really wants to save money, then it should look to the excessive bonus and retirement packages provided to its top executives instead of reneging on its retiree health care obligations,” said Craig Pinkham, president of the Utility Workers Union of America Local 369, which represents about 3,000 retirees.
Other companies have made similar moves to limit retirees’ health costs, according to the Employee Benefit Research Institute in Washington, D.C. In 2015 the Massachusetts Mutual Life Insurance Co., based in Springfield, and General Electric Co, now headquartered in Boston, did away with their traditional retiree plans in favor of giving employees fixed subsidies to purchase plans through exchanges. GE offered retired hourly workers reimbursements of $1,000 per year.
Many other companies are eliminating retiree health benefits all together. A quarter of US employers with 200 or more workers offer coverage to retired employees, down from two-thirds in 1988, according to the Kaiser Family Foundation. Of the companies that still cover retirees, 6 percent do it through private exchanges.
At Eversource, formed through the 2012 merger of Boston-based NStar and Northeast Utilities of Hartford, most of the affected retirees are older than 65 and eligible for Medicare. They will receive either $2,500 or $3,600 annually to pay for a Medicare supplement plan through OneExchange’s marketplace, depending on when they retired, and their spouses will receive the same amount. Pretyman said May has signed up for insurance through OneExchange and will receive an annual reimbursement of $2,500.
About 1,900 younger retirees who are not yet eligible for Medicare will receive $6,500 a year. The change was announced to employees in August and goes into effect Jan. 1.
Depending on the year they retired, former Eversource workers over age 65 had paid $816 a year for the company plan, while those who retired before 2000, according to the union, did not pay premiums.
Now they have to choose their own health care coverage online with the assistance of OneExchange workers. So far, Eversource said its retirees have enrolled in 462 different plans, offered by 51 carriers.
OneExchange, a division of benefits and health care consultancy Willis Towers Watson, connects retirees with Medicare supplemental coverage and prescription plans based on their location. OneExchange has worked with hundreds of thousands of retirees, is a licensed Medicare broker, and puts new employees through weeks of training before they assist retirees, said John Barkett, director of policy affairs for Willis Towers Watson.
“It benefits both the employer and the retiree most of the time to move to a Medicare exchange, so that both can pay less for a similar plan,” Barkett said.
Pretyman said the average premium for Eversource retirees who are over 65 is about $3,000, meaning the company reimbursement should cover the new premium costs for most. But some worry their out-of-pocket costs are now much higher.
Bill Doherty said his 79-year-old father, William, who retired from the company about 30 years ago, will end up shelling out anywhere from $2,500 to $2,900 for prescription medicine after factoring in the Eversource reimbursement; previously the elder Doherty paid about $200 per year for medicines, his son said.
“For 30 years, he never paid anything close to” $2,500, Bill Doherty said. “It’s a change in their benefit and at 80 years old, a $2,500 change is significant.”
For retirees such as Doherty, Eversource has agreed to cover the cost of prescription medicines once their out-of-pocket drug costs exceed about $2,500 a year, Pretyman said.
“Some are going to end up in a better situation and some are going to pay a little more, and the biggest factor there is the number of prescriptions,” she said.
Pinkham, the union local president, said he has heard different stories while fielding more than 200 calls from concerned retirees.
“Many of these workers live on a fixed income, often a small one, and the additional out-of-pocket, deductible, and prescription costs will be devastating,” he said in a statement.
One retiree who said the switch works in his favor is Tony Simas, who retired as director of Eversource’s call center earlier this year after working at the utility for 35 years. At age 61, Simas will be reimbursed up to $6,500 from Eversource, as will his wife. They’re using the money to buy a health plan on OneExchange that will save $350 a month in premiums compared to what Simas was paying for the Eversource coverage. Though his deductible is now higher, Simas expects to ultimately save about $1,500 a year.
Paul Fronstin, director of health research at the Employee Benefits Research Institute, said targeting retirees’ health coverage may be an easier way for companies to cut costs because it doesn’t immediately affect existing employees.
“Employers may also see retirement benefits as an easy target when cutting costs, because existing employees are less likely to react negatively to something they are not yet receiving,” Fronstin said.
Some retirees probably don’t like having to manage and buy their own health plan, he added, but others may prefer the options available in the private exchanges.
Matt Cappello, a 75-year-old retiree who worked for Eversource predecessor Boston Edison for 30 years, would put himself in the former camp. At his age, Cappello does not want to be shopping for health insurance on his own.
“I feel like I’m a bookkeeper, an accountant,” said Capello. “I don’t like the idea that I have to pay money out of my pocket and then get reimbursed.”
Pretyman said retirees will be able to get their money back within two weeks of payments, and eventually they’ll be able to set up an automatic reimbursement system that will result in faster payments.
About 98 percent of Eversource retirees have enrolled and purchased insurance through OneExchange, Pretyman said, and the company expects the remaining to register by Jan. 1.