To save an estimated $8.7 million a year, the East Baton Rouge Parish school system may no longer offer supplemental health insurance to almost 2,700 retired employees.
Instead, the School Board is considering paying money into Medicare for retirees.
The school system is trying to keep its self-insured employee medical coverage program in the black.
If approved, the changes would take effect Jan. 1.
The School Board discussed the complicated shift at its June 21 meeting and held a special meeting Thursday night in hopes of reaching out to retirees concerned about the possibility of higher out-of-pocket expenses.
“This is really an informational session,” School Board President Barbara Freiberg told a small audience of about 25 people Thursday.
“There is a misconception out there that this is a big increase, but it may be a big benefit.”
The presentation by Mercer Human Resources Consulting, which oversees medical spending for the school system, is available online at http://schoolboard.ebrschools.org/eduWEB2/1000145/docs/awk06.28.12link.pdf
The president of the East Baton Rouge Federation of Retired Teachers, Wendell Mack, expressed concern about the changes after hearing the presentation.
“I worked for 40-something years and now you’re pushing me out,” he said.
The board is planning to vote on the item at its July 19 regular meeting.
If the board rejects the shift to Medicare, it likely would have to increase out-of-pocket costs for the nearly 10,000 people who use the coverage.
Mercer has estimated a 33 percent across-the-board increase in premiums would be necessary to keep the program solvent.
The school system recently approved almost $29 million in cuts to its general operating budget for fiscal year 2012-13, which starts Sunday.
It’s the fourth consecutive year of budget cuts and more are anticipated in the future.
Almost half of the people who get medical insurance from the school system are retired, 4,658. Some retirees never paid Medicare payroll taxes and are too old to enroll in the program without paying a steep premium.
Almost 60 percent of school system retirees are receiving, or are eligible to receive, their primary medical insurance through the Medicare, a federal insurance program.
The school system offers these individuals supplementary insurance, but it is expensive.
Instead, Superintendent Bernard Taylor is suggesting the school system pay into Medicare to offer this extra insurance.
If approved, Medicare-eligible retirees would have a special health retirement account in their name with $3,280 placed in the account each year. With that money, employees could sign up for one of three basic programs: Medicare Advantage, Medicare Advantage Fee for Service or Medigap Plan F.
These plans have annual premiums that range from no charge for Medicare Advantage to $249 for Medigap; all three have no deductible. The East Baton Rouge Parish school system’s “Core” plan, the most used by these retirees, has a $409 annual premium and a $600 deductible.
The three Medicare supplementary plans also pay for 100 percent of all hospitalization, unlike the school system’s supplemental retiree insurance.
Mercer analyst Mary Morrison said the main drawback is some Medicare plans don’t pay all prescription-drug costs, a problem commonly called “the doughnut hole.”
That hole, as part of the 2010 Affordable Care Act, is being closed slowly and is to be fully closed by 2020.
The plan is to hire Extend Health, of San Mateo, Calif., to administer the new program for the school system.