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State retirees angered, confused by health insurance changes

Laurel Andrews

Since the implementation of a new state health insurance plan on Jan. 1, Alaska has been battling with a retirees’ group over changes in the new plan. Retired Public Employees of Alaska argues that the new plan, with details cloaked in confusing language, is reducing benefits, while the state contends that the changes don’t reduce benefits and the old plan was in dire need of updating.

The plan hadn’t been revised since 2003 and was “woefully in need of an update,” said Department of Administration Deputy Commissioner Mike Barnhill. For the first time in more than a decade, a new draft document was written up and presented to public employees.

The new plan has been called confusing by plan members who struggle to understand the changes. In the month of January, 50,000 phone calls were made to Aetna, Moda Health, and the Division of Retirement and Benefits call center combined, Barnhill said.

The state was hoping for more clarity, not less, Barnhill said. The state wrote in an FAQ for retirees that the 2003 plan “has been criticized for its lack of precision and clarity on a variety of issues. Many of the changes are intended to address this ... The Division will explore ways to provide explanatory documents that are more readable.”

On Wednesday, following requests by RPEA, the state extended its comment period until April 30, two months after the comment period was to close originally.

The state is self-insured but contracts with a third-party to process its claims. Every five years, the state of Alaska opens that contract up, switching over the years between various third-party vendors. In January, it switched to Aetna.

Around 84,000 members -- roughly 68,000 of whom are retirees and their dependents -- are covered under state insurance, with 30,000 claims processed every week, Barnhill said.

The switch to Aetna has been marred by transitional issues that will be smoothed out in months to come, leading to the delay and re-sending of identification cards and issues surrounding prescriptions. But those issues will be sorted out in time, RPEA president Jay Dunlay said. “It’s the meat of the changes that the retirees are really concerned” about, he said.

RPEA hired consultant Freida Miller, who compared the old plan and new draft documents. RPEA president Jay Dulany said that the association walked away with the perception of “significant reductions to (its) benefits coverage.”

Most contentious are changes to the dental plan, which had not been administered by a third-party administrator before. The plan puts some caps on dental cleanings and determines both in- and out-of-network dentists. Folks who have in-network dentists -- roughly 60 percent -- likely received reduced bills, Barnhill said. Those with out-of-network dentists probably did see increased costs, Barnhill said.

Dental plans are fully funded by retirees, unlike medical plans, which are funded by the state. Barnhill said that the changes are intended to save the retirees money. Caps on dental cleanings were due to roughly 250 retirees who were getting between five and nine dental cleanings a year without examples of medical necessity, which hiked costs for the rest of members.

In its FAQ, the state writes that most of the changes in the new document were wording changes intended to eliminate ambiguity. Basic coverage, including deductible costs, pharmacy co-pay and medical coverages, haven’t changed, the state said.

“There wasn’t any intention to be any reduction in benefits,” Barnhill said.

Retirees also worry about the new appeals process, which has been streamlined from four levels of appeal to three. The Division of Retirement and Benefits is no longer a party to appeals, and retirees wonder why. Barnhill said the new process will be more efficient and involves an independent medical review organization that will be an impartial party to appeal.

Dulany said he believes that the state is trying to decrease costs. The state is struggling with questions of unfunded liability of $12 billion in its state retirement system, roughly $3.8 billion of which is health care costs.

“It certainly makes sense to try to reduce costs, but it doesn’t make sense to do it on the backs of the retirees,” Dulany said.

He added that the association will “try to enlist the entire retiree population” to put pressure on politicians to address the health insurance issue hand-in-hand with the unfunded liability issue.

Besides that, “the only other avenue that we have would be a legal (case)” Dulany said. That something they want to avoid, as “nobody wins” in that situation -- even if they win, attorneys’ fees are taken out of the retirement fund. Still, it’s not unprecedented for RPEA to pursue legal action. “We’ve done it in the past and we’re not afraid to do it,” Dulany said.

Meanwhile, the state is “trying as best we can to be responsive,” Barnhill said.

Correction: This article previously referred to RPEA as a union. The error has been corrected, and RPEA is referred to as an association.

Contact Laurel Andrews at laurel(at)alaskadispatch.com. Follow her on Twitter @Laurel_Andrews.