Insurance industry executives will always say that the critical metric used to establish rates is "risk determines rate." Thus when risks go up, rates move right up with them. The reverse is also supposed to be true.

However, there are some situations where this metric doesn't appear to apply and it's to the detriment of annuitants subscribed to Medicare Parts A and B who have retained their prior employer's health plan into retirement. These groups can include retirees from the military, federal Civil Service, Postal Service, state and local governments, teachers and private industry.

Upon turning 65, if qualified, most usually subscribe to Medicare Part A and many to Part B as well. By law, Medicare assumes the primary role in covering medical expenses and the individual's pre-Medicare insurance carrier transitions to the secondary roll. The switch from primary to secondary medical provider lowers the insurance company's risks considerably, yet frequently, without a corresponding rate reduction.

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Payroll deductions over their entire career qualify retirees to enroll in Medicare Part A. Most also pay to subscribe to part B. These retirees have paid for, thus own, their extensive Medicare Parts A and B benefits. By not considering this Medicare ownership in setting supplemental coverage rates, insurance carriers can reap an enormous benefit when their medical coverage reverts from primary to secondary payer.

A non-qualified individual is charged $411 a month to buy into Medicare Part A. Many also opt to pay $104 a month for Part B. The $411 and $104 are actual government's charges; thus it should be a safe assumption to equate cost with value. The value of owning Medicare Parts A and B is therefore $515 a month ($6,180 a year). Subscribers to Medicare Parts A and B have thus paid for and own their considerable Medicare coverage.

One group of overcharged Medicare Parts A and B subscribers is retired federal annuitants. When federal employees are working or retired, but not yet 65, most of their medical expenses are covered by the Federal Employee Health Benefits Program (FEHBP). The FEHBP is the primary payer for the enrollee's medical expenses, but requires enrollees to pay a modest cost for deductibles and co-pays. Enrollees have numerous plan options and, far from being a platinum plan, the FEHBP provides satisfactory medical coverage for its subscribers.

Unfair overcharging begins when federal retirees turn 65 and subscribe to Medicare Parts A and B. Medicare becomes their primary payer with the FEHBP transitioning to the secondary role. Since Medicare Parts A and B coverage is quite extensive, the FEHBP, as secondary provider, is responsible for only Medicare's deductibles and co-pays. Frequently these are approximately the same that enrollees paid to the FEHBP prior to Medicare. Deductible and co-pay costs pale in comparison to that of a primary provider or to the value of the subscriber's Part A and B ownership. The transition from primary to secondary lowers the FEHBP's risk considerably but their Pre- and Post-Medicare rates remain unchanged. Federal retirees took another hit from the Social Security Hold Harmless Provision, which results in many federal retirees paying $121 a month for Part B, while Social Security recipients' costs remain unchanged at $104 a month. Federal retirees are beginning to make their federal legislators aware of this unfair practice and are asking for their support to require FEHBP providers to offer policies with rates truly reflective of actual risk.

Medicare Parts A and B subscribers who are not federal annuitants but retain their employer health plan into retirement owe it to themselves to review their pre- and post-Medicare rates to determine if they are being similarly overcharged. Individual circumstances could vary depending on previous employer, insurance carrier and contracts under which the annuitant previously worked. In all circumstances, however, when an insurance carrier's risks are reduced, it should be accompanied with a rate decrease.

These same Medicare Part A and Part B subscribers should determine if their supplementary insurance plan (1) transitions from being the high risk primary payer to the less risky secondary payer (2) becomes responsible for only the Medicare deductibles and co-pays, and (3) reaps the benefit of a significant risk reduction without a corresponding rate reduction. The results of said review will determine if and what remedial actions are needed for each group of Medicare A and B subscribers.

Thomas DeFiore of Hammonton, is legislative officer of the National Active & Retired Federal Employee Association, Jersey Shore Chapter 1664. Email him at defioret@yahoo.com.

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