For six months, retired Vermont state employees have been furiously protesting Gov. Phil Scott’s administration’s proposal to turn their Medicare supplemental health benefit over to management by a commercial insurance company.
Earlier this legislative session, they came to Montpelier asking elected representatives for help preventing the shift to a Medicare Advantage plan.
Now the House has an answer. Deep inside its 258-page appropriations bill, H.494, is language that would give the Vermont Retired State Employees’ Association, a group that does not have a role in formal labor negotiations, a veto over alterations to retirees’ health benefits.
The changes would also clarify that the state’s more than 8,000 retirees’ could be offered health insurance that is not exactly the same as what is provided to active state employees. That point has been the subject of ongoing disagreements among the executive and legislative branches and the Vermont State Employees’ Association over what the law currently allows.
“We’re not completely closing the door, but we want the parties to all agree,” said Rep. Mike McCarthy, D-St. Albans, chair of the House Government Operations and Military Affairs Committee, where the language was crafted.
The House budget bill states that any “alternative health coverage” for retirees must be “substantially equivalent” to the union-negotiated active employee benefit. It must also be agreed to not just by the Vermont State Employees’ Association, the labor union for active members, but also by the retirees’ group.
If passed into law, the wording would make a switch to a Medicare Advantage plan possible, but unlikely, given the widespread opposition to that proposal among retirees.
The protests began in September when Commissioner Beth Fastiggi of the Department of Human Resources and her staff presented the Medicare Advantage plan from Cigna as what would be on offer for Medicare-eligible retirees starting in 2023. They said benefits would be the same or better than their current plan, with savings shared between the state and retirees of at least $9 million annually.
But since February, after a reaction that Fastiggi called “fairly hostile” in her committee testimony, Scott administration officials say they do not intend to impose a new health insurance plan on retirees.
“The state has said in many forums that we are not unilaterally forcing a Medicare Advantage plan on retirees,” Fastiggi told McCarthy’s committee again last week.
However, they do expect it to be part of the next round of collective bargaining with the state employees union, which begins this fall for contracts starting in mid-2024.
Significantly, the budget language would make retiree health benefits off limits during any final-offer arbitration process between the administration and the state employees union. That means it can’t be forced on the union after a stalemate.
Shelley Martin, president of the Vermont Retired State Employees’ Association, said her board and 2,100-plus members are thankful for the legislative action. They would prefer it if the language did not allow any alternatives to what existing employees now have, but the veto clause would give them a say in what occurs. Plus, the arbitration component of the bill “really protects us,” she said.
The association is the official representative of all retired state employees, both those eligible to join the union and those who held ineligible managerial jobs.
Martin said she has heard from several hundred retirees since the fall. All of them say they are happy with their current health benefit, and many are upset and extremely fearful of what might happen.
The current benefit is supplemental to traditional Medicare. Self-funded by the state and managed by BlueCross BlueShield of Vermont, it pays for co-payments, deductibles, prescription drugs and other treatments not otherwise covered by the federal program. The Cigna plan would replace both a retiree’s traditional Medicare and the supplemental coverage.
Retirees and the state employees union objected to the choice of Cigna, which was recently sued by the U.S. Department of Justice for health care fraud. The company is accused of overstating the chronic illnesses of enrollees between 2013 and 2018 in order to inflate the government’s per-member annual payments.
But more broadly, the union and retirees oppose the shift to any Medicare Advantage plan. They point to health analysts who say the program incentivizes commercial insurers to delay approvals for treatment and deny claims. (A recent federal audit of the 15 largest Medicare Advantage providers found that a significant percentage of prior authorization denials — 13% — and payment denials — 18% — should have been approved under Medicare rules.)
Fastiggi and others have said that this would not happen in this case because Cigna has specifically tailored the proposed state plan to mimic active employee benefits. But the longtime director of Vermont’s employee benefits program, Kathy Callaghan, now a retiree, said that thinking is naive, at best.
The state benefits office can effectively advocate for employees and retirees to reverse denials under the current plan precisely because it is self-funded, Callaghan said. With a commercial insurer controlling the pursestrings, state staff won’t have any special pull.
“Once you get down that rabbit hole of appeals and denials, the state has lost its leverage over retirees’ benefits,” she said in an interview earlier this month.
Martin hopes Scott will tell his administration to give up its focus on Medicare Advantage. “I’d like to see him just suddenly say, ‘It’s not worth it.’ Then people would stop worrying.”
The Vermont State Employees’ Association also finds the legislative language not ideal.
President Aimee Towne told the House committee that it was unsettling to have an outside group, the retiree association, have veto power over the result of bargaining. The union represents only non-managerial active employees, though it has a retiree chapter with a seat on its board.
Steve Howard, the employees association’s executive director, called the budget bill add-on a promising step, and said union members looked forward to fine-tuning the language in the Senate. “We think it’s vital … that there be language in the budget that does put guardrails around this issue,” he told the committee.