Who is eligible for retiree medical benefits? Employees who retire with at least 15 years of service at age 55 are eligible for themselves and their spouses. A year of service requires 1000 hours of work. Coverage begins at age 65 and requires enrollment in Medicare and payment of the Medicare Part B premium.
What is the current retiree medical benefit? It’s a KP plan that maintains the same out of pocket costs as current active employees. It can be used at age 65.
Why does it change in 2028? In 2012 and 2015 negotiations, Kaiser raised the issue of skyrocketing liability on the retiree medical plan. Liability is an accounting requirement that forces employers to project how much they could possibly owe on the plan. It affects their credit rating which impacts their financing costs when they build new facilities or make other capital upgrades. Liability costs on retiree healthcare plans have risen dramatically as life expectancy and healthcare costs have gone up. This is why most employers have eliminated retiree healthcare benefits. Kaiser came to the Coalition with a desire to reduce their liability by $6-7 billion. The Coalition worked with them on a plan to do that while protecting the benefit for employees. A restructured plan that involves Premium Subsidies for KP Senior Advantage Plans (KPSA) plus a Health Reimbursement Account (HRA) was developed. California Coalition members who retired after 2016 will transition to this plan in 2028. Coalition members in other states have already transitioned to the plan and we’ve been able to learn from their experience.
How does the post 2028 plan work? At age 65, employees enroll in a KPSA plan. Employees have access to a premium subsidy that is projected to cover the premium of the plan. That amount increases by 3% every year to account for inflation. In addition, employees receive a health reimbursement account that is funded at age 65 based on years of service. A debit card will be issued that will work with this account to pay deductibles, co-pays, co-insurance and other out of pocket costs associated with the plan.
How does our current contract improve the plan? For people who retire after January 2024, the plan we will be on in 2028 has been improved. We saw that in Oregon, Kaiser changed the Senior Advantage plans they were offering and the lowest cost plan had higher costs. Previously, the premium subsidy could only be used for the lowest cost (non-zero premium) plan. Now, we have negotiated that the premium subsidy can be applied to any of the plans offered in the region. This will allow us to maximize the value of the premium subsidy.
The goal of the 2028 plan was always to reduce Kaiser’s liability while maintaining the full value of the benefit for employees. With rising healthcare costs and longer life expectancy, out of pocket costs are going up. Therefore, we negotiated an increase in the funding for the HRA from $2000 per year of service to $2500 per year of service for anyone who retires after January 1, 2024. We also negotiated an increase in the additional funding at age 85 from $10,000 to $15,000. Other unions at Kaiser were able to increase the funding for the HRA but only after sacrificing the premium subsidy for new hires. We did not have to do that.
How are spouses covered? Under the current plan, eligible retirees can elect a spousal plan to cover their spouse at age 65 (they must enroll in Medicare and pay the Part B premium). Under the post 2028 KPSA plan, a Medicare eligible spouse receives the same premium subsidy as the retiree as long as the retiree has begun the premium subsidy. Your HRA can be used to cover out of pocket costs for your spouse on a KPSA plan if in a Kaiser service area or a Medicare plan if outside a Kaiser service area.
What if I move to another state after I retire?
- Before 2028, if you move to a Kaiser service area, you will be covered under a plan with the same co-pays as active members.
- Before 2028, if you move outside of a Kaiser service area, you will be offered a Kaiser Out of Area Plan, which offers comprehensive coverage for charges that are considered “reasonable and customary”.
- After 2028, if you move to a Kaiser service area, you will be eligible for a KPSA plan in that service area. You can apply your premium subsidy to any KPSA plan offered. You will also access your HRA to cover out of pocket costs.
- After 2028, if you move outside of a Kaiser service area, you will be able to use your premium subsidy to purchase another Medicare Advantage Plan or Medicare “Medigap” plan or to pay Medicare premiums. You can also access your HRA to cover out of pocket costs.
- There is no coverage if you move out of the country.
How is the Retiree Medical HRA in this plan different from the Health Reimbursement Account we can convert our unused sick leave to? The Retiree Medical HRA is only for out of pocket costs related to the KPSA plan at Age 65. The Sick Leave Conversion Healthcare Reimbursement Account is funded with 80% of your unused sick leave at retirement as described on pages 18-20 of the National Agreement. It can be used any time after retirement to cover a wide range of health, vision, dental and hearing aid related costs that are covered by Section 213 of the IRS Code. Saving your sick leave (if you don’t actually need to use it when you or a dependent are sick) funds this valuable retirement benefit and also helps us get bigger payouts on the PSP bonus.
Where can I see the contract language on the Retiree Medical plan? The plan is described on page 68-72 of our National Agreement. The improvements to the plan are described on page 23-25 of the TA packet.
How can I get a sense of what KPSA plans are currently offered in my region?