Erlanger, too, seeks shelter from insurance profit storms

Erlanger, too, seeks shelter from insurance profit storms

December 10th, 2013 by Pam Sohn in Opinion Times

Erlanger CEO Kevin Spiegel announced recently that retiree health benefits will be trimmed.

Erlanger CEO Kevin Spiegel announced recently that retiree...

Photo by Doug Strickland /Times Free Press.

Erlanger is putting its retirees under the knife with its latest cost-cutting efforts.

Beginning next year, Erlanger will foot only about 10 percent of the health insurance costs of its retirees, instead of about 70 percent as it had in the past, CEO Kevin Spiegel told Times Free Press reporter Kate Harrison last week. That means some of the hospital's 150 or so retirees will see their health insurance premiums triple in cost.

For this effort, Erlanger Health System, Hamilton County's fourth-largest employer, will see a savings of about $500,000 next year, and it is joining a growing trend of employers backing away from paying insurance benefits for retirees. At Erlanger, the move is the latest in a series of cost-cutting measures enacted since Spiegel took the helm at the hospital in April. All the cuts are needed, he insists, to bring Erlanger out of its several-year financial slump. Spiegel also has talked about a plan to "freeze" the defined-benefit pension plan Erlanger has offered for decades, shifting instead to a retirement savings plan similar to a 401(k).

"We just can't afford it anymore, or provide it (the retiree health benefit) anymore," Spiegel said. "This year we had to ask the question: Can we really afford retiree health benefits at all? We decided not to eliminate the benefit in its entirety, but the retiree will be paying most of the cost."

On the hospital's current $1,000-deductible plan, retirees pay a $143 monthly premium for an individual and $292 for a family. Next year, retirees will pay $374 premiums for an individual, and $783 to $1,132 for a spouse or family, respectively.

Since the public hospital has run $9.5 million and $7.9 million deficits in the past two years and looks to end this fiscal year with a $5 million loss, cuts to a hospital retiree insurance benefit seems to be a good move.

Especially in light of federal hospital charity subsidies that were redirected away from hospitals and to states to fund TennCare-like Medicaid expansions. Oh, but, oops, Gov. Bill Haslam, in a partisan move, decided Tennessee wouldn't take any federal money to pay the expansion's entire cost for the first three years and 90 percent thereafter. (And, yes, that would be free money -- since no one seems to be planning to pay back any federal taxpayers for it, spent or unspent.) But we digress.

Medicare is a wonderful national health-care plan for seniors, and that is how most retirees -- including Erlanger's -- pay for health care. It's true that not all Erlanger's retirees are 65 or older. Some were allowed to retire at 55. But if they could afford to retire at 55, they can probably afford higher premiums for their retiree health insurance. It's also important to note that while federally funded Medicare offers considerable choice of health care providers, Erlanger retirees already are limited only to Erlanger if they want their retiree insurance to pay.

Erlanger joins a gowning list of companies that are abandoning retiree health benefits plans. Russ Blakely, a health insurance broker in Chattanooga for 35 years, said roughly 80 percent of retiree health benefits plans that existed 10 years ago are gone today, and the rest will likely become obsolete. DuPont, Caterpillar, IBM Corp., GE and Time Warner Inc., have all announced making similar shifts.

It's a sobering concern that begs an important question given that health care costs have skyrocketed, but the largest hospital here has been in the red for three years. If consumers pay more both at the health provider doors and on their insurance premiums, who's making the profit?

Here's a hint. Bloomberg has reported the recent profit margins of five of the country's largest insurers -- WellPoint, UnitedHealth Group, Aetna, Humana and Cigna -- climbed to an average of 8.24 percent in the year and a half since health care reform was signed into law. Even before the law passed, their profit margins had averaged 6.88 percent. And that was after the health insurance industry spent hundreds of millions a year for half a decade opposing reform.

So if you're angry about your insurance and health care costs, don't just target Erlanger. There's an epidemic of profit-mongers.