Why have retiree rates drastically increased over the last couple of years?
Several years ago, the Consortium separated rates for covered participants into an active employee rate and a retiree rate, based on claims, as opposed to blending into one rate all active employees and retirees as in the past. One significant increase in retiree premiums occurred in July 2002. At the time, retirees represented approximately 15% of all MSU health plan participants. Health care costs for retirees were accelerating much faster than active employees costs at that time. This, coupled with the double-digit increases in health care inflation, gave rise to the mid-year increase in premiums. Since 2002, health care inflation and claims experience soared, which, in turn, had drastic effects on our retiree premiums. Many retirees who did not have pre-existing conditions left the consortium for other plans, which created adverse selection.
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