A change to how the University of Maine System provides health care for nearly 2,900 retirees and their dependents has raised alarm that the cost-saving measure could negatively affect their care during the coronavirus pandemic.
The change involves shifting from a defined benefit plan — where the benefits are outlined ahead of time — to a defined contribution plan, which provides a person a certain amount of money to access undefined benefits. The plan fills Medicare coverage gaps for eligible retirees.
The university system is promoting the change as a way to save money while providing retirees with more options and cheaper care by allowing them to be part of a bigger risk pool. But some retirees say the shift has introduced uncertainty around their health care amid a pandemic that has claimed nearly 185,000 lives in the U.S.
At least three unions representing teachers, service workers and part-time clerical and technical staff are pushing back, arguing the system should have bargained with them before moving forward with the change.
“It was a bomb from the skies,” said Jim McClymer, a physics professor at the University of Maine in Orono and the president of the Associated Faculties of the Universities of Maine, a union that represents professors in the system.
The system is one of the several Maine state departments tasked with identifying 10 percent of budget cuts to counteract the $1.4 billion revenue shortfall the state is expected to face through 2023 due to the coronavirus pandemic, but the change was not related to those cuts.
The system’s board of trustees approved a $559 million budget earlier this year that included a projected $5.7 million revenue shortfall. Virus-related hits including lost event revenue, student safety expenses and other investments were expected to be in the range of $20 million.
This change is expected to reduce costs for retiree benefits by $2.5 million — or 34 percent — annually, system spokesperson Dan Demeritt said. But conversations about changing the plan began two years before the pandemic, said Carol Corcoran, interim chief human resources officer for the system.
Plan members will be given $2,100 for individuals and $800 for spouses to spend on care in a seperate account and will need to shop for plans through Aon, the university’s contractor. Care will be paid for by the member and then reimbursed by the university. Retirees were informed of the change around mid-August. The shift is expected to be in place Jan. 1.
The move will save the university money because it will be able to plan for a defined amount of money to spend on retirees, Corcoran said. She said the system’s current health care plan costs were expected to increase 8 to 10 percent in 2021 if changes were not made.
“The program itself just wasn’t sustainable for the university and this way we found them what we think is a win-win solution,” she said.
But McClymer said his union and others were not contacted prior to the change’s announcement. He said the union and the system are expected to sit down Friday to discuss the issue. All eight of the system’s union contracts expire in 2021, according to its website.
Corcoran said the university system was not required to bargain over the change because it does not believe retirees are covered by the unions once they end their employment. Trustees voted earlier this year to move the subject of retiree insurance from its jurisdiction to administrators. Demeritt said the board was briefed on the issue during an executive session.
Proposals for the plan were not publicly advertised because it was deemed to be a personnel matter, Demeritt said. The contract with Aon lasts for five years with an option to extend.
Older retirees could be confused by the reimbursement system or might not have the money to pay for the cost upfront, said Bill Steele, a retired theatre professor at the University of Southern Maine. He also said the university system could not guarantee retirees would get the same level of care or be able to afford marketplace plans.
“Twenty-one hundred dollars doesn’t go very far in a health care budget these days,” Steele said.