What’s in a Health Insurance Premium? Comparing Retiree Health Care Costs

In this story:

• Retirees enrolled in PERACare pre-Medicare plans will see higher monthly premiums in 2022
• PERACare plans operate under different circumstances than plans on the individual marketplace
• PERA is working to lower costs wherever possible

Colorado Gov. Jared Polis announced last month that Colorado residents can expect to see big savings on individual insurance premiums in 2022 — about 24 percent, on average. That’s great news for people who don’t receive health insurance through an employer and have to purchase coverage on their own. For retirees enrolled in PERACare’s pre-Medicare plans, it likely came as a surprise that their premiums would instead be going up next year.

PERACare plans operate under slightly different circumstances than those on the individual marketplace, which in Colorado is called Connect for Health Colorado. While those differences can have an impact on a plan’s premium, there are a number of other important factors to consider when shopping for health insurance.

Connect for Health Colorado and PERACare

Insurance premiums — the amount insurance companies charge each month for coverage — are driven primarily by the cost of services and prescription drugs. Those costs have been rising across the country for years, and premiums have largely followed suit.

Colorado lawmakers have made multiple attempts to rein in premium increases in recent years, but they don’t always apply to all plans. In 2020, the legislature established the state’s reinsurance program, which helps cover the cost of expensive claims to keep plan costs down. That program is the key factor in reducing individual premiums for 2022, but it only applies to plans in the individual marketplace and not group plans like those offered by PERACare.

Demographics can also play a big role in the cost of health insurance — think of how a large number of younger people in a group brings down the average age of that group, for example. Insurance plans sold on Connect for Health Colorado are open to the general public and therefore cover people across a wide range of ages and circumstances. PERACare’s pre-Medicare plans, on the other hand, cover only retirees who aren’t yet eligible for Medicare — ages 50 to 64.

Older Americans are more likely to use more medical services than other sections of the population, so plans that only cover aging patients can be more expensive to administer. In addition, the prices for many services, in particular hospital and ER costs, are higher in Colorado than in other areas of the country.

What PERA is doing to lower costs

PERA’s Director of Insurance, Jessica Linart, said PERA understands the challenge of rising health care costs for retirees, and her team negotiates with PERACare insurance carriers to lower costs wherever possible. That can include administrative fees, which are a small portion of the overall cost of a plan. Other costs, like prescription drug prices, can be harder to control because carriers have already negotiated those prices with manufacturers and providers.

One area where PERA can help lower costs is by encouraging retirees to choose less expensive care options.

“PERACare plans have lower copays for higher quality doctors, lower copays for generic drugs versus brand names, and lower costs for outpatient surgeries versus surgeries performed at a hospital,” Linart said. “All of this can help bring down the overall claims costs, which can ultimately lead to lower premiums.”

PERACare plans also cover preventive care at 100 percent and include a fitness center benefit and weight loss programs to help retirees maintain their health, which can reduce overall costs long-term.

Other factors to consider

Premiums aren’t the only cost to consider when shopping for health insurance. Plans can have vastly different out-of-pocket costs like co-pays, coinsurance and deductibles. Then there’s a plan’s out-of-pocket maximum, which is the most a person will pay in a year. There can often be a trade-off with these costs: higher out-of-pocket costs in exchange for lower premiums.

It’s also important to check a plan’s network of providers and formulary, which is the list of covered drugs. Plans will sometimes opt for a small network and formulary to keep prices down. Linart said PERA usually opts for a broader network and formulary, which can be more expensive but provides retirees with more options.

“We encourage retirees to compare their options in PERACare and on the individual marketplace, to find the coverage that best suits their needs for provider and medication access, benefits and monthly premium,” Linart said.

Open enrollment for PERACare’s pre-Medicare and Medicare plans runs through Nov. 17. Open enrollment for Connect for Health Colorado runs through Jan. 15.