Sliding Scale Information for Non-Medicare-Eligible Retirees

Sliding Scale Law Information And Example Premium Adjustments For Non-Medicare-Eligible Retirees

There are increases as well as decreases in the premiums for retiree’s subject to the sliding scale effective each October coverage month. These changes in the premiums are related to the retiree sliding scale law.

There are two versions of the sliding scale law. The first was enacted through Act 2004-649 and amended by Act 2011-704. If a member retired prior to 10/1/2005, the member is not subject to the sliding scale law, but they are subject to the base premiums set by the PEEHIP Board of Control. Alternatively, if a member retired on or after 10/1/2005, they are subject to either the initial law or the subsequent version, depending on their date of retirement.

The sliding scale law takes into consideration the years of service and the cost of the insurance program.  The total cost of the health insurance coverage is made up of two components:  1) the amount PEEHIP pays (PEEHIP subsidy) and 2) the amount the retiree pays.

Each fiscal year the cost of the insurance is recalculated based on the actual claims cost of the prior year plus the medical trend. Because the cost of the insurance program changes from year-to-year, the retirees’ premiums may either increase or decrease each year.

The change will vary for each retiree because the sliding scale law requires the years of service to be used in the premium calculation. If the retiree’s retirement date was on or after 1/1/2012, an age at retirement penalty and a third tier subsidy penalty will also affect their premium calculation if they are not yet Medicare eligible.

If a retiree has more than 25 years of service, the retiree will receive a years of service discount off their premium and PEEHIP pays for more of the retiree’s premium (a greater subsidy for the retiree). The two components mentioned above will be adjusted accordingly for the retiree based on their specific situation, i.e. years of service at retirement, date retired, etc. 

The opposite occurs when a retiree has less than 25 years of service – the retiree pays a penalty which means their premium is always above the base premium and PEEHIP pays less (a lesser subsidy for the retiree). 

Even though a retiree’s discount percentage (or penalty percentage) remains the same each year, the calculated amount of the discount (or penalty) can change from year-to-year, because claims cost/medical trend changes each year. 

For examples and a more detailed explanation, please see below:

Sliding Scale Law Information and Example Premium Adjustments

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