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Pentagon Health Overcharges New Gray Area Benefit.

In the famous words of President Ronald Reagan, “There you go again.”  The Pentagon plans to overcharge gray area retirees from the Guard and Reserve as they implement the new TRICARE Retiree Reserve (TRR) health care plan, just as the did when they introduced TRICARE Reserve Select(TRS).

And to add insult to injury it appears the premiums on both TRS and TRR will be going up by 4.5 percent in January.

While the announcement on the new program is not scheduled to be made on September 1^st, ROA received an advanced copy about the program that was sent to members of Congress.  The new TRR fees are:

This is a lot higher than expected.  It appears that DoD health affairs is using the same logic as they did when DoD overpriced TRS, but comparing costs to the open market, vice looking at their actual costs.  As stated in the circulated DoD memorandum: “For comparison, in 2009, the average annual premiums for employer-sponsored health insurance [were] $4,824 for single coverage and $13,375 for family coverage.” (Employer Health Benefits: 2009 Summary of Findings, The Kaiser Family Foundation and the Health Research & Educational Trust, www.kff.org/insurance/ehbs-archives.cfm )” 

ROA was told that DoD Health Affairs' justification is that the gray area retiree population is a higher risk group as it is aged between 38 and 59, when compared to the general serving population of 18 – 44.  This logic is contrary to the basis of insurance where risks are reduced by having a larger population pool.  Other arguments will be made by ROA that the older population is more mature and more risk adverse.

In 2007, a Government Accoutability Office report found that the Pentagon was overcharing for TRS and recommended reductions.  It took Congressional interaction to help reduce TRS premiums.

DoD is motivated by the idea that it is paying too much for health care, so it appears that they are interested in getting as much money out of “beneficiaries” as they can justify.  By their actuarial manipulation, they not only are covering costs, but making money on these new rates.  Gray Area retirees who participate will be subsidizing other health care plans.

The cost of TRS is set by law at 28 percent of DoD overall TRICARE Standard cost.  For individuals the TRS cost is $49.62 and $197.56 for families per month.  Doing the math, that means that the individual cost of TRICARE is $177.22 for individuals and $705.57 for families per month.  With TRR at $388 per month that is nearly 220 percent of DoD’s cost for individuals, and the $976.41 is 138.4 percent of the cost for families.

If beneficiaries, who lose access to TRS, were permitted to use the Active Duties Continuing Health Benefit Plan (DoD’s COBRA) they would only be charged premiums of $933 per quarter for individuals and $1,996 per quarter for families and have between 18 to 36 months coverage.  Under the COBRA act, organizations are allowed to charge 2 percent over the premium costs to cover administration.

It can be said that this approach to overcharge for Guard and Reserve gray area retirees is again a reflection that the Pentagon undervalues the service of current Guard and Reserve members, and the contributions of Reserve Component retirees.  Pentagon leadership has this phobia that if benefits for the Guard and Reserve are too attractive then people will quit Active Duty.  It is obvious to ROA that the new TRR program is intended to discourage flight into the Reserves.

This also reflects the Pentagon's future philosophy of increasing TRICARE health fees for Active Duty retirees, a battle that is anticipated between DoD and the associations in the coming 18 months. 

Bad math and bad logic will only make TRICARE Retired Reserve a program that is doomed to failure.  The Pentagon currently wonders why less than 10 percent of serving members sign up for TRS.  This failure to develop a true continuity of health care just demonstrates the Pentagons lack of strategic vision to implementing health care as a retention incentive.

ROA continues to be disappointed in DOD health affairs approach to implementing these Reserve programs.  It appears that the Pentagon doesn’t have a handle on what its health care costs actually are.

In 2006, ROA had hoped for open discussions on costing health care coverage.  With how DoD has handled TRS and TRR, we have lost confidence that the Pentagon will be honest in its promise for a fair approach, and ROA is reevaluating its position as we prepare for future struggles with DoD over health care.

ROA encourages its member and other Reserve Component beneficiaries to contact their members of Congress with their concerns.  Personal contact on this issue will mean more than a form letter campaign.  You can get contact information at www.roa.org/write2congress by entering your zip code into the gray box.

I apologize in advance to ROA members for this alert is hurriedly written in a moment of disappointment and passion, so there may still  be grammatical errors included, but I did triple check my math.

Very Respectfully Submitted,

Marshall Hanson, CAPT, USNR (ret.)
ROA Legislative Director.