Gov. Butch Otter is renewing his push to trim back the health benefits Idaho now provides to state retirees, the Associated Press reports. Click below for the full story from AP reporter John Miller.
Otter renews bid to cut retirees from ID insurance
By JOHN MILLER
Associated Press Writer
BOISE, Idaho (AP) — Gov. C.L. “Butch” Otter has renewed his efforts to drop state retirees who are eligible for federal Medicare from Idaho’s health insurance plan and limit escalating benefits for early retirees.
Mike Gwartney, Otter’s Department of Administration director, said Idaho’s unfunded health care costs will hit $800 million by 2016 without the changes.
Otter wanted to make the cuts last year. But after complaints that Otter had neglected to adequately inform retirees of the proposal, Gwartney held some 30 meetings in 15 cities. He said retirees would get help to switch to private plans, calling them more affordable than the state’s.
One change this year: Retired workers between 55 and 65 would get a monthly premium subsidy of $100 to help buy the state plan, down from last year’s $185 proposal. Gwartney said the poor economy leaves Idaho unable match the 2008 offer.
“Last year we had surpluses,” Gwartney told The Associated Press on Wednesday. “People were told very clearly that this is the year they probably ought to jump on. Quite frankly, $100 reflects the economic environment we’re in.”
Idaho has about 3,155 retirees and about 1,300 dependents who get state insurance, down by about 226 from last year. About 850 retirees are under 65.
Gwartney’s staff presented the 2009 proposal to about 35 lawmakers, state worker representatives and others in Boise.
During the 2008 Legislature, a similar bill passed the Senate but stalled in the House after lawmakers decided the retirees’ concerns merited waiting.
Under the new proposal, workers hired by the state after July 1, 2009, won’t be eligible for state health insurance if they retire early at age 55. When retirees are eligible for Medicare at 65, they won’t be able to receive state benefits, and instead must switch to Medicare supplemental plans.
The proposal, which would take effect Jan. 1, 2010, doesn’t touch state worker’s pension benefits.
Teresa Luna, Gwartney’s assistant at the Department of Administration, said private plans would save workers $38 to $179 in monthly premiums.
“It would allow the state to use its resources to find comparable plans at cheaper rates on the open market and would allow retirees to continue to use their unused sick leave funds to pay for premiums with major vendors,” Luna said. “It would also allow your under-65 partner to receive the state plan and receive the subsidies.”
State worker representatives praised the agency for holding meetings, though they weren’t ready to endorse the bill.
Donna Yule, Idaho Public Employees Association executive director, said she was concerned that any premium savings could be consumed by increased prescription drug costs. Some plans have a coverage gap, or “doughnut,” where retirees must pay annual drug costs between $2,510 and $4,050.
“We’re concerned about those older people who are going to fall into the doughnut,” Yule said.
Consultants estimate Idaho’s unfunded liability will rise to $477 million this year, if nothing changes. That would jump to $800 million over eight years, as more baby boomers retire.
Robert Schmidt, an actuary at Milliman Inc. in Boise, said unfunded liability is a promise to pay long-term benefits on a “pay-as-you-go basis” not funded from a trust fund, such as pension plans.
Public employers are being required to report this liability to bring accounting in line with private sector practices. Booking liability could affect how investors judge Idaho’s ability to meet financial obligations, including debt payments.
States are addressing this issue differently. Alaska Gov. Sarah Palin has suggested setting aside $451 million. Utah has taken similar steps, while in New Mexico, a program providing health care coverage to 42,000 governmental retirees and dependents may be insolvent by 2020.
A California commission recommended this month setting aside money for $118 billion in unfunded retiree health care costs over the next 30 years.
If Otter’s bill passes, Idaho’s liability would slip under $100 million, Schmidt said.
Many retirement programs are eliminating Medicare-eligible retirees from health insurance plans and freezing subsidies for retirees under 65, said Doug Toschi, Idaho’s benefits consultant.
“Going back to the early 1970s and 1980s, one of the predominant reasons for offering retirement medical programs for post-65 retirees was that they didn’t have prescription drug benefits,” Toschi said. “With the advent of Medicare Part D in 2004 … that’s been taken care of. Premiums are relatively low, and there are buy-up programs that are available.”
Here are the details:
NOT ELIGIBLE: Workers hired by the state after July 1, 2009, wouldn’t be eligible for state health insurance if they retire early at age 55.
REDUCED SUBSIDY: Current state employees who retire at 55 would still be eligible for monthly premium subsidies that have been extended in recent years to keep their costs down, but those will be capped at $100 a month. That’s down from Otter’s $185 offer last April, due to the economic crisis.
COST SAVINGS: Mike Gwartney, director of the state Department of Administration, says employees who switch to private health plans could save $38 to $179 monthly in premiums over the state plan.
DEPARTURES: Since Otter tried to cut retirees from the state plan in 2008, 226 retirees have opted voluntary for private insurance. That leaves about 3,155 retirees still getting their insurance from the state, along with 1,300 of their dependents. About 850 of the retirees are under 65.
DOUGHNUT: State workers union representative Donna Yule says she fears some state retirees with high prescription drug costs could actually see their monthly costs rise, due to so-called “doughnut” provisions in private plans that require them to pay annual drug costs between $2,510 and $4,050.
UNFUNDED LIABILITY: Without changes, consultants have told Gwartney that Idaho faces unfunded health insurance costs for retirees of $800 million by 2016, up from $477 million now. With those costs on Idaho’s books, it could affect the state’s credit rating.
OTHER STATES: In New Mexico, a program providing health care coverage to 42,000 governmental retirees and dependents may be insolvent by 2020. A California commission recommended this month starting to set aside money for $118 billion in unfunded retiree health care by 2039.
Copyright 2009 The Associated Press