February 19, 2010 in City

Wash. state workers’ health care fund strapped

Low assets concern officials

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OLYMPIA – The fund that covers state workers’ health care is strapped for cash because the state cut its premium payments by hundreds of millions of dollars, using that money for other things while the insurance fund spent down a large surplus.

But the Health Care Authority’s surplus disappeared faster than state officials expected. At the end of 2009, the balance sheet of the authority’s Public Employees Benefit Board fund showed “stunning declines in assets, capital and surplus, net income and cash provided by operations,” Insurance Commissioner Mike Kreidler warned in a letter to Gov. Chris Gregoire.

The figures were so bad that if the authority’s fund were a private insurer that he regulated, Kreidler said, he might order it into receivership. Because the state controls the fund, he only could warn of the fund’s “financial deterioration.”

The preliminary year-end statements for the fund showed total assets were down nearly $200 million in 2009, and its liabilities for the year exceeded its assets by more than $3 million. Because the fund started the year with a balance of about $329 million, it’s still in the black. But Kreidler was worried about a poor ratio of money coming in to money going out.

The state employees’ union is worried, too. It sent out a call to action this month, urging members to contact Gregoire and legislators about the financial condition of the fund, and warning of one way the state might try to fix it: jacking up their health insurance rates.

Gregoire and the state’s budget agency, the Office of Financial Management, were aware of the problem before Kreidler’s Dec. 4 letter, Nick Lutes of OFM said.

“We’ve been working on it all fall. We knew we were running into a very serious fund balance,” Lutes said.

The governor has proposed a $60 million fix in her supplemental budget, but the final number will depend in part on the Legislature.

The fund collects the premiums for state employees and pays out their medical and dental claims. Under the current contract, the state pays 88 percent of the premium and employees pay 12 percent.

The problem began in the previous biennial budget cycle, when the economy was strong and the benefit board fund had a large surplus. The budget for the 2007-09 biennium cut back on the state’s payments into the fund, keeping more money in whichever fund pays an employee’s salary.

Having too big of a surplus is a problem for federal agencies that monitor the fund, and the governor and Legislature opted for a “pay as you go” approach, Lutes said.

“They turned the revenue stream down to use up the fund balance” he said.

About half of all employees are paid from the general fund, which covers a wide range of state programs and services. General fund money that wasn’t used to pay the workers’ insurance premiums was available for other programs.

Last spring, the Legislature continued to let the benefit fund surplus drop. It also used a low estimate of how much the demand for services would grow. Instead, Lutes said, the demand was higher than expected, the payouts greater and the surplus disappeared faster.

Partly that’s from rising health care costs, he said. Some of it might be a result of people not delaying medical or dental care because they fear they could be laid off and lose insurance.

Now Gregoire wants the Legislature to raise the per-employee contribution to the fund. Her supplemental budget calls for an average monthly increase of about $85 per employee. The Legislature, which like the governor is scrambling to fill a $2.8 billion budget gap, could propose a different number, which would be added to the many things to be negotiated in coming weeks.

13 comments on this story so far. Add yours!

• 

  westerly on February 19 at 8:11 p.m.

  Looks like state people will have to folllow the private sector in jacked up rates etc…nice welcome to the real world!! lol

• 

  chefxh on February 19 at 9:38 p.m.

  We state workers live in the real world. We pay high premiums that go up every year. We also make about 20% less than private-sector workers in comparable jobs. It is the price we pay for our supposed security. Suddenly we are that much less secure.

• 

  Coffee on February 19 at 9:56 p.m.

  Didn’t the gov use to put away people that handled money the way she and her cohorts just did with the state works health care funds?

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  fletch on February 19 at 10:31 p.m.

  First the legislature did not fully fund the pension and the fund is now down over $15 billion from 2 years ago. Now the medical fund has been raided. Glad to see the elected legislators and the Governor are living up to their obligation to take care of the state workers. What would happen to a CEO that raided the workers medical fund.

• 

  zelda on February 19 at 10:47 p.m.

  >> We also make about 20% less than private-sector workers in comparable jobs. <<

  Based on a salary survey done in which year? A lot of public sector jobs don’t even exist in the private sector and the ones that do have either been eliminated or are now done by independent contractors who have to pay for their own health insurance. For better or worse, we have become a nation of temps.

  There is only one direction the wage pressure from this recession goes and it’s down. Government jobs and benefits have to reflect the prevailing economic forces.

  The argument that government benefits provide some sort of gross-up compensation for underpaid employees not only is specious and economically unsound, it’s tone-deaf to the overall situation, i.e., “cry me a river.” If you want to keep your job, it’s time to let go of the benefit embellishments.

• 

  misjustice on February 19 at 10:53 p.m.

  Dear Fletch;
  A CEO that raided worker’s medical funds would get a $100 million dollar bonus on top of their $800 million dollar salary and a promotion!
  Love, Misjustice

• 

  zelda on February 19 at 11:03 p.m.

  Fletch — if you work for a publicly traded corporation, particularly one that’s been around for a while, you might want to read the 8K very carefully. Employees’ medical expenses, esp. those of retirees, are a liability — something that corporations work actively to shed as quickly as possible by shifting more and more of the burden annually onto employees.

  So you ask, “What would happen to a CEO who raids the workers’ medical fund?” In all likelihood, the CEO would get a huge bonus for stellar financial performance and lots of sweet stock options. But it wouldn’t be termed a “raid,” more like “robust vigilence of the balance sheet and renewed emphasis of return on assets.”

• 

  Effrepublicans on February 19 at 11:13 p.m.

  Zelda Krup… if you were a State employee you would be eating your words. I work as a State employee and if I was in the private sector I would be making double what I am making right now. So lets make that 20% you have a heartburn about and make it more like 50%. Besides, I haven’t seen a raise to match inflation for the last 4 years. Granted the inflation rate went down last year but its still there and yet my salary has been frozen. This isn’t a b$%ch session on my salary but the lack of any understanding by people who see State employees as the problem and solution for the current economic situation. By the way, for almost the last decade before the economic collapse our retirement benefits that were supposed to be funded by the State was not because of the economic boost. The legislature took that money to help pay for benefits that you see/use everyday. Now, as a result of that our retirement is nowhere near where it should be. But it sounds like you would rather sit on your butt and complain about people who provide benefits that make your life better.

• 

  zag4christ on February 19 at 11:39 p.m.

  I am sitting here wondering, for real, what is more important, the unionized state employees seeing their cash cow sinking into the sunset, or the fact that the entire country is in the entitlement mode. Both are wrong. WA state employees have had a huge hind teat for a long time, and they are fighting being weaned. Our governor does not want to wean them. We must. Peace and God Bless

• 

  HankTingler on February 20 at 2:58 a.m.

  Gregoire’s competence at work.

• 

  ZagChuck on February 20 at 5:12 a.m.

  @ Effrepublicans

  First of all, even the U.S. Department of Commerce disagrees with you. According to the U.S. Department of Commerce (Bureau of Economic Analysis), employment in the government sector continues to be a lucrative career in the state of Washington, as elsewhere. Most statistic show the avg income of the public at least $30k behind that of the avg income of govt. employees, and every statistic shows government workers enjoy greater benefits than their counterparts in the private sector who have to compete to maintain their careers and obtain promotions. These benefits include, but are not limited to: promotions based on a time of service, longer vacations and more holidays, less expensive health care/child care, and lower productivity rates.

  Secondly, the largest part of the problem with our government can be found in your closing remark: “But it sounds like you would rather sit on your butt and complain about people who provide benefits that make your life better.” Too many people, such as you, assume this is the role of government. Like you, they are wrong. It is not the role of government to “provide benefits that make your life better. ” THE GOVERNMENT IS NOT SUPPOSED PROVIDE BENEFITS. It is supposed to protect our freedoms, and stay out of the way!

  So, with all due respect, most of us non-government employees request that you, and all the other state employees who whine about their “meek” paychecks, would just stop complaining about how bad you have it (It’s really annoying) and understand that it is OUR money you are spending. Your attitude on this subject, ( and your whining about your pay) is a huge part of the problem. You took the job you have, knowing how much it paid, STOP WHINING ABOUT IT!!!

  The reality is simple: If the government would quit spending all of OUR money on failed programs in an effort to “provide benefits that make your life better.” and trim the spending on the bureaucracies of the programs it is required to provide, such as Education and Criminal Justice, our lives would be better…..

  Until then, we’ll continue to be robbed by our government with its huge bureaucracies, failed programs, and HUGE tax burden that chases businesses and jobs out of this state.

  Perhaps you could go to whatever union you belong to and demand they stop supporting candidates that rob your benefits packages….. I’m just saying….. that may be a more beneficial venue than trying to explain your hardships as a government employee to people who pay your salary.

• 

  cowboy on February 22 at 7:12 p.m.

  Effrepublicans why would you stay at a job that has low pay and no raise? if you can go to private sector and make double then go. No one is stopping you. Don’t preach that what you do is the godly thing when in reality the reason you stay is the benefits.

• 

  crikey on February 22 at 11:46 p.m.

  As an ex-DOC nurse, I can vouch for the waste of resources by workers. The general attitude is ‘No matter what I do (or don’t do), they can’t get rid of me,’ and the unions are there to make sure that’s true. I watched unbelievable time-waste, paper waste and duplicity that finally drove me out after 2 years. Management was unqualified (2 of my supervisors had no medical exerience at all), the warden never set foot inside the walls during my time there, constant trouble-makers were never terminated, just tolerated, and they had 3 people doing what one could easily have handled. It seemed that the main goal was to turn a blind-eye to problems. It’s a relief to be a ‘civilian’ again, and not have to deal with the bureaucratic BS that runs rampant in state jobs.