retiree health care

Retiree health committee suggestion No. 1: No Medicare Advantage

Betsy PriceGovernment, Headlines

retiree health care

A committee exploring the way state retirees receive and use healthcare, and how the state pays for it, has issued its recommendations.

After nearly facing a revolt of retirees angered by the state’s move to substantially alter their health care, a committee has issued more than a dozen recommendations designed to keep them — and the state’s coffers — healthy.

One of the recommendations made by the Retiree Healthcare Benefits Advisory Subcommittee — which met 20 times over nine months — was for the state to not use a Delaware-specific Medicare Advantage plan, which was what set off the retirees.

They viewed it a lesser plan that violated the state’s promise of excellent healthcare because it could restrict access to doctors and factilies, require referrals to other doctors which was not needed before, and otherwise alter benefits.

The recommendations also suggest that current retirees and future retirees have different levels of plans, and that payroll taxes rise to help current workers pay part of their own healthcare coverage.

See the full report here.

Other recommendations include:

  • Continue to contribute 1% of general fund from the prior year to the Other Post Employment Fund, commonly called OPEB, which helps pay for retiree healthcare. It is massively underfunded now, a point that outside financial analysts often refer to as a worry and liability.
  • Increase OPEB pre-funding from 0.36% of payroll to 0.5%, then increase by an additional 0.25% of payroll each fiscal year until it reaches 10%.
  • Ensure that current Medicare-eligible and pre-Medicare state retirees and state employees who retire prior to Jan. 1, 2025 will be entitled to Special Medicfill/Rx benefits with no changes to the state share percentage of payments when they are Medicare eligible. That’s the plan retirees didn’t want to lose.
  • Limit changes to plan design, eligibility requirements, or contribution share/percentage to workers hired on or after Jan. 1, 2025.
  • Solicit public comment before the retiree health committee votes to adopt the final request for proposal for retiree healthcare plans.
  • Research and measure the cost of state-sponsored healthcare benefits for three subgroups: current workers, eligible pensioners who are ineligible for Medicare, and eligible pensioners who are eligible for Medicare.
  • Address the issue of healthcare pricing in Delaware, including statutory, regulatory and administrative changes in 2024 to bring more transparency, consistency, affordability and sustainability to healthcare prices and price growth.

The committee listened to retirees and workers talk about how they valued their healthcare benefits and took that seriously. It’s one of the main benefits workers cite when they go to work for the state.

At the same time, said Lt. Gov. Bethany Hall-Long, the committee wanted to make the healthcare system sustainable and it was not at the rates that the health care consumption and insurance was rising.

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The estimated liability for retiree health care benefits is currently $8.9 billion, of which $8.4 billion is unfunded, said a press released from the committee. The net unfunded liability is expected to grow to $20.7 billion by 2042.

Last year, the General Assembly passed Senate Bill 175, which requires that every year, at least 1% of the total of all general fund operating budget appropriations for the prior fiscal year is appropriated to the Other Post Employment Fund.

Changes for retirees

The subcommittee also recommended modifying the state’s calculation for the portion of the state share for healthcare that the state pays for retirees. The percentage is based on the number of years of service for each retiree.

Currently, the state pays 100% of its share for workers who have 20 years or more of service and pay a smaller percentage for workers who have 15-20 years of state service.

The subcommittee recommended requiring workers hired on or after Jan. 1, 2025 to serve at least 25 years to receive the 100% state share, with those working 15-25 years receiving a smaller percentage.

The panel recommended that the state change healthcare benefits provided to Medicare-eligible retirees hired on or after Jan. 1, 2025 with two Medicare Supplement Plans available, one similar to Medigap G and one similar to Medigap L. Those plans offer more benefits that the average Medicare gap plan

The full list of recommendations and additional details can be found in the full subcommittee report.

The retiree health committee will continue to meet. Find their meetings here.

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