A previous version of this story said the committee will vote to endorse a retiree health insurance option on June 26. It will not. It plans to vote at some point during the summer.
A subcommittee devoted to finding a solution to insurance for state retirees that balances cost to the state and to the retiree talked about a new option Monday.
The subcommittee is expected to vote throughout the summer on which option and which model under that option they want the full State Employment Benefits Committee to consider.
The subcommittee was created earlier this year after retirees revolted when they were told last year that their health insurance would be shifted to a Medicare advantage plan that was more restrictive than the generous health plan they had.
The retirees sued and a state court ruled that the move violated what they had been promised for post employment benefits.
The insurance problems revolve around projections that show the state cannot afford to keep paying for the current plan for all current and expected retirees.
Under traditional accounting, the state should be collecting now for insurance that will be paid later, but it’s way behind.
There is an $8.3 billion shortfall in collections for future retirees as of July 1, 2022, and it is estimated that the shortfall will increase to $20.7 billion by 2042 if nothing is done to close the gap.
Among the options the subcommittee has considered is changing who is eligible and when they are eligible. That could include reducing coverage for spouses, increasing the minimum retirement age, adjusting the amount of benefits offered based on length of service, and removing people who quit before retiring.
The committee also talked about two options related to creating a health reimbursement account. The account would start with $5,100 that would automatically increase by 2% or 4% each year. A retiree would use that money to buy their own insurance and pay health costs.
For each of the options, there were three different groups they can apply those options to: people hired after Jan. 1, 2015, people hired after Jan. 1, 2025, and people who retire after Jan. 1, 2025.
Previously, Cheiron, a consulting firm that advises the benefits committee, had only presented the committee with two models for each of the options, but had not included people hired after Jan. 1, 2025.
Related Story: Retiree skewers subcommittee for possible change in benefits
When that was added, it reduced the unfunded liability the least compared to the other models.
Reducing coverage based on years of service for people hired after Jan. 1, 2015 would reduce the state’s liability by $3.8 billion. Doing it for those who retire after Jan. 1, 2025 would reduce it by $4.6 billion.
If that change were applied to people hired after Jan. 1, 2025, it would only reduce the liability by $3 billion.
Removing people who stopped working for the state before retiring would reduce the state’s liability by $1.6 billion if applied to people who were hired after Jan. 1, 2015; $1.2 billion if applied to people hired after Jan. 2025; and $1.5 billion if applied to people who retire after Jan. 1, 2025.
Reducing the coverage of spouses by 50% for people who were hired after Jan. 1, 2015 would reduce the state’s liability by $1.8 billion; for people hired after Jan. 1, 2025, it would reduce the liability by $1.1 billion; and for people who retire after Jan. 1, 2025, it would reduce the liability by $2.7 billion.
Setting a minimum retirement to 60 and applying that change to people who were hired after Jan. 1, 2015, would reduce the liability by $2.5 billion; for people hired after Jan. 1, 2025, it would reduce the liability by $2.8 billion; and for people who retire after Jan. 1, 2025, it would reduce the liability by $2.5 billion.
The state offering a reimbursement account with $4,900 in it each year, with a 2% annual increase, would reduce the state’s liability by $10.9 billion if applied to people hired after Jan. 1, 2015, by $10 billion if applied to those hired after Jan. 1, 2025, and by $13.1 billion if applied to those who retire after Jan. 1, 2025.
For an HRA indexed at 4%, it would increase the liability by $600,000 if applied to people hired after Jan. 1, 2015, have no impact on the liability if applied to people hired after Jan. 1, 2025, and increase the liability by $600,000 if applied to people who retire after Jan. 1, 2025.
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