More options, no decisions on state retiree healthcare plans

A new committee is continuing to hear more options on changing healthcare for state retirees. (File)

The State Employee Benefits Committee retiree subcommittee is considering more options to save the state money on healthcare over the next 20 years. It met Monday and may meet on July 10 and July 20 to discus options.

The options presented relate to the “Other Post-Employment Benefits” that the state is trying to cut back on and close the unfunded liability gap.

That liability gap revolves around projections showing the state can’t afford to keep paying for its current healthcare 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 hasn’t.

While there is an $8.3 billion shortfall, or unfunded liability, in collections for future retirees as of July 1, 2022, it is estimated that the shortfall will increase to $20.7 billion by 2042 if nothing is done to close the gap.

The first two options discussed on Monday involve decreasing how much the state covers for a Medigap Supplemental Plan, which is based on the current Special Medicfill Plan, with one option decreasing how much the state pays from 95% to 90% while the other option would decrease how much the state pays from 95% to 85%.

Within both options were different groups, including those hired on or after Jan 1, 2015, those hired on or after Jan. 1, 2025, and those who retire on or after Jan. 1, 2025.

By decreasing the state share to 90%, it would reduce the liability by $1.1 billion for those hired after Jan. 1, 2015, by $1 billion for those hired after Jan. 1, 2025, and by $1.1 billion for those retired after Jan. 1, 2025.

By decreasing the state share to 85%, it would reduce the liability by $2.1 billion for those hired after Jan. 1, 2015, by $2.1 billion for those hired after Jan. 1, 2025, and by $2.6 billion for those retired after Jan. 1, 2025.

Another option would be to offer a Medicare Advantage plan based on the proposed Highmark Blue Cross Blue Shield Delaware Freedom Blue plan, with the state covering 95% and retirees responsible for the remaining 5%.

That option would reduce the liability by $7.4 billion for those hired after Jan. 1, 2015, by $6.8 billion for those hired after Jan. 1, 2025, and by $9.5 billion for those retired after Jan. 1, 2025.

Earlier this year, the subcommittee was created after retirees opposed being 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.

Another option involved letting people choose between a Medigap Supplement Plan, with the state only covering 85%, or a Medicare Advantage Plan, with the state covering 95%.

The modeling, which estimated the liability would be reduced by $3.6 billion, was only done with this option for people who retired on or after Jan. 1, 2025 and assumed 90% of retirees would take the Medigap plan and 10% would take the Medicare Advantage plan.

Along that same line of options, with letting retirees after Jan. 1, 2025 and choosing between Medigap and Medicare Advantage, another option would incentive retirees to choose the Medicare Advantage plan by making retirees who choose the Medigap plan have to pay 30% of the state’s share if they retire before 65.

In that same option, retirees who are between 50 and 55 would 80% of the state share if they choose the Medigap option, and retirees who are under 50 would have to pay the entire state share.

This option would reduce the unfunded liability by $6.9 billion.

Staying on the job to get better healthcare

Richard Geisenberger, secretary of the Department of Finance, said the option of letting retirees choose between Medigap and Medicare Advantage could encourage employees to stay with the state longer in order to get better benefits.

“However, it is probably safe to assume that this would impact someone would think about, ‘hey, maybe I’ll put in an extra year or two because I really want that Medigap program and therefore in order to not have this 25%,’ ” Geisenberger said.

Cheiron, a consulting firm, also provided an option to reduce the liability by combining multiple options.

The one example provided at the Monday meeting combined 1% of the state budget with reducing a spouse’s share of the plan by 50% with a Medigap plan that reduces the state share to 90%, leading to a total reduction in the unfunded liability by $11.9 billion.

Cheiron previously modeled the impact increasing the state share would have, showing how putting 1%, 2%, or 3% of the state’s 2022 fiscal year budget, $4.7 billion, would fund either 59.8%, 93.2%, or 101.7% respectively of the unfunded liability.

House Bill 196, sponsored by Rep. William Carson, D-Smyrna, includes $50.9 million for Other Post-Employment Benefits, which is 1% of the state’s budget.