Wednesday, April 28, 2010
By Kate Alexander
AMERICAN-STATESMAN STAFF
State employees, retirees brace for higher health care costs
Key legislators discussing ways to help with $140 million health care funding gap.
Legislative leaders are discussing whether the state can help close a $140 million funding gap in the employee and retiree health care program.
But significant plan changes appear inevitable, given the long-term financial picture for the program, which covers about 500,000 state employees, retirees and dependents.
The Employees Retirement System of Texas estimates that it will need an additional $880 million in the next two-year budget to pay for rising costs and to replace the reserves being used in the current budget.
The current $140 million deficit resulted from higher-than-expected costs and underfunding by the Legislature that will force ERS to eat through its reserves.
For now, ERS is pressing ahead with plans to cover the gap by shifting more costs to the plan participants. The Board of Trustees will vote in May on proposals that include higher member payments for doctor visits, prescriptions, hospital stays and more.
Although the state will continue to pay the $385 monthly premium for full-time employees and retirees, the members will be shelling out more from their own pockets at a time when they have not seen a raise or a pension increase.
More than 45,000 plan participants responded to an ERS survey on possible plan changes, and the proposals reflect their responses, ERS spokeswoman Mary Jane Wardlow said.
Bill Hamilton, president of the Retired State Employees Association , said he is concerned about the new cost burden on retirees but understands the need for changes to secure the program's financial footing.
The Legislature and health care service providers need to help with the solution because they both contributed to the problem, said Andy Homer , director of government relations for the Texas Public Employees Association.
"People don't want this. It is too much, too fast," Homer said. "If there is a way to mitigate this, they should."
Lawmakers expect a shortfall of at least $11 billion when they return to Austin in January to write the 2012-13 budget, and state leaders already asked agencies to trim 5 percent of the budgets for the current year.
So, loose change to deal with this health care deficit is in short supply. But legislative staffers say conversations are continuing about finding some additional money for health care.
Mike Gross, vice president of the Texas State Employees Union, said quality state workers see lesser salaries as a trade-off for good benefits.
"That equation is starting to falter," Gross said.