Retiree health care agency proposes solvency plan

July 29, 2014 • State News

SANTA FE, N.M. (AP) — Taxpayers and public employees would pay an extra $45 million annually under a proposal to improve the finances of a program providing subsidized health care for retired state and local government workers.

The Retiree Health Care Authority executive director Mark Tyndall said Monday the Leg[auth] islature will be asked to phase in the increases in payroll contributions over three years starting in mid-2016. Lawmakers convene in January.

A government worker or educator earning $40,000 annually would pay an extra $150 a year if the proposed 0.375 percent payroll contribution rate increase is enacted. Governmental employers — meaning taxpayers ultimately — would pay an additional $300 annually for that worker.

About 55,000 retired public employees and their families receive health care through the program, which is partly financed by insurance premiums paid by retirees.

If nothing is done, the program is expected to run short of money in about 19 years and be forced to trim benefits, Tyndall said in an interview.

But solvency could be extended to 25 years with the payroll contribution increases that will be recommended to lawmakers and other changes the authority’s governing board plans to implement on its own.

Under the legislative proposal, about 100,000 public employees would make an additional $15 million in annual payroll contributions if the increases are fully implemented. Governmental employers would increase yearly payments by $30 million.

The Legislature turned down a proposal last year for a larger increase in payroll contributions.

Workers currently contribute about 1 percent of their salaries to the retiree health care program — roughly $15.39 bi-weekly. That would increase $5.76 for each two-week pay period if the proposed increases are fully implemented.

The higher payments would be required for employees of state agencies, school districts, many colleges and universities, most counties and the largest cities.

Separate from the legislation, the authority’s governing board has approved measures to shore up the long-term finances of the program.

Those steps include an 8 percent increase in premiums for health care plans starting next year and a 5 percent premium increase for Medicare supplement insurance coverage.

The board proposes to change regulations to require starting in 2020 that a newly retired worker be at least age 55 to qualify for any subsidies for health insurance they obtain through the program. There currently is no minimum age requirement.

Subsidies vary according to how long an employee worked for the government.

Another board proposal will require a retiree to have worked 25 years — up from 20 years — before qualifying for the maximum subsidy in which the program covers 65 percent of insurance premiums. That change wouldn’t apply to public safety retirees, such as police and firefighters.

Qualifying retirees currently pay about $272 a monthly for the program’s most comprehensive coverage — about 35 percent of the total cost of the insurance.

The board plans to trim subsidies for a retiree’s spouse. That would require the family member to pay 62 percent of the total insurance premium rather than 60 percent currently.

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