Under the Dome

NC officials stall on possible change to state retiree health plan

After receiving negative reaction from the public, a legislative panel on Monday put off discussion of a proposal to shift coverage for Medicare-eligible retirees in the state government system.

Changes are in the works to soften concerns.

At the core is an effort to reduce a massive-and-growing unfunded liability that looms over the state’s Retiree Health Benefit Fund. A draft bill presented to the Joint Legislative Program Evaluation Oversight Committee Monday in Raleigh would move state costs to the federal government by moving eligible retirees to Medicare Advantage plans available through private companies. The state’s potential savings: $64 million a year.

But news of the proposal sat uncomfortably for a number of beneficiaries, who questioned whether Medicare Advantage was right for them, according to legislative staffers who fielded phone calls. They recommended an amendment that would establish an appeals process for retirees who find Medicare Advantage a bad fit.

That could result in fewer migrating to Medicare Advantage — sometimes called Medicare Part C, a policy allowing private insurance companies to provide Medicare benefits — and possibly reducing the savings the state is projecting with the proposal. The bill calls for Medicare Advantage plans that include a prescription drug benefit.

As is, $64 million in annual savings from the shift is not enough to dent a projected 30-year liability that is estimated at $25.5 billion on the retiree health fund. The fund provides the state’s share of retiree premiums to the State Health Plan.

That figure is expanding thanks in part to a growing retiree class and the state’s practice of funding benefits when they’re provided, rather than pre-funding them during an employee’s time on the job.

But it’s a start, according to lawmakers on the Joint Legislative Program Evaluation Oversight Committee, which reviewed the draft bill on Monday. It would also establish a new committee in the General Assembly to examine further options.

Retirees uneasy with the proposal include Lynn Johnson, a Smithfield resident who said she worked 15 years for the state and wants to keep her current state health plan.

“Why don’t they set up the committee and look at it first before they (mandate a shift to Medicare Advantage)?” Johnson said. She said she carried both the state plan and Medicare Advantage and experienced higher prescription drug costs when Medicare Advantage took precedence.

Kiernan McGorty of the legislature’s Program Evaluation Division, which first presented on the unfunded liability in July, indicated the amendment in store for the bill could provide some relief for people with multiple levels of insurance.

“Circumstances like that, it would allow the state treasurer’s office and the state health plan folks to determine if there’s times when you don’t want to force the Medicare Advantage plan,” McGorty said on Monday after telling lawmakers of a series of phone calls the state received from concerned retirees.

Medicare Advantage policies generally offer the same coverage as traditional Medicare “but can do so with different rules, costs, and coverage restrictions,” notes an explainer from McGorty’s office. “Medicare Advantage plans typically offer richer benefits than Medicare.”

Roughly 70 percent of eligible state-system retirees are already on Advantage plans currently, according to the state.

Under the state’s current policy of paying retiree medical benefits on a pay-as-you-go basis, its general fund budget sets aside $618 million in the current fiscal year. In 10 years, that number could grow to $1.1 billion, according to the legislature’s Fiscal Research Division.

The state pays 100 percent of some premiums.

Nationally, rising healthcare costs are intersecting with a “retirement boom” as the 65-and-over age bracket grows. According to a 2012 Pew Center on the States report, that percentage was expected to rise from roughly 14 percent that year to more than 20 percent by 2030.

While a pressing matter in North Carolina, too, lawmakers only reviewed the draft bill briefly on Monday, postponing deeper talk until the amendment is drafted. It’s expected to re-emerge in December.

In past discussions, however, some have urged a cautious approach to changing employees’ and retirees’ benefits, often viewed as part of their compensation package.

“Whatever we do, we need to go slowly and ensure we don’t have any unintended consequences down the road,” said Rep. Pat Hurley, an Asheboro Republican.

The bill is just a conversation starter for lawmakers and could take on any number of changes. It would have to pass both the House and Senate before it could go to the governor for signing. The legislature isn’t scheduled to reconvene until April 2016.

Benjamin Brown: 919-832-8358, @benbrownmedia