Editorials

NC broke a promise to state retirees on health insurance benefit

North Carolina Treasurer Dale Folwell says the unfunded future health care expenses of state retirees could increase sharply following a judge’s ruling that retirees should not have to pay for coverage they were promised at no cost.
North Carolina Treasurer Dale Folwell says the unfunded future health care expenses of state retirees could increase sharply following a judge’s ruling that retirees should not have to pay for coverage they were promised at no cost. tlong@newsobserver.com

The Robert W. Service poem goes, “A promise made is a debt unpaid.” It might be the mantra for the state’s generous health plan for state workers and retirees, who enjoy a benefit of health insurance post-retirement that isn’t found often in private industry these days.

But State Treasurer Dale Folwell, whose office oversees the plan, says the estimated $43 billion in unfunded future health care expenses of retirees is a scary liability, and now will get worse after a Superior Court judge’s ruling. Judge Edwin Wilson of Gaston County ruled in favor of retirees who sued the state in 2012 after a 2011 law mandated that retirees make monthly payments for standard insurance coverage that had been offered for decades. It’s a generous benefit, but one the state believed worthwhile in order to attract good employees who might get more money in the private sector but could be drawn to government work because of that and other retirement benefits.

The state lost, and now is looking at $100 million in damages. The judge ruled that retirees had a contractual right to get the benefits without a premium, something that should have been obvious to legislators who pushed the idea. One day, it may be necessary for the state to adjust health plan benefits for future employees, but this action was premature and, as it’s turned out, legally tenuous. And those retirees will be getting their premiums back.

The state health plan covers more than 700,000 employees, retirees and dependents. And Folwell isn’t entirely wrong to raise caution flags about the increasing expense of the plan. He says more growth in the unfunded liability “could increase dramatically, reaching an unsustainable level in the very near future.”

But legislators – many of them inexperienced in the finer points of regulations and benefits regarding state employees – need to move with caution when it comes to something like changing a valued benefit, one that was indeed a promise when those workers signed on. This action was precipitous and now will be costly to all taxpayers.

If Republican leaders believed the retirement system needed changing, they should have opened more discussions about it, and moved toward change only with an idea of not affecting the benefits of current workers and retirees. That is not fair, however expensive it may be.

Making changes in the plan to curb expenses should include input from representatives of state workers – not in confrontational court hearings but in meetings where the state can make its case for changes. If the situation is edging toward a critical stage, then certainly state workers would not want to jeopardize all future benefits for retirees to maintain a temporary status quo.

This case seems to boil down in the end to something simple: The state had a debt unpaid, and the judge said, “You’re going to pay it.”

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