LATEST UPDATE ON RETIREE HEALTH INSURANCE

On Wednesday, July 29, the Legislature passed H. 4151, a supplemental budget, that included, among other things, a change to state retirees' health insurance.

The final FY10 budget contained increases to state employees' health insurance premium costs, specifically, increasing current state employees' costs (previously 85/15 for those hired before June 30, 2003) to 80/20 and to 75/25 (previously 80/20 for those hired after June 30, 2003), but keeping retiree health insurance premium costs at 85/15 (employer pays/employee pays), for those who retire after July 1, 1994 (those who retired before July 1, 1994 are still at 90/10).

On June 29, the Governor filed a supplemental budget request which included, among other things, a proposal entitled, "Healthcare Contribution Program," with a small retirement incentive for those who file before October 1 (keeping health insurance at 85/15) and a proposal to increase certain retirees' health insurance costs to 80/20 for those who file their application for retirement after October 1. It also included a limit on filling any vacancies resulting from upcoming retirements.

Despite the opposition of the State Employees' Labor Coalition, including the MTA, the Legislature adopted this language as part of the supplemental budget passed on Wednesday. The language of the supplemental budget was not released from House Ways and Means until just before the vote on Wednesday, although House and Senate leadership had apparently agreed earlier to support this proposal. The supplemental budget, including this provision, is now on the Governor's desk, and he is expected to approve the language.

Below is a more detailed summary of the change (outside Section 30 of H. 4151):

* For those state employees who are eligible to retire (i.e., this is NOT an early retirement proposal), if they file their applications to retire by October 1, 2009 and retire no later than January 31, 2010, their health insurance premium costs will stay at 85/15, which is current law.

* For those state employees who file an application to retire after October 1, 2009, health insurance costs will rise to 80/20. This is consistent with former law that a retiree's health insurance cost is the
same as the cost when the retiree was an active employee.

* The section also restricts the refilling of positions left vacant by those who retire and receive the benefit under this section; specifically, the language states that "no person shall be hired" by state or community colleges or at the University of Massachusetts, "on a permanent or temporary
basis" to fill any position made vacant by those retiring under this section "unless the secretary of education determines that the position is critical and essential to the operations of or services provided by the commonwealth". It also limits the total annualized cost of compensation that can be paid out by the Commonwealth for refilled positions to 30 percent of the cost which would have been paid during FY10 had the positions not been vacated, with the same limit applying for FY11. Other state agencies have similar rehiring restrictions under this section, not just higher education employees.

Donna Johnson
President, USA