×

Governor’s proposal calls on retirees to contribute to health costs

  • State retirees over age 65 would have to start paying a roughly $40 monthly premium for health benefits under Gov. Chris Sununu’s budget proposal. AP



Monitor staff
Friday, February 24, 2017

State retirees over age 65 would have to start paying a roughly $40 monthly premium for health benefits under Gov. Chris Sununu’s budget proposal.

The Republican’s spending plan calls for the 9,000 state retirees in that age group to start paying a 10 percent premium contribution toward their health benefit plan, which is a supplement to Medicare. 

The proposal is the latest attempt to cover the plan’s soaring costs, which are driven by an increasing number of retirees and rising pharmaceutical costs. The head of the state’s largest public union opposes the proposal, calling it “cruel” to raise costs for seniors on fixed incomes.

In the past, only retirees under 65 have paid premiums. Lawmakers upped that group’s share to 17.5 percent last year to help make up a $10 million shortfall.

Sununu’s budget projects the retiree health benefit plan will cost $171 million over the next two years, an increase of $25 million over the current plan.

His proposed premium increase would raise an estimated $7 million. The remaining funds would come from general fund dollars and agency contributions, state officials said. In his recent budget address, Sununu said the cost shouldn’t be borne only by the retirees or the state.

“The cost of healthcare is rising,” said Vicki Quiram, commissioner of the Department of Administrative Services. “Every state is struggling with the same issues, whether for retirees or active employees, and every company and private business too.”

Given the way the state pays for retiree health care, the budget can be particularly susceptible to price fluctuations.

Unlike the state’s retirement system – that pays out pension benefits from a fund made up of regular contributions and investment returns – retiree health benefits are paid on a year-to-year basis and come straight out of state coffers.

The fund has limited reserves after lawmakers tapped the savings to help close the shortfall last year.

Rich Gulla, head of the State Employees Association, is concerned about setting a minimum premium at 10 percent, and worries it could be increased in coming years.

“The average pensions is $13,000 a year for these folks,” he said. “The additional cost is a lot and I think it’s cruel.”

The retirement system as a whole has been underfunded for years, leading to a $4 billion shortfall. Towns, cities and school have been asked to fill in the gap and required to pay rising contributions for their workers, leading to some of the biggest increases in annual municipal budgets.

(Allie Morris can be reached at 369-3307 or amorris@cmonitor.com.)