SEBC Retiree subcommittee looking at what changes can be made to save the state money.
A retiree’s voice broke as she recounted to the SEBC Retiree Benefits Subcommittee on Friday what it would mean for her health coverage to change.
“About 10 days ago, my husband was diagnosed with cancer,” Diana Noonan said in the Zoom call. “He had scheduled for surgery next week. And the word cancer is daunting, and it’s also been frightening, and it’s rocked our family. I cannot imagine how much worse it would be if we had to worry about coinsurances and paying out of pocket prior to many of the surgeries and treatments involved. We simply do not have the funds.”
Noonan said it’s immoral for the subcommittee to consider taking away any of their healthcare benefits.
“I cannot imagine that this committee can begin to believe that it is anything but immoral and unethical to take any level of medical benefits away from us at this point in our lives,” Noonan said. “Especially when for over 30 years we had been told that while salaries were not great, our retirement benefits would be…We are people who have age but we still have value. We are parents and grandparents and we have busy lives.”
Related Story: Survey: state workers like their healthcare, want higher pay
Prior to Noonan’s comments, the subcommittee had been discussing how they can lower the state’s unfunded liability.
That liability comes from the post employment benefits that are paid out of what’s called the OPEB Trust Fund. It includes retiree benefits such as healthcare, life insurance and disability, but not pensions.
Money for those benefits will need to be accrued, or the state will not be able to support those benefits.
The state currently has an $8.3 billion shortfall in that unfunded liability as of July 1, 2022, and estimates that shortfall will increase to $20.7 billion by 2042 if nothing is done.
The subcommittee looked at three different methods to reduce the liability, including having state employee spouses only get 50% coverage under the plan, reducing the amount the state pays into the plan based on how long someone has worked for the state, and eliminating access to health coverage for people who don’t work for the state when they retire.
Related Story: SEBC subcommittee continues to dissect Medicare plans
When considering reducing coverage for employee spouses, Cheiron, a consulting firm, estimated two scenarios, model A, which applied to employees hired on or after Jan. 1, 2015 who later retire, and model B, which applied to any retirees on or after Jan. 1, 2025.
For model A, Cheiron estimated a $1.8 billion reduction in the liability over 30 years, while for model B, they estimated a $2.7 billion reduction in the liability over 30 years.
In considering reducing the amount people get per year of service, Cheiron had model A, which applied to employees hired on or after Jan. 1, 2015, and model B, which applied to employees hired on or after Jan. 1, 2025.
For model A, the state saved $3.8 billion over 30 years, and for model B, the state would save an estimated $3 billion over 30 years.
Finally, when considering eliminating access for people no longer with the state, Cheiron had model A, which applied to employees who leave state employment on or after Jan. 1, 2025, and model B, which applied to employees who leave state employment before Jan. 1, 2025 and weren’t eligible to draw a pension before that date.
For model A, the state would save an estimated $1.5 billion over 30 years, and for model B, the state would save an estimated $1.8 billion over the next 30 years.
Related Story: Panel: State should make 1% extra retiree funding the law
Joanna Adams, the Delaware Pension Administrator, said eliminating health insurance for those who left the state early may not have the biggest immediate impact, but could lead to larger savings in the future.
“There’s more senior employees leaving state government, probably now more so than ever,” Adams said. “So I think this is a category that may not have an immediate impact or may not have a large impact overall, positive or negative, but I think we’ll see the potential for this area to grow in the future.”
Michael Begatto, executive director of Delaware Public Employees Council 81, said when they hired people, it was with the understanding that they would get certain benefits.
“Those same employees that we hired, we gave hiring bonuses to, we gave incentive bonus pay to, now we’re going to make them pay it on the back end,” Begatto said. “Because they’re now gonna get a less of a benefit that they were told when they came to work for the State of Delaware.”
Lt. Gov.Bethany Hall-Long, chair of the subcommittee, said that they haven’t decided anything yet, and things could change later down the line.
Share this Post