State and school employees seeing health costs rise a little now, a lot later

State and public school employees will make bigger contributions for their health insurance in 2017, but the big increases are coming in later years, legislators were told Wednesday.

At a State & Public School Life & Health Insurance Task Force meeting, John Colberg with the independent actuarial firm Cheiron told legislators that public school employees and retirees will see a 2% increase in 2017, while state employees and retirees will see a 3% increase.

Those increases were decided by the State and Public School Life and Health Insurance Board in its July meeting. Significant increases would be required among state employees in 2018 and school employees in 2019.

Assuming a 6% increase in costs and no increase in state contributions, state employees would pay 22% more for their insurance in 2018, 26% in 2019 and 19% in 2020. If costs increase at a 3% rate, employee contributions would have to increase 13% in 2018, 19% in 2019, and 13% in 2020.

Among school employees, a 6% increase in costs with no increase in state contributions would require a 2% increase in 2018 but an 18% increase in 2019 and a 20% increase in 2020. If cost increases are held to 3%, school employees would pay 2% more in both 2018 and 2019 and 12% more in 2020.

The increases are coming because utilization and costs are increasing for school and state employees. After dropping in 2014 and 2015, school employee costs will hit about $300 million in 2016 and rise to more than $350 million by 2020. Costs during the first five months of 2016 are 27.1% higher than the first five months of 2015 – from $212.10 per member then to $269.59 now. The cost for the entirety of 2015 was $258.14 per member. Meanwhile, contributions from state reserves are projected to remain steady at $38 million a year.

Among state employees, costs were above $250 million in 2015 after dropping the previous two years. Costs will rise to above $350 million in 2020. Costs for the first five months of the year are 25.8% higher than the first five months of last year – from $261.35 per member to $328.82. Meanwhile, available state reserve funds will drop from $19 million in 2018 to $11 million in 2018 and $2 million in 2019, the last year when reserves will be available.

There are 59,111 active and retired beneficiaries on the public school plan and 38,065 active and retired beneficiaries on the state employee plan.

Among school employees, 45% are on the most expensive premium plan, they contributed 63% of the contributions, and they were responsible for 61% of the claims. Those on the mid-level “classic” plan make up 49% of the enrollment, contribute 35% of the contributions, and were responsible for 35% of the claims. Those on the basic plan make up 6% of the enrollment, contribute 2% of the contributions and are responsible for 2% of the claims.

Among state employees, 91% are on the premium plan, they make up 95% of the contributions and are responsible for 98% of the claims.