Costs could go up to keep good benefits for education employees

MONTGOMERY - State education employees and retirees will likely be paying more for heath insurance and could face higher co-pays in 2010 as the state looks at ways to rein in costs.

Retirement Systems of Alabama Deputy Director Marcus Reynolds told the Public Education Employees Insurance Board on Tuesday that it will take about $238 million in 2010 to maintain current benefits.

In the past, the Legislature appropriated other education funds to pick up the difference in health coverage for state educators who are under the Public Education Employees' Health Insurance Plan, or PEEHIP, but that is not possible with revenue at a low point.

Reynolds outlined options such as higher participant co-pays, monthly premium contributions and prescription drug coverage that he asked the board to consider before it meets to vote later this year. His proposed options could cut the increase to as little as $138 million or raise it to $257 million.

Reynolds urged the board to look at the options with the future in mind, not just a patch job to get through another year.

"We'll give you every penny we can, but you're still working with a formula that will not sustain itself," Reynolds said.

Reynolds said the plan needs a minimum of $98 million in reserves to take care of emergencies, but he expects to begin fiscal 2010-2011 with $48 million in reserves unless something changes.

"When you start living off of our reserves, it concerns me," he said.

Each year, the board makes decisions about benefits and the amount participants pay. Last week, Education Superintendent Joe Morton called for education employees to pay more so the state can keep critical classroom programs after three straight years of proration.

PEEHIP costs for education employees and retirees have remained the same for 25 years and benefits have changed very little, while private sector employees' premiums have increased. Hubbert said several times in the past that education employees chose to give up raises to keep good health benefits.

PEEHIP board members representing active education employees, retirees, principals and others said participants who contacted them are willing to pay more to keep good benefits.

Alabama Education Association Executive Secretary Paul Hubbert, who heads the PEEHIP board, said before the meeting that some change is warranted because the state lacks revenue to absorb health coverage increases.

Acting Finance Director Bill Newton said Gov. Bob Riley "asked that we find a way to keep benefits as close as possible to current benefits." But state revenue figures do not look good for the budget that must go to the Legislature in January, he said.

Hubbert said he questions whether university employees who do not participate in PEEHIP as active employees but retire into the system should pay more.

But Reynolds said university retirees "are pretty much paying their own as we go."

M.J. Ellington is the Montgomery bureau chief for the TimesDaily.