Shoring up educator insurance

A proposal that would help limit educators' out-of-pocket expenses for health insurance uses money intended for future needs.

Paul Hubbert, executive secretary of the Alabama Education Association, outlined the proposal in AEA's Nov. 14 newsletter.

It would plug a $238 million shortfall in educators' health insurance plans.

But the proposal could pose long-term problems, said Marc Reynolds, the Retirement Systems of Alabama deputy director who oversees the program.

Hubbert wrote that to navigate a rough 2011 the Public Education Employee Health Insurance Program could tap the program's savings accounts established for future needs.

But Reynolds cautioned against using the program's long-term savings for short-term solutions.

"They are financing their ongoing operations out of savings with no real plan for putting it back," Reynolds said. "At some point, the savings will be gone. We will be right back there next year with the same problem and no savings to fall back on."

Hubbert's suggestions include using $60 million from a constitutional fund set up to help pay future retiree benefits, $22 million that Medicare reimburses the plan for Medicare-eligible retirees' prescription drugs and

$8 million from the higher premium surcharge that smokers pay.

Combined, the three sources would generate $90 million and reduce the remaining 2011 shortfall to $148 million.

The PEEHIP board will discuss possible solutions at its Dec. 10 meeting.

"We must make decisions that will make PEEHIP fiscally sound, while being as fair and as painless as possible," Hubbert wrote. He termed revenue problems the most difficult budget period in a generation.

Reynolds said the current PEEHIP plan is unsustainable because it lacks funds to pay for future retiree benefits, estimated at about $12 billion.

The constitutional retirement fund that Hubbert suggested tapping to tune of $60 million contains only $600 million of the $12 billion needed for the future, Reynolds said.

In past years, the PEEHIP board made decisions about health plan coverage and sought needed extra revenue from the Legislature, keeping member contributions low. But Hubbert and Reynolds said state revenue is just not there to pick up the extra insurance plan costs for 2011.

Long-term changes are needed, Reynolds said.

In October, Reynolds gave the board other revenue-generating options. They included slight increases in member monthly premiums and changes in co-pays for doctor visits, prescription drugs and related services.

Hubbert said after the October meeting that he does not expect the board to act hastily on the immediate problem, but rather to wait to see how much funding the Legislature can contribute next session. He said low employee personal costs for health coverage are part of the package that draws good teachers to Alabama.

Full-time education employees who are non-smokers pay $2 per month for single health premium coverage and $134 for family coverage. Part-time employees pay a different rate. All but two or three school systems in the state participate in the PEEHIP health plan.

Most PEEHIP board members, who represent different education groups, have said their constituents understand some changes are coming.

Another hint of change came when Education Superintendent Joe Morton asked the Board of Education to approve freezing the PEEHIP contribution in the fiscal 2011 K-12 budget.

The state school board approved a resolution at its last meeting endorsing the freeze at 2010 levels.

The budget went to Gov. Bob Riley for consideration in his 2011 budget proposal to the Legislature.

Morton said last week employees expect change because of escalating health insurance premium costs.

"But the change is not just about increasing their monthly contribution," he said. Other changes involve increasing co-pays and other adjustments to the health plans that could help balance the fund, Morton said.

"There is a combination of changes the Legislature could make to make this work," he said. That way, if there was any growth in the Education Trust Fund, "it could go to the classroom."