State benefits program reserves falling

The program providing health benefits to state workers lost more than $9 million in the first nine months of 2002, and director Woody Thorne says members are looking at premium increases in January.

He told the legislative Interim Finance Committee Tuesday rising costs, an unexpected number of large claims and the process of changing to a new administrator are all driving up the costs.

The plan started calendar 2002 with $18 million in reserves. He said at the current rate, there will only be about $6 million left by the end of the year.

"I'm very concerned about the drain on reserves," he said. "We continue to see an increase in those large claims."

Thorne said the state contribution for each active employee will increase from $357.50 to $384.50 per month effective July 1.

He said the contribution is more than what it costs for a single employee.

"The state has always factors in more than what it costs for a single employee and the difference subsidizes dependents," he said.

He said since the state contribution is fixed for the biennium, any increase would eat into the dependent subsidy, forcing the benefits program to increase the amount state workers pay for their spouse and children.

At present rates, an employee pays $135 a month, a single employee pays $121 to cover his or her children and a full family costs $256.

Thorne said those rates would go up and, in the worst scenario, state workers might have to pay part of their own premium costs until the 2003 Legislature can appropriate money to make up the difference. But Thorne said it's too early to estimate how much premiums might increase.

He said some of the problems should be fixed when the plan completes the switch to Benefit Planners as its administrator. That is the company which processes benefit claims and pays the hospital, doctor and other bills on behalf of members.

Even so, he said those members "can expect a significant increase and some benefit changes" at the first of the year.

In addition, he said the plan will convert in January to a fiscal year instead of calendar year, which will give administrators another chance to increase rates if necessary in July 2003.

He said members don't seem to want to give up any of the benefits they now have in the plan, so he expects a premium increase more than a reduction in benefits.