Public worker
health costs
may rise 250%

A state auditor's report says
combining union and state
plans might save costs

By Craig Gima
Star-Bulletin

The cost to taxpayers of providing health benefits to state and county employees and retirees could increase 250 percent to $949 million annually in the next 15 years, according to a report by the state auditor.

The state and county share of providing health benefits in 1998 was $266 million.

One way to curb the rising cost of providing health benefits would be to combine the various plans now offered by the unions and the state into a single plan. The report also details several other recommendations to reduce costs including looking at increasing payments by the state and employees now to take care of the "unfunded liability" when employees retire and no longer contribute to the cost of health benefits.

State auditor Marion Higa said union health plans competing with the state are increasing the state's costs because they create a smaller pool of beneficiaries for the state to negotiate with and retirees, who are the most expensive group of beneficiaries, end up with the state.

The number of retirees is also growing as people live longer, and when the baby boomers reach retirement age,that will become a major factor in the cost of health benefits.

The Legislature passed a bill this year to look into creating a pilot union-run health plan. Two states -- Oregon and Pennsylvania -- use what are called employer-union trust funds that basically allow a single union health plan to provide health coverage. The auditor said a employer/union trust fund is a reasonable way to provide a single health plan.

But Higa also recommends that the current union plans need to be audited to ensure that state and county contributions to the union plans are being used to purchase health benefits.

She noted that none of the union plans has ever returned any difference between what it costs to provide coverage and what was paid to the unions.

Higa also suggests reducing the state and county contributions for retiree coverage by looking at, among other things, whether the state should pay for contribution for spouses of retired employees and by changing the benefits for retirees and their dependents.

Other recommendations include giving the health fund more authority and flexibility and restructuring the Board of Trustees, implementing some kind of long-term care coverage and modernizing the fund's computer system and improving customer service.