South Carolina’s state employees will have to pay more for health insurance after officials voted to increase their premiums this week. The state Budget & Control Board approved increasing employee’s premiums by 4.5 percent, as well as raising the amount the state puts in.
Governor Nikki Haley said the move was necessary to shore up the state’s reserves and keep its credit rating intact. But opponents questioned why that was the case, since the health plan has more than enough to cover its expenses this year.
Sam Griswold is president emeritus of the State Retirees Association. He says the health plan’s own projections show it already has plenty of reserves to cover its expenses. He called the additional $19 million in projected reserves a “profit.”
“There’s just no need for an increase in rates,” he told SCRN, “As a matter of fact, there’s so much money built into this that you probably won’t have to increase rates for next year.”
Employees have not had a rate increase since 2005, although their wages have been flat for the past few years, as well. The state and local governments have seen heavy increases, however, as health care costs have gone up. Employer premiums were raised by 9.7 percent in 2008, but have remained at that level since then. The expected increase was tempered by employee layoffs and lower-than-anticipated costs of care.
The reasoning was the same this year, as state officials were worried about a possible shortfall should more claims be filed than expected in the next two years. A consultant for the program believed the additional $19 million in premiums would provide an adequate buffer. The current projections predict about $214 million in reserves by the end of June 2012 if premiums are not increased.
(See numbers here)
State law requires the reserves cover an additional 45 days of claims. Without an increase, that $214 million would be enough for 47 days. Factoring in the new increase would bring that number up to 52 days.
Comptroller General Richard Eckstrom and State Treasurer Curtis Loftis requested a smaller, 3.5 percent increase. However, they were outvoted by Haley, Senate Finance Chairman Hugh Leatherman, and House Way & Means Chair Brian White.
Griswold said that excess revenue was much more than necessary, and questioned why the state was taking the action. “Retirees are living on fixed incomes, many of them too old to go back to work if they start getting squeezed,” he said, “Their cost of fuel and their cost of food has gone up. If you don’t have to impose an increase on them, why would you?”
Right now, the plan also sets aside additional money for a trust fund designed for other post-employment benefits. That trust fund was set up to cover unfunded liabilities in the state’s retirement system, currently projected as more than $9 billion. Officials take funds out of the health plan ($14 million in 2009 and $16 million in 2010) to go towards that trust fund. However, this upcoming year calls for a $159 million transfer, far above the historical average.
The insurance plan covers more than 400,000 people, or nearly 10 percent of the state population. That includes state employees, retirees, and families. It also includes some local employees, such as teachers and utility workers.