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The news from the New Mexico Retiree Health Care Authority is that things could be worse, but they are not exactly great.
If you are one of the 22,000 state and local government and public school retirees covered for health insurance through this program, or a current employee looking to this program for your future, you might want to pay attention.
RHCA has managed to save itself from several financial and political scrapes and survived to this point. At the moment, the program has projected solvency for the next 15 years. Sort of.
Because decisions will have to be made, RHCA top managers, Director Wayne Probst and Deputy Director Marc Tyndall, are traveling the state presenting the issues to covered retirees who are willing to show up for an hour or two. Some actions can be taken by the RHCA board; others would require legislation. The issues are a microcosm of the nation’s concern about the cost of health care, but they are not exactly micro.
With no changes in revenue or expenses, the projection is that in 2018 the fund has to start drawing on principal rather than income to pay claims. That begins a downward trend until the fund runs out of money in 2029. That’s what 15 years of solvency means. Nobody wants that.
RHCA started at a disadvantage. This program, created to provide health insurance to government retirees at reasonable costs, was started by legislation in 1990. From the beginning, it was funded by small contributions from active employees and their employers. It started covering retirees the following year, with no chance to build a nest egg.
Active employee contributions are the largest single source of funding. The contributions were originally one percent of payroll from government employers and another half percent from the employees.
Legislation enacted in 2009 increased the contributions to one percent from employees and two percent from employers.
The covered retirees pay premiums for their coverage. Since they contributed during their active working years, the premiums are subsidized. Those who worked for a participating employer for 20 years or more get the largest subsidy and pay the smallest premium. Those who worked for less than 20 years pay higher premiums, based on the number of years of service.
Health care costs generally increase about 8 percent every year, but revenues to the fund don’t increase nearly that much.
The number of active employees has shrunk due to budget concerns, and so have those contributions. So the program has to find money somewhere else.
Probst and Tyndall show a list of options currently under consideration. None of the choices are nice. Every choice takes a bite out of somebody’s wallet: Increase the minimum age of participation. Be less generous with coverage of members’ children. Increase premiums across the board.
Require 25 instead of 20 years of service for the maximum subsidy. Ask the Legislature to approve increased contributions from active employees and employers. Every option adds a piece to the long-term solvency of the program.
I’m watching these options carefully presented, and I’m thinking that this is a thoughtful and rational approach to a difficult problem. The affected people are in the room. Everyone is concerned, but nobody’s behaving badly, and nobody’s playing politics.
I have sometimes wished that every New Mexican could have access to a program like this, one that offers pretty good benefits in return for costs that are not pleasant but are affordable.
Today I’m wishing that our leaders at the national level would take a lesson from the tone of the way this organization is working on solving its long-term problems.
Contact Merilee Dannemann through www.triplespacedagain.com.