Health insurance: State workers could pay more: SEIB seeking additional funds to offset rising costs [Montgomery Advertiser, Ala.]

By Brian Lyman, Montgomery Advertiser, Ala.
McClatchy-Tribune Information Services

Jan. 20--The board overseeing the health insurance system for state employees is requesting about $55 million in additional state funding for fiscal year 2014, and says it will ask state employees to chip in extra money to help implement new health care policies. The request could mean higher premiums or reduced benefits.

The State Employees' Insurance Board has requested an additional $55 million from the state's General Fund, and says it will ask employees to contribute $94 million -- up from $75 million in the current fiscal year -- to pay for obligations.

William Ashmore, the director of the SEIB, said the board was trying to get back to prior levels of funding and address an expected shortfall of about $71.6 million in the 2014 fiscal year, which begins Oct. 1.

The SEIB is currently receiving $298 million in state funding, in additional to contributions from employees; in 2010, the number was $361.8 million. Ashmore said they will request a total of $353 million in state funding, on top of the $94 million being requested from state employees.

"We're doing our best to keep costs down, but that doesn't mean we don't continue to get hit by inflation and Affordable Care Act costs," he said.

Ashmore specifically blamed the Affordable Care Act, and its requirement to provide contraceptives without co-pays, as the reason for the additional money. Ashmore said obligations from the act made up the "majority" of the costs.

Despite a voter-approved infusion of $145 million last September, and the transfer of 25 percent of the state's use taxes into the budget, the General Fund remains tied down by flat growth from its roughly three dozen revenue sources.

Mack McArthur, executive director of the Alabama State Employees' Association, said he hoped the insurance costs would not be passed on to state employees, who have not had a pay increase since 2008. Other costs, McArthur said, have eaten into their paychecks.

"When you look at state employees right now, you take into account there's been no (cost-of-living increase) since 2008, there's been a 9 percent (reduction) from inflation, 2.5 percent is being taken from out of their pockets for retirement, and 2 percent because of the Social Security tax holiday going away. We're talking over a 13.5 percent (reduction)," he said.

Lawmakers said they were reluctant to pass new insurance costs on to state employees.

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"There's always the option of having employees pay additional premium costs, but they haven't received a raise in over four years, and such an increase in employee contributions might mean less in take-home pay," said Sen. Arthur Orr, R-Decatur, the chairman of the Senate'sFinance and Taxation General Fund committee.

Besides moving $145 million from the Alabama Trust Fund into the General Fund budget, the Sept. 18 amendment also changed a method in which the General Fund received funding from the Trust Fund. Previously, the board controlling the fund could vote to transfer up to 75 percent of the capital gains in a single fiscal year to the General Fund. Now, funding is allocated based on a third of the prior year's capital payments, and 5 percent of the average market value of the assets in the fund, based on a three-year average.

The prior system left a great deal of uncertainty in planning budgets. However, the Legislative Fiscal Office said last week that if the old system had been kept in place, the General Fund would have about $45 million more in revenue this year.

Orr called that development "ironic," but also noted that in 2011, the General Fund was projected to receive tens of millions of dollars in revenue during budget planning that poor stock market performance wiped out by the beginning of the fiscal year that October.

"By passing the constitutional amendment, we have much more predictable revenue," Orr said.

The request from SEIB comes on top of other expected increases, including a Medicaid budget increase of at least $35 million. Orr said last week he was dealing with at least $100 million in additional funding needs, even before processing other agency requests.

"It's too early to tell at this point in time how the agencies will adjust," he said. " It will be another challenging year for the General Fund budget."


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