State workers should pitch in on insurance

By Deborah D. Thornton

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Health care benefits are a hot topic. One major concern is benefits and costs for government workers. Many states - 19 as of fiscal year 2009 - have zero funds set aside to fund retiree health care benefits. Another seven have funded only 25 percent of their liability, according to a report by the Pew Center on the States.

In total, the states only have about 5 percent of the expected liability set aside. With the continuing growth in health care expenses, this is a significant problem for these states and their taxpayers. Many states are making changes in the structure of retiree health care benefits to address this long-term liability.

Iowa is one of the states that has no funds set aside to pay current or future retiree health care benefits. Instead, state government has been paying these expenses from current tax collections. As of FY2009, the amount anticipated for health care expenses of current and future

government retirees in Iowa was just over

$538 million. This is about one-twelfth of all annual state spending and a significant liability to Iowa taxpayers.

Based on these estimates, the “required” annual contribution for Iowa retiree health care costs in FY2009 was $56.8 million. This money should have been set aside in reserves, as the Iowa Public Employees' Retirement System (IPERS) money is, to grow and be available to pay the health care costs of retirees. In FY2009, only 42 percent of that amount was paid in.

Additionally, most Iowa state government workers do not pay a monthly health care insurance premium. We are one of only six states that pay 100 percent of insurance costs for most employees and their families. According to the 12th annual Iowa “Employer Benefits Study,” by David P. Lind and Associates, the average premium paid by private-sector employees in Iowa for family health care plans is $346.66 per month, up from only $180 a decade ago. The average amount paid by private-sector workers for an “individual only” plan is $70.

Those few state government workers who are required to help pay for their individual insurance pay only $14 per month.

Nationwide, 38 percent of the states require their single employees and/or retirees to pay from

29 percent to more than 60 percent of their health insurance premium, according to human resources benefits group The Segal Company. For employees with families, 56 percent of states require at least a 29 percent personal contribution.

The FY2013 budget proposed by Iowa House Republicans calls for all state workers, including legislators and other elected officials, to pay $200 a month toward their health insurance. According to Speaker of the House Kraig Paulsen, “Taxpayers can no longer afford to carry the full burden. ... Asking all employees, including state Legislators, to contribute ... toward their own health care is the right thing to do.”

Unemployment in Iowa remains over 5 percent. When private-sector families are paying $350 per month or more toward their health insurance, it seems only fair that government workers pay at least $200.

Paulsen and the Republicans in the Iowa House are right. At the very least, they should adopt this plan for themselves and other elected officials. Next they should address the unfunded liability of the retiree health care. Then the state will continue to move toward sound fiscal health, treating all taxpayers fairly.

Deborah D. Thornton is a research analyst with the Public Interest Institute, Mount Pleasant. The views expressed in this column are those of the author and not necessarily those of PII. Comments: Public.Interest.Institute@LimitedGovernment.org.