A state board on Thursday approved a number of changes to state education employee benefit plans to help offset a nearly $140 million shortfall for 2016.
Changes to the Public Education Employees’ Insurance Plan will go into effect when the new year fiscal year begins Oct. 1.
Approved changes will increase the surcharge for smokers to $50 from $28.
Copays for some medical specialists will increase by $5.
The changes will also affect employees with a spouse on the plan: Fees for a spouse will increase by $25 each year from 2016 to 2018 before capping at $75 a year.
Retirement Systems of Alabama Deputy Director Don Yancey said the shortfall largely is due to increased health care costs.
“The bottom line is that health insurance costs are skyrocketing everywhere,” he said. “It’s not just in Alabama. Other states are faced with this same problem.”
“I don’t think anyone would try and sit there with a straight face and tell you that health insurance is cheaper than it was eight years ago,” he said.
The board voted down the largest measure, which would have increased monthly premiums by $10 for individual employees and $20 for families. The current monthly premium is $15 for an individual.
Amy Marlowe, a spokeswoman for the Alabama Education Association, an education employee lobby, said it was a “big victory.” She said employees haven’t received a raise in eight years and can’t afford to pay increased health care costs.
“They just absolutely could not afford any type of increase in premium for the health insurance program,” Marlowe said.
The majority of the shortfall will be replaced by transferring funds from the state’s retiree health care trust fund. In 2007, the Alabama Legislature created the fund to begin saving money as a way to defray future health care costs of retired education employees.
Under the law, the state can transfer up to 10 percent of the fund’s market value for the previous year. Yancey said that should allow PEEHIP to receive as much as $115 million for 2016. He said the plan will receive $65 million to fill a shortfall for the remainder of fiscal year 2015 and then another $82 million for the next year.
Yancey said 2015 will mark the first time money is transferred. He said the fund was never intended to be a slush fund.
“Kind of like your savings account,” Yancey said. “If you dip into it every month to pay the bills, it will disappear pretty quick.”
Yancey said the board will have to consider a number of new options for fiscal year 2017.
“This is a major problem that we’re faced with and it’s going to be ongoing,” he said. “Essentially we’re going to have to face this every year to try to figure out how to come up with enough money to keep the program every year, which is a very, very good health insurance program.”
Republished with permission of The Associated Press.