Delaware’s State Employee Benefits Committee voted Monday to extend a health insurance plan for state pensioners until July 2024 while litigation surrounding a proposed change to those plans continues.
Seven months after lawsuit by retiree advocates prompted a Superior Court judge to halt implementation of a new Medicare Advantage plan for retired state employees, Delaware’s State Employee Benefits Committee remains in a bind: until the litigation ends, the state must continue to offer retirees the same health insurance plan – known as Medicfill Supplement plans – they joined upon retirement.
To that end, the State Employee Benefits Committee voted to extend the state’s contract with Highmark Delaware until July 2024. While state contracts are typically put out for bids every three to five years, the Highmark Delaware contract has not been rebid in six years.
To avoid complaints or lawsuits from other insurance providers frustrated by the State Employee Benefits Committee's decision to bypass Delaware's fair procurement rules — which generally require a competitive bidding process for large state contracts — Human Resources Secretary Claire DeMatteis says the Committee pointed to the so called "critical need" exception written into Delaware Code.
"It's a very narrow exception," she said. "It can only be used if the critical need 'cannot be reasonably foreseen or guarded against.' It should be difficult to use the exception." In this case, she says, the Superior Court's order that the state continue offering Medicfill plans to pensioners leaves the Committee with no option but to extend the Highmark Delaware contract.
If the court lifts its order before next July, DeMatteis says the state could open a special enrollment period to give retirees an opportunity to change plans without the risk of being penalized for preexisting conditions — a risk they would face if left to find new insurance outside of an enrollment period. If the court doesn't lift its order or the state can't get the contract out for a bid in time, she says the Committee has the opportunity to extend the contract one more time for a maximum of six months.
But former state Sen. Karen Peterson, a plaintiff in the lawsuit, says she and other state retirees do not want to give up their Medicfill plans at any point.
“We want to stay with what we were promised," she said. "We worked for low pay for all those years, knowing that at the end of the line, we traded low pay for great benefits. That’s what we’re fighting for.”
Meanwhile, the Committee is also considering whether to raise insurance premiums for retirees for the first time in six years. In March, the Committee voted to raise premiums for non-Medicare plans — either active employees or pre-65 retirees — by 9.4 percent in fiscal year 2024, but that action exempted retiree plans.
Nearly 90 percent of retired state employees — those who retired before 2012 with more than 20 years of experience — pay no premiums whatsoever, and the state's premium revenues go to cover the year-to-year costs of the state's retiree health insurance plan.
But DeMatteis says any potential premium increase wouldn't address the fundamental problem that the Committee sought to fix when it proposed the switch to a Medicare Advantage plan: Delaware's current retiree health insurance program leaves the state with a $10 billion unfunded liability that is projected to more than double in the coming decade.
“What’s causing the unfunded liability is that taxpayers pay 95 percent of all retiree and pensioners’ healthcare, year after year after year," she says. "The only way we fix that is with a structural change."
The group's Retiree Healthcare Subcommittee is scheduled to deliver final recommendations for structural changes to address that unfunded liability by October.
