The Retiree Healthcare Benefits Advisory Subcommittee (RHBAS) presents its final recommendations to the Legislative Joint Health Committee on addressing the future of state retiree health care and Delaware's other post-employee benefit (OPEB) unfunded liability.
RHBAS background
In February 2022, the State Employee Benefits Committee (SEBC) made the decision for Delaware to transition to a Medicare Advantage plan to reduce the state’s share of health care costs, but retirees voiced concerns over the new plan’s pre-authorization requirements and lack of out-of-network coverage.
Retiree advocacy group RISE Delaware filed a lawsuit in Superior Court in September 2022, alleging the state failed to follow administrative procedures by switching to Medicare Advantage without state retiree's input. In October, a judge issued a temporary stay, blocking the state's ability to proceed with Medicare Advantage.
"This court cannot agree that the need for prior authorizations for over 1,000 procedures and the use of only in-network doctors is the same level of benefits retirees obtained with the current policy," Judge Calvin Scott wrote in his decision.
In January 2023, State Sen. Bryan Townsend (D-Newark/Bear) sponsored legislation establishing the RHBAS, including membership of three state retirees and four members of the General Assembly.
OPEB liability
Other Post-Employment Benefits (OPEB) in Delaware refers to state retiree benefits other than pensions, largely dealing with health care benefits.
The estimated liability for retiree health care benefits is currently $8.9 billion — $8.4 billion is unfunded.
In April 2023, the net unfunded liability was expected to grow to $20.7 billion by 2042 if no changes in plan design, eligibility or funding was made.
In July of 2023, Gov. John Carney signed Senate Bill 175, requiring that every year, at least 1% of the grand total of the General Fund operating budget appropriations for the prior fiscal year is appropriated to the OPEB Fund to begin addressing the unfunded liability.
RHBAS recommendations
RHBAS is recommending Medicare Advantage not be considered moving forward, and is instead urging the state to provide two Medicare Supplement Plans similar to the Medigap G plan and Medigap L plan with a retiree/state premium split for a 25+ retiree of 5/95%.
“Our goal was no matter what we do in the future, that we are not forcing Medicare Advantage and that we are making sure employees have Medicare eligibility with plans that are very similar to a Medigap plan we have now," RHBAS Chair and Lt. Gov. Bethany Hall-Long says.
State Rep. Paul Baumbach (D-Newark) filed legislation last month that would repeal the option of providing the Medicare Advantage Plan entirely. The bill currently awaits a hearing the House Administration Committee.
The subcommittee is also recommending increasing OPEB pre-funding from 0.36% of payroll to 0.5%, then increase by an additional 0.25% of payroll each fiscal year until it reaches 10%.
Baumbach says he plans to introduce legislation to solidify this pre-funding structure in the coming weeks.
RHBAS is also recommending a change in the eligibility requirements for the state share of medicare-eligible healthcare premiums.
The current structure is as follows:
RHBAS is recommending less than 15 years of service receive 0%, 15 years to less than 20 years receive 50%, 20 years to less than 25 years receive 75% and 25 years or more receive 100% of the state share.
If adopted, these changes would apply to state employees hired on/after January 1, 2025.
RISE Delaware reacts
Elisa Diller, co-founder of RISE Delaware, told the Legislative Health Committee the group commends RHBAS's efforts to address retiree health care issues and appreciates its focus on public input.
"RISE Delaware has been incredibly supportive of the RHBAS. They have done a fine job. These folks modeled what every citizen wants in terms of citizen participation in a committee," Diller says.
She spoke on the importance of following through with providing the OPEB Fund with 1% of the previous year's general fund and spoke in support of Baumbach's bill to remove the Medicare Advantage option from the Delaware Code and an additional bill that would revise the membership of the SEBC and require the Secretary of the Department of Human Resources to inform state employees and retired state employees about changes in benefits coverages, including proposed changes.
Looking forward
It is now up to the SEBC, Governor's Office and General Assembly to implement these recommendations as they see fit.
In October, the SEBC issued a request for proposal (RFP) for one self-funded employer-sponsored Medicare Supplement plan to be offered to current and future benefit-eligible Medicare retirees that duplicates the current Medicare Supplement plan. Aetna, Brighton Health Plan Solutions, Highmark Delaware and Trustmark Health Benefits all submitted proposals.
The SEBC is expected to complete the RFP process and announce a contract award on March 25, 2024, but RHBAS is recommending the SEBC solicit public comment before holding a final vote.
The state is also in the process of appealing the Superior Court's decision to block the Medicare Advantage program.
