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Last set of state retiree healthcare recommendations enter the legislative process

Delaware Legislative Hall
Delaware Public Media
Delaware Legislative Hall

State lawmakers set out to codify the final set of recommendations to protect state retiree healthcare benefits.

State Rep. Paul Baumbach (D-Newark) successfully passed two bills last month enacting some of the Retiree Healthcare Benefits Advisory Subcommittee’s (RHBAS) recommendations on how the state should handle pensioner’s healthcare benefits moving forward.

Those bills repealed the ability for Delaware to switch to a Medicare Advantage plan for current state retirees and employees, as well as improved transparency within the State Employee Benefits Committee — both still await action from Gov. John Carney.

If Carney decides not to sign the bills but does not actively veto them, they will still go into effect.

Baumbach’s next set of four bills addresses the remaining recommendations of the RHBAS.

The first bill aims at increasing the prefunding for Other Post-Employment Benefits (OPEB), which refers to state retiree benefits other than pensions, largely dealing with health care benefits.

As of February, the estimated liability for retiree health care benefits was $8.9 billion — $8.4 billion being 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 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.

In addition to SB 175, Baumbach's bill would require the state to increase prefunding to the OPEB Fund in an amount equal to .5% of the rate of covered payroll of the Fiscal Year 2025 operating budget, and then increase by .25% every year beyond that.

The change is expected to cost the state $33.5 million over the next three years.

The second bill raises the years of service required to receive a higher percentage of state cost share on health insurance premiums.

This would mean state retirees with 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.

The third bill requires the state group health insurance program to include a pensioner coordination of benefits policy for eligible pensioners who were first employed on or after Jan. 1, 2025.

The fourth and final bill requires the state to continue offering eligible pensioners employed before Jan. 1, 2025, a plan that is comparable to the current Special Medicfill Medicare Supplement plan.

However, for eligible pensioners first employed on or after Jan. 1, 2025, Delaware may offer different Medicare supplement plans that are not high deductible plans.

This decision differs from the original RHBAS recommendations because it does not limit the new plan to be comparable to the current Medicare supplement Plan G and Plan L.

The bill notes this difference is because the state will not be able to offer a different Medicare supplement plan to any eligible pensioners until Jan. 1, 2040, and details about the Medicare supplement plans that will be available at that time is unknown.

“What the advisory subcommittee recognized is that there has to be give and take. So there are pieces where this side gives and elements where this side gives, and that’s where we put them all together. And really, I think it’s best to look at the report as a package of seven and these indeed are four of them," Baumbach said.

Representatives from RISE Delaware, a group formed to formally advocate for Delaware retirees promised healthcare benefits, and the Delaware Retired School Personnel both spoke in favor of the legislative package.

All four of the bills were released from the House Administration Committee with bipartisan support and head to the House floor for consideration.

Before residing in Dover, Delaware, Sarah Petrowich moved around the country with her family, spending eight years in Fairbanks, Alaska, 10 years in Carbondale, Illinois and four years in Indianapolis, Indiana. She graduated from the University of Missouri in 2023 with a dual degree in Journalism and Political Science.
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