Surprise health insurance savings for state program

By M.J. Ellington
DAILY Staff Writer

MONTGOMERY — Financial surprises in the state's employee/retiree health insurance costs in 2005 will mean savings for state agencies and some individuals on the plans in 2006.

Because of cost savings measures put into place in 2004, the State Employees Insurance Board approved a $7.6 million credit toward the 2006 health insurance expenses of state agencies, said SEIB Deputy Administrator Gary Matthews.

State employees who have flexible spending accounts as part of their health coverage will get a $50 credit to their accounts in January. Retired state employees will get a one-time reduction in their January health insurance premium up to $50, Matthews said. The total employee/retiree credit will be $1.4 million.

Although some of the insurance board's cost-saving measures began in 2004, Matthews said the savings credits are due to lower than expected health claims costs for 2005, not the broader changes adopted by the Legislature in 2004.

Extra charge for smokers

The insurance board's Matthews believes it will take two to five years before the state knows the real effect of the broader 2004 reform measures. Some measures, including an extra charge for smokers, are intended to encourage healthy behavior.

The effects of other measures, such as coverage for young people who retire from the state and go to other jobs, are just beginning. "People are just becoming familiar with the options that are available," Matthews said.

Most measures adopted by the Legislature in a 2004 special session that Gov. Bob Riley called on health reform did not go into effect until Oct. 1 of this year.

Riley said spiraling state employee health insurance costs and doom-and-gloom projections for the future were the reason for the changes.

Legislation from the session paved the way for the increased health insurance rates for employees who smoke and retirees who work fewer than 25 years.

It also gave broader powers to the state employee and education insurance boards to adjust premium rates and established a state flexible benefits plan for school employees.

The premium surcharge for people who smoke is $20 a month.

Matthews said he cannot reveal information about individual health accounts, but Gov. Bob Riley already acknowledged that he pays the surcharge.

The Retirement Systems of Alabama's January newsletter said others who pay to light up include retirement systems CEO David Bronner and state Finance Director Jim Main.