GIC REPORTS $120 MILLION DEFICIT

Adds Pressure to Growing State Budget Gap

DECEMBER 19, 2014: As reported in the January 2014 edition of the Voice, the state’s Group Insurance Commission (GIC) is grappling with a significant budget deficit for the current fiscal year.

However, it now appears that the problem is more significant than previously thought. At today’s GIC meeting, Executive Director Dolores Mitchell characterized the deficit as being “north of $120 million” – some $70 million higher than previously thought.

The Association’s Shawn Duhamel and Bill Rehrey were present at the meeting, which was the Commission’s regularly scheduled monthly meeting. GIC officials did not discuss possible solutions to closing the budget gap, beyond the hope of a supplemental appropriation by the legislature in 2015. Supplemental appropriations are a normal course of business, not only for the GIC but many public agencies. Last year the GIC received two supplemental appropriations totaling $66 million.

Once again Mitchell explained that the deficit is not the result of high plan utilization or a “spending problem”, but rather the inability of the budget appropriation to keep pace with the growth of the GIC’s enrollment. As we have reported, the influx of municipal retirees and workers, along with the consolidation of state agencies has swelled GIC enrollment by over 40,000 lives in recent years. State budget appropriations have not accurately reflected this growth.

Harking back to 2010, when the GIC was forced to close an $85 million deficit by raising copayments and deductibles, Mitchell made it clear that she does not believe that a “cost shift” onto retirees and active workers is warranted. She argued that current copayments are inline, and in some cases higher, than what is being charged in the private sector.

However, one area where the GIC does lag private sector charges is in the area of the annual deductible. As part of the remedy to close the 2010 deficit, the GIC ushered in the plan’s first ever annual deductible, which remains set at $250 per enrolled (maximum of $750 per family). The $250 deductible only applies to non-Medicare retirees and active employees.

“There is some hint that the GIC might look at increasing the annual deductible to a higher level. While it might be common for some private sector companies to have high deductibles, those type of benefits usually come with jobs that pay far more than public sector wages,” says Duhamel. “Before any type of increased costs are considered, the impact on retirees must be taken into consideration. With the average pension just $26,000, the average retiree cannot afford to pay more.”

Association officials plan to meet with GIC officials shortly after the first of the year and prior to the GIC’s January Commission meeting to discuss options to close the deficit that do not involve cost shifting.

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