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Tuesday, January 17, 2006

Ind. Law - Star reports House members health perk may be cut [Updated]

A story by the Indianapolis Star's Mary Beth Schneider, posted to the Star website at 3:28 PM, reports that:

House Speaker Brian Bosma, R-Indianapolis, is planning major changes to a costly taxpayer-subsidized lifetime health care plan for former lawmakers and their families.

"Significant changes are imminent," Bosma said today.

Bosma would not give details on the changes that he can unilaterally make to the health insurance system for former state representatives.

But he told reporters he has "come to preliminary decisions" to scale back the plan. The changes would affect any state representative who is in office on Nov. 8 [2006] or later.

All 100 state representatives are up for re-election this year. The changes could impact how many decide to retire, and keep the current health care plan adopted in a series of bills in 2001 and 2002. Any changes impacting the Senate would be up to Senate President Pro Tempore Robert D. Garton, R-Columbus.

The report also states:
Under the current benefit plan, lawmakers who leave the General Assembly after serving at least part of four, two-year terms are eligible, along with their spouses, surviving spouses, divorced spouses and their dependents.

Since mid-2002, when legislative leaders began offering the benefit, the cost to taxpayers has risen rapidly and, as of 2005, exceeded $250,000 a year. In 2004, former lawmakers receiving the benefit paid between $710 and $1,900 a year for family dental, health and vision coverage. That represented a savings of $3,343 to $12,800 over the amount retired state employees pay for the same levels of coverage.

No source is given for these figures in the Star story. In a previous story I recall reading that 25 legislators are covered at present.

If each of these legislators (with their families) are receiving, say $10,000 over the amount retired state employees pay for the same levels of coverage (and for these retired state employees the coverage does not continue once they are Medicare eligible), that is 25 x $10,000/year = $250,000.

Now, how long are they going to live? The benefits continue to cover the retired legislators and their families through their lifetimes. And of course, as they grow older, their benefits will go up sharply.

Assume that these current 25 family groups have an average future lifespan of 20 years. That is 20 x $250,000 = $5,000,000. For just the 25 legislative family groups currently retired. (Staff is also said to be covered.)

So the unfunded cost of the already retired legislators and their families covered by the plan could be $5,000,000. Or much more, given how health care costs are rising.

Add to that the members that retire this year - say 15, with 25 years average future lifespan. That is another $3,750,000.

So the total unfunded liability of the plan going into the next session will be nearly $9 million, and as I understand it, there is no talk right now of changing the plan for these 25 plus 15. So that is a gift (a "golden parachute") from the taxpayers of $225,000 to each of these retired legislators.

Note: These are my back of the envelope calculations based on the little information that has been released, plus some quesses. Apparently, the legislature has had an actuarial study of future liabilities done, but has refused to release it.

[Thanks to Advance Indiana, which caught the Star story before I did.]

[Updated] To facilitate accessing earlier ILB entires on legislative perks, the ILB had created a new category -- Legislative Benefits. To create a linked list of ALL the ILB entries on this topic, constantly updated, simply go to the "Categories" list in the right column and click "Legislative Benefits" -- it is near the end of the categories list. Currently there are a dozen entries.

Posted by Marcia Oddi on January 17, 2006 04:27 PM
Posted to Indiana Law | Legislative Benefits