HEALTH INSURANCE Rising costs also swamp public sector
Higher premiums are being passed on to government workers and retired teachers.
By WILLIAM K. ALCORN and CYNTHIA VINARSKY
VINDICATOR STAFF WRITERS
YOUNGSTOWN -- Some retired teachers may soon be spending up to a fourth of their pensions for health care.
Rising health insurance costs that have plagued the private sector for years have caught up with governmental budgets and employee pension and health care funds.
Meanwhile, private employers are struggling to find ways to balance workers' health coverage expectations with the realities of skyrocketing health insurance premiums.
On the public side, costs for the State Teachers Retirement System of Ohio keep rising as the baby-boomer generation nears retirement. With its investment earnings decimated by the stock market free fall, it faces bankruptcy by 2008 if it doesn't find more revenue somewhere.
That somewhere is the pockets of retired public school teachers, who previously thought they were in pretty good shape with their pension and health care.
For Cora Beck, 59, of Mineral Ridge, a retired McDonald math teacher, the STRS money troubles could increase her monthly health care insurance bill from $66 to $500 or $600, starting in 2004 and continuing until she's 60. That's about 25 percent of Beck's $1,991 monthly retirement check.
Beck's husband, R.C., 62, who taught English 32 years at Lakeview and LaBrae schools in Trumbull County, fits into a different age category. As such, he may have to pay $200 a month beginning in 2004 until he turns 65.
Other teachers who retired early will bear a greater burden and pay for a longer time.
Skyrocketing health insurance costs are causing similar problems for businesses and their employees around the Mahoning Valley.
Health premiums jumped more than $1 million last year for RMI Titanium in Weathersfield, which provides health benefits to its 520 hourly and salaried employees plus 600 retirees.
Faced with a dramatic drop in demand for domestic titanium, the company is searching for ways to reduce costs to remain competitive.
Richard Vandegrift, vice president of operations, said the company recently changed its benefit package for salaried employees to reduce RMI's costs. The company didn't provide details on the changes. "Similar changes will be addressed when a new contract covering hourly employees is negotiated later this year," he said.
Employees at the Youngstown-Warren Regional Chamber were already paying 15 percent of their health insurance premiums last summer when the agency's carrier announced a 26.8 percent rate increase.
Officials looked for a better deal without much success, said Dorothy Boggio, human resources manager. The Chamber decided on a compromise: a less-deluxe policy and higher costs for the agency and the employees.
"About 20 percent of the covered employees really grumbled, but the rest accepted it," Boggio said. "There was really little more that we could do."
MVI HomeCare and Hospice Care in Liberty has to balance the higher cost of health insurance against the nursing shortage, said Diane Brookbank, human resources manager.
When its rates went up 20 percent recently, MVI managers shopped around and found a better deal -- just 12 percent higher instead of 20 percent -- but the increase was not passed on to employees.
"The field we're in is so competitive, and we've got to get nurses, so we don't increase our copayments," Brookbank said. "In fact, last year we actually decreased our copayments for family coverage to get more nurses in here."
Niles Iron and Metal, a scrap iron and metals processor, has found a way to cushion the blow of asking employees to share the cost of health insurance. The company participates in a federal program that allows contributions to come out of workers' pay before income taxes are deducted.
The company pays a fee to participate, said vice president Joel Clayman, but the cost is minimal compared to the tax savings it provides employees.
Public sector administrators, too, are looking for ways to pass higher health insurance premium costs on to workers.
Herb Dyer, executive director of STRS of Ohio, confirmed that the money to subsidize retiree health care was predicted to run out by 2008 if there were no changes.
Because of that, Dyer said the STRS Retirement Board has raised the employee contribution from 9.3 percent to 10 percent, the maximum allowed by law. To further bolster the pension fund, the retirement board cut back the allocation to health care.
Dyer said STRS's 2003 cost for a teacher under the age of 65 is $510 a month, an amount expected to go up to $590 a month in 2004.
"I am sure that retired career teachers who spent 30 or more years in the classroom will have to pay more than $150 a month, and it could be more than $200 a month.
"We may ask retired teachers under the age of 60 to pay all of the cost until they reach 60, and we may ask short service teachers [less than 30 years in the classroom] and their spouses to pay all of the premium costs," he continued.
The final terms of retiree health care cost sharing and the extent of the benefits to be covered will be set later in the spring. In the meantime, STRS is having meetings around the state to explain to teachers what is happening, and why.
Teachers aren't the only public sector employees facing higher copays and deductibles, and sharing in paying premium costs of health care.
For example, Trumbull County switched from an open plan, where employees could use any doctor or hospital, to a less expensive and more restrictive managed care plan. The new plan also includes up-front deductibles of $200 for single coverage and $400 for family coverage before its 80-20 percent coverage kicks in, plus $15 copays for office visits and increased prescription copays.
James Keating, Trumbull County's risk manager, said health care costs in general, and prescription drug costs in particular, are a concern. Prescription drug costs were 71/2 percent of total medical costs in 1997. By 2002 the total reached jumped to 20 percent, he said.
Also, Trumbull County employees began in 2002 paying a portion of the health care insurance premium -- 10 percent of the premium, capped at $30 for single coverage and $60 for a family plan. Because Trumbull County is self-insured, there is not a true premium, but Keating said the plan changes helped reduce its costs substantially for both family and single coverage.
Cities take action
Cities are facing similar problems in health care costs, said John Mahoney, deputy director of the Ohio Municipal League. Concern has risen as the cost of health care increased and revenues decreased. The past two or three years, income tax revenues have been flat or negative, and state Local Government Fund moneys have shrunk, Mahoney said.
Part of what cities are doing to counteract this is bargaining for employee copays. Cities also have seen everything from tax increases to service cuts, to tougher negotiations with employees; to cutting travel and training costs. Also, he said, there are a lot of job vacancies that aren't being filled, and there have been some layoffs, especially in Northeast Ohio.
Part of the equation is that public employees have come to expect that their health benefits will be there while they are working and when they retire, even though health care is not mandated by law, as are pensions, said Cheryl Subler, policy analyst for the County Commissioners Association of Ohio.
The Public Employees Retirement System is starting to evaluate what steps can be taken to preserve some level of benefits for employees and retirees, Subler said.