- Report Published -
|Study of Establishing a Health Care Plan for Political Subdivision Beneficiaries of the Virginia Retirement System|
|Department of Personnel and Training|
|SJR 66 (Regular Session, 1996)|
|A discussion of retiree health insurance costs must distinguish between early retirees--those not eligible for Medicare--and retirees eligible for Medicare. The reason is that Medicare is the primary payer of health care services for its eligible population. In 1992, Medicare spent an average of $3,391 per enrollee. Any insurance which supplements Medicare pays a relatively small amount.|
An analysis of claims costs, the incidence of morbidity, and actuarial data leads to the conclusion that it is not feasible to offer a health insurance plan with meaningful benefits to early retirees of VRS in the absence of a significant subsidy. A high percentage of Retirees cannot afford the cost of coverage. The Department found no financially sound insurance plan which is the primary payer for a broad range of health benefits for early retirees only.
Subsidies for insurance plans for retirees are virtually always derived from the employer's active employee group. This is illustrated by the state employee health benefits program, where active employees pay higher than necessary premiums in order to provide coverage for early retirees at the same rates active employees pay. (In the case of Medicare, costs are borne by the younger, working population.)