Maryland has the power to cut back on expensive health benefits promised to state workers without any legal ramifications, according to the state’s attorneys.The state is analyzing how many health benefits could go on the chopping block as lawmakers search for ways to shrink a ballooning $33 billion in unfunded retirement and health liabilities.
Unlike pension benefits, health benefits are not provided to state employees under a contractual agreement — meaning current benefits, as well as those accrued for retirement, are not set in stone.
“Enrollment in health benefits is optional,” explained Assistant Attorney General Bonnie Kirkland. “There has been no promise by the state for a particular level of benefits for retirees,” she told a commission charged with recommending changes to the pension system.
Maryland’s generous health care plan cost the state roughly $884.6 million in fiscal 2010 and cost employees $237.2 million. The state’s contribution is expected to grow by $159 million next fiscal year — and continue to increase by 8 percent annually through 2015, according to the state Department of Legislative Services.
Maryland pays more into employee health plans than 28 other states — including Virginia — according to the National Conference of State Legislatures.
The state typically pays 95 percent of medical claims for current employees, after premium contributions, co-pays and out-of-network payments are calculated, according to Gabriel Roeder Smith & Co., the state’s benefits actuary.
Other plans similar to Maryland’s cover 83 percent of claims, the company estimated.
The commission studying pension reform is expected to make recommendations on benefits cuts and other structural changes in mid-December. – Hayley Peterson
