House Bill 12-1250 – The End of PERA Care

House Bill 1250 was introduced by Representative Holbert. This bill changes the way the PERA health care trust fund is funded. Currently, employers pay 1.02% of employee salaries into the fund. HB 1250 would change this funding mechanism which would result in the trust fund not being adequately funded and could result in the end of PERA Care.

The coalition opposes this bill.

Read the bill in its entirety here.

In 1985, the Colorado General Assembly determined that retiree health care coverage should be overseen by PERA and the PERA Health Care Trust Fund (HCTF) was created. The HCTF is a pre-funded system that is used to offset the costs of retiree health care for participants in PERACare. Prior to the creation of the HCTF, retiree health care was provided on a pay-as-you-go basis by appropriation in the State budget. The HCTF receives 1.02 percent of the employer statutory contribution. The contributions to the fund are invested over the working careers of public employees and are used to offset the costs of retiree health care for retirees who participate in the PERACare program. The current monthly amounts are up to $230 for those under the age of 65, and up to $115 for those who are age 65 and over.

The PERA Health Care Program is a retiree health care program that was thoughtfully created. Unlike other retiree health care plans in the public and private sectors, the HCTF pays a flat dollar subsidy based on years of service and age of the retiree. This amount does not fluctuate with health care premium costs. The subsidy amount has not been changed for over 12 years and since then, health care costs have doubled. That means that as health care costs have increased, retirees have had to pay more for health insurance which erodes the value of their overall PERA retirement benefit.

 

This bill will deny health care coverage to 42,000 retired public employees and their dependents who currently participate in the PERACare Health Care Program.

  • Those prevented from participation in PERACare will have to try to find health care insurance on their own at substantially increased costs since PERA has the ability to secure attractive group rates for a large retiree population.
  • This bill affects nearly 3,200 retirees age 65 and older who did not qualify for Medicare Part A during their working careers. Additionally, those retirees would be forced to pay a penalty for not enrolling in Medicare Part A when they first became eligible.
  • The current monthly premium for Medicare Part A is $451. The penalty for not enrolling in Medicare Part A upon becoming eligible increases this monthly premium by 10 percent. The higher premium has to be paid for twice the number of years that the person could have had Part A, but did not enroll.
  • This bill cuts benefits that have been promised for over 30 years and on which people rely. This bill impacts the most vulnerable of the PERA retiree population. For example:
    • One retiree over the age of 100 would receive a 20 percent cut to their total benefit. The average retiree who is over 100 would see 6.5 percent reduction to their total benefit.
    • The average 90-100 year old without Medicare Part A coverage would see an average total benefit cut of 16.8 percent. The average 90-100 year old with Medicare coverage would see a 5.2 percent total benefit cut.
  • The genesis behind the 1985 creation of the PERACare Retiree Health Care Program was to take a pay-as-you-go retiree health care program off the State’s budget. The program was funded by a cut in the contribution to the PERA retirement plan and the State saved money. The State never pre-funded the plan and just transferred the unfunded liabilities to PERA.
  • This bill will increase the Medicaid costs for the State by throwing people off the PERACare insurance rolls and by cutting many retirees’ total benefit below the monthly income threshold for eligibility for the Medicaid program.
  • This bill will cut the pre-funded health care insurance subsidy for over 37,000 former public employees over the age of 65. For retirees with Medicare coverage, their total benefit will be cut by an average of 3.5 percent. For retirees without Medicare coverage, their total benefit will be cut by an average of 12 percent.
  • The loss of subsidy for no Medicare Part A retirees costs an average of $482 per month.
  • The loss of subsidy for Medicare eligible retirees costs an average of $107 per month.
  • Many retirees would face increasing premiums since individual coverage premium costs are higher for those who are older and buying coverage outside of a group plan.
  • For retirees who are still able to qualify for PERACare coverage, it is likely the premiums would increase because fewer retirees would be allowed to participate in the PERACare program.