DOVER – A working group charged with addressing state retiree healthcare benefits issued a series of recommendations Friday to help ensure that current and future retirees have access to quality healthcare coverage and the trust fund for the benefits is solvent for future generations. 

The General Assembly established the Retiree Healthcare Benefits Advisory Subcommittee (RHBAS) via Senate Bill 29 in January 2023 in response to concerns about retiree healthcare benefits for current and retired state workers and how to address a growing unfunded liability for those benefits. A 2022 attempt to transition from a publicly managed Special Medicfill Supplement Plan to a Delaware-specific Medicare Advantage plan generated strong opposition from state retirees and an ensuing court challenge to the plan by RISE Delaware. 

Chaired by Lt. Governor Bethany Hall-Long, PhD, RN, the subcommittee, comprised of elected and state officials, retirees and state union representatives, met more than 20 times during a nine-month period to collect public testimony and review information about other states’ Medicare supplemental coverage, individual marketplace and Medicare plans, funding options, and actuarial and financial data.  

As a result of those meetings, the subcommittee made more than a dozen recommendations to the governor, the State Employee Benefits Committee and the General Assembly to ensure that current and future retirees have quality healthcare without restricting coverage or eligibility, and to reduce the unfunded liability. Included was a recommendation that Delaware neither request nor consider a Medicare Advantage plan going forward. 

“Delawareans and our millions of annual visitors rely on our dedicated, hard-working professionals who keep our state running every day. They educate our children, keep our streets safe, ensure our parks and beaches are pristine destinations, provide critical healthcare, and connect people with vital services,” said Lt. Governor Hall-Long. “It’s extremely important we maintain a strong, viable healthcare system for our retirees and current workers, while ensuring that Delaware remains an attractive employer by continuing to invest in future workers. 

“During this very public process, our retirees and workers spoke about how they valued the current healthcare benefits on which they rely, and we took that seriously. We also took our fiduciary responsibility to reduce the unfunded OPEB liability seriously. The result is a series of recommendations designed to strike a balance, protecting healthcare benefits for current retirees and addressing long-term sustainability for the healthcare system for current and future workers. 

“I’m extremely grateful to the dedication, hard work and collaborative spirit of our subcommittee members – in particular our vice chairs, Sen. Bryan Townsend and Rep. Paul Baumbach, and union representatives – and for the advocacy of so many state retirees. We owe a special thank you to the Department of Human Resources and State Pension Office, whose technical support was essential to this process. I’m pleased to share this report with the governor and General Assembly and hope these recommendations are enacted.” 

The estimated liability for retiree health care benefits is currently $8.9 billion, of which $8.4 billion is unfunded. The net unfunded liability is expected to grow to $20.7 billion by 2042. Last year, the General Assembly passed Senate Bill 175, which requires that every year, at least 1% of the total of all general fund operating budget appropriations for the prior fiscal year is appropriated to the Other Post Employment (OPEB) Fund. 

As part of their recommendations, the subcommittee leaned more heavily on funding as the most impactful way to achieve greater long-term stability for retiree healthcare and tackle the OPEB liability. Adjusting eligibility and plan design provided only modest liability reduction. 

“The Retiree Healthcare Benefits Advisory Subcommittee’s success in developing recommendations for an affordable, long term healthcare plan for the State of Delaware’s retirees is the direct result of the passion and commitment of our retiree community and the dedicated labor unions who fight for them and our current state workers each and every day,” said RHBAS Co-Vice Chair Senate Majority Leader Bryan Townsend, the prime sponsor of Senate Bill 29, which established the subcommittee. 

“A lot of the credit also goes to Lt. Governor Bethany Hall-Long who led this subcommittee through 20 sometimes contentious public meetings with grace and compassion. Her leadership was instrumental in bringing this subcommittee to a consensus around what I believe is a fair and transparent proposal that I am hopeful will be adopted by the full State Employee Benefits Committee and the General Assembly in the coming months.” 

In addition to its directive that Medicare Advantage not be considered, subcommittee recommendations include: 

• Continue contributing 1% of general fund from the prior year to the OPEB fund. 
• Increase OPEB pre-funding from 0.36% of payroll to 0.5%, then increase by an additional 0.25% of payroll each fiscal year until it reaches 10%. 
• Ensure that current Medicare-eligible and pre-Medicare state retirees and state employees who retire prior to January 1, 2025 will be entitled to Special Medicfill/Rx benefits with no changes to the state share percentage of payments when they are Medicare eligible. 
• Limit changes to plan design, eligibility requirements, or contribution share/percentage to workers hired on or after January 1, 2025. 
• Solicit public comment before the SEBC holds a public vote to adopt the final request for proposal (RFP) for retiree healthcare plans. 
• Research and measure the cost of state-sponsored healthcare benefits for three subgroups: current workers, eligible pensioners who are ineligible for Medicare, and eligible pensioners who are eligible for Medicare. 
• Address the issue of healthcare pricing in Delaware, including statutory, regulatory, and administrative changes in 2024 to bring more transparency, consistency, affordability, and sustainability to healthcare prices and price growth.

“In the last ten months of 2023, the newly established RHBAS met 20 times, and in the process set the standard, and set it high, for public engagement,” said RHBAS Co-Vice Chair Rep. Paul Baumbach. “I am incredibly proud of the dedication and hard work of the members of the subcommittee, the supporting staff, and of the public.

“We worked together to tackle a multi-billion-dollar challenge, and in the process identified multiple steps to resolve this problem over decades, which is appropriate, given that the problem was created over decades. I look forward to the ongoing work of the RHBAS, and I am hopeful that other public bodies adopt some of the public engagement practices pioneered by the RHBAS.”

The subcommittee also recommended modifying the state’s calculation for the portion of the state share for healthcare that the state pays for retirees. The percentage is based on the number of years of service for each retiree. Currently, the state pays 100% of its share for workers who have 20 years or more of service and pay a smaller percentage for workers who have 15-20 of state service.

The subcommittee recommended requiring workers hired on or after January 1, 2025 to serve at least 25 years to receive the 100% state share, with those working 15-25 years receiving a smaller percentage.

The panel recommended that the state change healthcare benefits provided to Medicare-eligible retirees hired on or after January 1, 2025 with two Medicare Supplement Plans available, one similar to Medigap G and one similar to Medigap L.

The full list of recommendations and additional details can be found in the full subcommittee report.

“I am proud to have been a part of this committee and of the work we have accomplished. We took the time to thoroughly dig into the issues and listen to what the public had to say,” said Delaware State Education Association Executive Director Jeff Taschner. “The crucial feedback from public comments guided and informed our work, it allowed us to come up with

recommendations that meet the needs of retirees and address the concerns they raised throughout the process. If adopted, the RHBAS recommendations will address funding issues that seemed insurmountable and will begin the long overdue process of addressing healthcare pricing issues that negatively impact all Delawareans.”

“The subcommittee showed the willingness of all those involved to come together and resolve a difficult situation in a way that maintains and fulfills the state’s commitment to retirees and their obligation to current employees when they retire,” said Delaware Public Employees Council 81 Executive Director Michael Begatto, a subcommittee member representing thousands of state workers. “Retirees and current workers who were concerned should be pleased with the outcome and feel relieved and secure that they will be protected if these recommendations are accepted. I’m grateful that all parties recognized that our state workers who provide so many services to Delawareans deserved this commitment and worked together to find a path forward. I look forward to these recommendations being approved to honor the work of this subcommittee and stand by our dedicated state retirees and employees.”

“Thanks to the leadership exhibited by Lt. Governor Bethany Hall- Long, Sen. Bryan Townsend and Rep. Paul Baumbach, we were able to get to a place where retiree health care is no longer under imminent threat,” said Delaware State Troopers Association legislative agent Bill Oberle, who served on the subcommittee. “I have served on numerous committees during my legislative and post-legislative career. This subcommittee was unique in that our activities were totally inclusive and thoroughly transparent. It should serve as a model moving forward. It is my sincere hope that the governor, members of the General Assembly and members of the SEBC adopt our recommendations in totality. It represents a rare opportunity to be proactive.”

The RHBAS will continue to meet this year to further discuss the issue of retiree healthcare benefits and explore solutions.

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