Retiree Health Care Is a Shared Responsibility
A recent editorial by the Journal put a spotlight on the New Mexico Retiree Health Care Authority (NMRHCA). In many ways, the editorial contained important and accurate information about the challenges facing NMRHCA. Unfortunately, however, the editorial provided only half of the picture at best. Reading it, one could come to the conclusion that the benefit retirees receive is provided predominately or even solely on the backs of taxpayers. Nothing could be farther from the truth.
The Legislature created NMRHCA in 1990 in part because “medical care inflation has far exceeded the general inflation rate” and “this phenomenon will continue into the foreseeable future”. NMRHCA was therefore created to “alleviate this burden on the retiree as much as possible”.
The Legislature of 20 years ago turned out to be only too prescient about health care costs. According to the Kaiser Family Foundation, health premiums rose by 114% between 2000 and 2010 while the average pension for an Educational Retirement Board (ERB) retiree rose only 34% (from $14,736 annually in 2000 to $19,782 in 2010).
The Legislature also intended to ensure that retiree health care was a shared responsibility between current and future retirees, an important point that the Journal editorial glossed over.
NMRHCA retirees pay a portion of their salaries to NMRHCA while they are active employees. In most cases this means the average educator has paid into NMRHCA for at least 25 years prior to retiring. The contributions paid by active educators have gone up by nearly 33% over the past three years.
Additionally, retirees covered by NMRHCA shoulder a substantial portion of the costs once they retire. While the benefit is supported by public funds through contributions made by employers (something that is common in the private sector as well), 55% of all NMRHCA revenue comes from active and retired participants.
To provide some perspective, a retired teacher with twenty years of service who is under 65 will pay approximately $594 per month for coverage for themselves and their spouse. This hardly represents a “free” ride.
In addition to the premiums paid by the retirees, there are often significant out-of-pocket expenses associated when they access care. Deductibles range from $300 to $800 for pre-Medicare plans. Retirees must also pay a percentage of costs that can total an additional $3,000 to $4,000. Retirees who are eligible for Medicare are also responsible for paying Medicare’s Part B deductible and additional copayments for prescription drugs.
Active and retired educators understand the significant challenges associated with providing health coverage for a retiree population. As the Journal only grudgingly noted, NMRHCA has made significant efforts to improve the long term financial stability of the program in the last four years. The NMRHCA Board has already made difficult decisions to “scale back” the benefit retirees receive. Deductibles and out-of-pocket costs have been tripled and premiums in some cases have increased by more than 50%. Retired educators have supported these changes because we understand they are necessary to ensure the long term financial viability of NMRHCA not only for ourselves but future retirees as well.
NMAER will continue to support the Board and carry our share of the burden of this important benefit. We hope the Journal will also cover this part of the story as it continues to report on NMRHCA.
Dr. Tomas Salazar, President
New Mexico Association of Educational Retirees.