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Health care for state officials: Is it fair when others go without?

Health care for state officials: No Cadillac plan, but it's at least a Buick
CORBIS/Nigel Sandor

When Minnesota Gov. Tim Pawlenty used a line-item veto and unallotment last year to eliminate $396 million in funding for a state health-care program for the poor, chances are that he wasn't worried about paying for health care for himself or his family.

While in office, the governor does not pay a dime toward his monthly insurance premium. The most he would pay toward a premium for his family is $130 a month. His annual maximum out-of-pocket costs are $1,200 for himself and $2,200 for his family.

But Pawlenty isn't the only elected official enjoying these kinds of health benefits offered under the State Employee Group Insurance Plan (SEGIP). [PDF] Legislators, constitutional officers and state employees also are covered by SEGIP. It's a term of employment.

"The governor has the same plan as a groundskeeper," said Nathan Moracco, director of the Employee Insurance Division of the Minnesota Management & Budget (MMB) department. Only the governor's salary is $120,300 a year vs. a groundskeeper's $11.25-an-hour pay, employee unions point out.

Today, the state Senate is expected to vote on a bill to restore some of the funding that Pawlenty eliminated for the General Assistance Medical Care program, which covers Minnesota's poorest of the poor. A similar bill is working its way through the House of Representatives.

Early this week, Pawlenty, a Republican, said he didn't think much of the DFL-backed joint legislative proposal. "It doesn't look like the thing holds up financially relative to the budget challenges that we face. It doesn't look like it's going to be a complete solution," Pawlenty is quoted as saying in a Pioneer Press story.

Gov. Tim Pawlenty
MinnPost photo by Craig Lassig
Gov. Tim Pawlenty

The administration plans to shift GAMC enrollees to MinnesotaCare, a premium-based insurance program currently serving 118,000 low-income residents. The idea has drawn ire from critics ranging from hospitals that stand to lose millions of dollars in uncompensated care to advocates for the poor who worry that MinnesotaCare's co-pays will be too expensive.

While 480,000 Minnesotans were uninsured in 2009 compared with 374,000 in 2007, according to a state Health Department report, [PDF] Pawlenty and his appointees, the state's constitutional officers, and legislators are among 50,000 state employees and their 70,000 dependents who receive relatively generous health benefits from SEGIP. The state picks up 100 percent of their premiums and 85 percent of their dependents' premiums. And no matter how many family members they have, officials and employees pay no more than $130 a month for their premiums.

Other goodies
Former members of the state Senate and House also get a couple more goodies. A state statute (43A.27, Subdiv. 4, clause C) allows former legislators to continue either single and/or family coverage in SEGIP until they're eligible for Medicare — as long as they pick up 100 percent of the costs. Think of it as COBRA — minus the 18-month limit on benefits and the 5 percent administrative fee.

Legislators also can opt in and out of SEGIP over their lifetimes, and they won't be denied coverage for any pre-existing conditions when they re-enroll.

"In theory, they can come and go as it suits their needs," said Moracco. In other words, it would be possible for former legislators to let their premiums lapse and re-enroll when they or their families are sick.

In practice, no such abuses have been verified despite some rumors, said Rep. Michael Beard, R-Shakopee, who looked into the issue about five years ago at the request of the former Department of Employee Relations (now part of MMB).

State Rep. Michael Beard
State Rep. Michael Beard

Interestingly, elected officials and the administration receive the same health benefits negotiated by the state's two-largest employee unions — the Minnesota Association of Professional Employees (MAPE) and AFSCME Council 5.

That means Pawlenty, his cabinet and legislators have liberal-leaning unions to thank for these benefits.  

But is Pawlenty grateful? Not exactly. In fact, his spokesman indirectly blames the unions for a $1.32 billion benefits program in the current biennium, which is slightly higher than the projected $1.2 billion state deficit.

"They have made a number of demands over the years and decades that are reflected in the state's program," spokesman Brian McClung said in an email. "You should ask them about the history of their demands and the subsequent costs to the state."

The $1.32 billion program, $87 million of which comes from employees' share of the costs, includes medical, dental and benefits like short-term/long-term disability, long-term care coverage and life insurance, Moracco said.

SEGIP, said MAPE executive director Jim Monroe, is "a long way from what certain people call a Cadillac plan." SEGIP enrollees face deductibles, co-pays and out-of-pocket costs depending on which tier of coverage they choose, he explained.

"Over the years, the state employee unions have made a conscious effort to trade wages for health care," said Eliot Seide, executive director of AFSCME Council 5. "In the eight years of the Pawlenty administration, state workers have taken four wage freezes. Additionally, it's the state unions who have offered the most and best ideas for (health) cost savings to the administration. ... The governor has bragged about SEGIP as a model at the National Governors Association and other venues across America. Mr. McClung ought to be aware of what his boss is saying around the country."

Cadillac vs. Buick
Better-than-average health benefits are part of the total compensation package for public sector employees, some of whom are paid less than their private sector counterparts, Moracco notes.

"What the state looks at is, how does the (health) plan compare to other public entities'," Moracco said. "In that vein, ours is pretty similar. When you're looking at private entities, you have to look at what is the total compensation. I think it would be deceiving to look at either aspect — whether salary or insurance benefits [for state employees] — when trying to compare with private enterprises out there."

Another factor is at work in two years of no cost increases in SEGIP premiums, he said. Employees basically are "incented" with lower co-pays if they seek out lower-cost providers. "It’s important to recognize that the state program should cost more than it does," he said. "If we didn’t have this plan design in place, our premiums would be higher or require more cost-sharing from employees."

Beard, who is covered by the state program, agrees with Monroe that SEGIP isn't a Cadillac plan.

A Buick plan, perhaps.
 
"I haven't seen any Cadillac plans around here but they're certainly Buick plans and for sure they're better than what we can do in the private sector," said Beard, who used to own a small publishing business and recalls chafing at annual premium increases.

Minnesota is one of 14 states that pay 100 percent of the monthly premium costs for their state employees, according to the National Council of State Legislatures. The state also picks up 85 percent of the $15,784 annual premium for employees and their families. (Here are highlights from a SEGIP plan [PDF].)

In the private market in Minnesota, employers typically cover 76 percent of the average annual family premium of $13,639, according to the Kaiser Family Foundation's State Health Facts.

A state employee or elected official pays about $1,562 annually toward a family premium, while a private sector worker pays $3,279 on average for a family premium.

Minnesota's average family premium in 2008 also was at the bottom of the heap in affordability, Kaiser found. Only Massachusetts' average annual family premium cost more than Minnesota's.

No question, Minnesota offers a "pretty decent" health plan to employees and elected officials, said Sen. John Marty, a DFL candidate for governor who has been pushing for a single-payer plan to cover all residents.

State Sen. John Marty
State Sen. John Marty

"That's why I want to make it [the Minnesota Health Plan] happen in two years," said Marty, who acknowledges that task will be a tough slog. "It's not just the fact that it's [health insurance] bankrupting people — it's killing people. … It's a moral issue — it's not just an economic issue — because there are no state employees in Minnesota who are going to die for lack of access to health care. There's a lot more at stake. It very clearly colors the way people around here (state government) view the rest of the world — because they don't have the problem. But it makes it all the more urgent."

No pay increases
So, how fair is it that elected officials and state employees receive "Buick" health benefits when health care for the poorest of the poor is at risk, nearly 500,000 Minnesotans are uninsured and countless taxpayers are considered under-insured because of high-deductible plans and rising premiums?

"I have no snappy answer for that one," said state Rep. Jim Abeler, R-Anoka, vice chair of the House Health Care and Human Services Finance Division. "It's a good question. … If we take lawmakers out [of the question] … I can happily argue that all the rest of the employees are entitled to insurance. … State employees have been quite flat on pay, so I'm not the least bit troubled in defending why we give that to them."

State Rep. Jim Abeler
State Rep. Jim Abeler

For that matter, Abeler adds, legislators' base pay of $31,140 hasn't been raised in 10 years although per-diem pay has increased to $77 in the House and $96 in the Senate. Neither has the governor's salary been raised in many years.

Abeler, a chiropractor with six children (three of them still dependents), said he occasionally jokes that he ran for office to get the state dental benefits. [PDF] As a sole practitioner before his election, he bought individual health insurance for his family and paid for dental care out of his pocket. He knows SEGIP is significantly more affordable than plans in the individual market.

"I appreciate the benefit and … it probably helps me" continue to run for office, he said. "My other business has shrunk because I've neglected it" while in office. "I'd have a harder time affording my health benefits. I think the question is: What does it take to attract good people who have real jobs to come here?"

In Marty's view, it isn't "unfair" that employees and legislators receive generous and affordable health benefits. The point, he says, is that "everybody in the state deserves affordable health care."

So, why not just use some of the SEGIP money to bail out the GAMC program? It's not that simple, said Sen. Don Betzold, DFL-Fridley, and chair of the Senate Finance Committee's State Government Budget Division. For one thing, the benefits are locked into a contract with employees.

State Sen. Don Betzold
State Sen. Don Betzold

"If we said, let's raise state employee premiums so we can use the money for GAMC, I suppose legally it can be done but politically it's a nightmare for us because people would say, 'You're raising my premiums to pay for someone else's health care,' " Betzold said.

The bigger issue, he says, is the unwillingness of the governor to raise taxes to balance the state budget and meet its human services demands.
 
"Most of us were shocked when the governor targeted this particular group [GAMC enrollees]," Betzold said. "He says he doesn't want to raise taxes, but the fact is there are people out there that put over $8,000 into their bank accounts every two weeks, and he doesn't see the need to raise or at least restore the same tax rates they paid 10 years ago. They're able to deposit $8,000 every two weeks yet people who make less than $8,000 a year don't need health insurance."

Former Republican legislator Phil Krinkie, now president of the Taxpayers League of Minnesota, claims he likely was the least-expensive legislator while in office because he went to the doctor two times in his 16-year tenure. He is now covered by the plan that his wife, Mary Krinkie, has as a lobbyist for the Minnesota Hospital Association. Interestingly, Mary Krinkie has been a key proponent of the GAMC proposal crafted by DFL legislators.

As one can imagine, husband Krinkie has heard quite a lot about GAMC in the past nine months.

"When I go home at night, I say to her, 'Please, please leave that acronym out of the conversation,' " he quipped. "I don't want it [the importance of the GAMC issue] diminished, but legislators shouldn't lose sight of the forest for the trees. It's important they take care of this issue, but health care for everyone else in the state is also an issue. Why are you providing Cadillac coverage for people making over $100,000 a year while you can't cover the poorest of the poor? It's a very salient point for legislators to grasp; they truly have, in my view, lost perspective here."

'Middle-class welfare'
Krinkie has his own theories about what's breaking the state budget and causing ongoing deficits. "When we look at why we have budget problems, it's not because of the programs that are assisting the poorest of the poor; it's not because of General Assistance Medical Care; it's not because of welfare, or housing or energy assistance.

"That's not what's breaking the budget," he said. "What is breaking the budget is middle-class welfare," including "Cadillac" health benefits for state employees making more than $100,000 a year, he said.

Beard was in the first year of his second term in 2005 when he was asked by the Pawlenty administration to carry a "housekeeping" bill that would end former legislators' ability to remain in the SEGIP program and opt in or out as needed, the latter provision being unavailable to other SEGIP enrollees.

"Apparently there had been allegations that previously retired members were calling up the day before they were going to the hospital and saying, 'Put me on the plan — I'm having a heart attack,' or some dumb thing like that," Beard said. "That was the rumor … although the staff members who actually administer the plan say it never happened."

Beard had no idea initially that he would be heading into a "bipartisan firestorm."

"I was amazed at the phone calls I got from former legislators I didn't even know asking, 'What are you doing? This is the only thing we have left here. Now that we're out of here, we don't have the retirement anymore or anything. The only thing we have left is the ability to buy back into the state employee group insurance plan.' "

The proposal, which was not adopted, would have allowed former legislators to still buy into the program but they had to sign up during the open enrollment period and remain on the plan for a year, he said.

"I was happy to know that at least we didn't blow that thing up for a lot of retired legislators, who had been counting on it in their older years," Beard said. "Apparently, there are a lot of folks that retire from here and go back to farming or solo-practice accounting, insurance or law or whatever, that this is still a reasonable deal for them."

Today, the full Senate looks at a bill to restore GAMC by using surcharges designed to draw more federal reimbursement dollars and by cutting payment rates to some providers. Chances are the legislation will pass the DFL-dominated Senate and House.

The question is whether the legislation will be signed by the governor, and if not, will it survive another override vote. Either way, the governor, legislators and other state employees will still have access to affordable health care.

Casey Selix, who covers health reform and other issues for MinnPost, can be reached at cselix[at]minnpost[dot]com. Follow her on Twitter.

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Comments (12)

So, the governor has state paid full health care coverage, and the bottom of our society has none! Why am I not surprised? What IS surprising is that the average Minnesotan still has not understood how this governor, and this administration has decimated our state in so many vital and traditional ways.

It is a mystery why the lower and middle classes (and even the Tea Party folks) have not caught on to how they are getting screwed. The best quote I have seen on this dynamic was from the BBC"

"It is the French Revolution in reverse -- the workers are pouring out into the streets and shouting "more power to the Aristocracy"!

People really do seem to have a hard time seeing beyond their own personal situation when determining their stance on health care reform.

Whenever I have a conversation with my friends about this topic, those who have great, affordable coverage and no health problems think everything is fine. Those who are unemployed, work for a small company, pay high monthly premiums, and/or have recurring health problems see a great sense of urgency for reform.

I'd imagine this is a similar pattern of thinking for many politicians, and government is notorious for giving its employees very expensive health insurance with little out-of-pocket cost to the employee (thanks to unions).

What would T-Paw's advice be to someone who is severely ill or injured without insurance (or a high-deductible plan) and no money to cover medical costs? Would he tell the person to suck it up? His current strategy seems to be to pass the buck onto hospitals.

Ahhh. Again blame the big bad unions. When unions negotiate, the negotiate an entire compensation package. Some of it goes into salary, some into retirement, some into insurances. It's all accounted for as employee compensation. Do you really think state employees are over-compensated? They know that employer costs for health care insurance are costed against their negotiated package. These are not "free" to employees. It's either more or less in one pocket (i.e. salary), or more or less in the other pocket (i.e. benefits). The entire package is compensation one way or the other.

A correction on some benefits from this state employee. It was implied that the state pays for or shares in the cost of the 'extras' like life insurance, short/long erm disability etc.

The state does pay for the equivalent of yearly salary for term life - anythign else above that is covered by the employee. Long term and short term disability are covered by the employee. m Long term care insurance is covered by the employee.

Thanks to our current health care "system" the situation discribed above is only going to become more pronounced: fewer people will be able to afford more costly insurance and more people will be uninsured. For example, Wellcare's subsidiary in CA just raised its rates 40% because "fewer people are able to buy insurance due the recession and the ones remaining are sicker".

Without fundamentl changes, the whole health care edifice is unsustainable--who will be able to afford healthcare when it consumes 20-25% of our GNP in 2020?

President Pawlenty? If so what will that mean for health care benefits of what used to be the middle class?

Brad,

I don't begrudge unions at all for doing what they do. But a lot of people get paid just as low a salary as government employees (or less) for full time work with fewer benefits. I think people should be able to get good, affordable, health care coverage, union or not.

What's even more upsetting to me is that the State often exempts themselves from new mandates that they require all other plans in MN to include.

People argue that these mandates are too expensive, but they pass them anyway, only too exempt themselves because they are too expensive.

An addendum to my earlier post:

It seems to me that the above discussion is somewhat like trying to decide who gets what chair on the Titanic.

Unless we make some fundamental changes, we're all going down together.

Slate had a good article yesterday where they used confidential health insurance underwriting memos to show how individuals get denied coverage or end up paying extremely high premiums for poor coverage. Basically if you are an individual and have been predisposed to any illness and or pregnant they don't want you. its getting that anyone who has a job with decent health coverage is is rich and middle class as compared to thoses without. By the way Ms. Selix great great article.

So State legislators have good, affordable health insurance, for life, even after they leave office.

Same for members of Congress.

Good for them. And good for their families too.

And yet the rest of us, well not so good for us.

And in the last 2 years over 100,000 fellow Minnesotans (mostly voters, all constituents) lost their health insurance, mostly because they also lost their jobs.

"Minnesotans without health insurance rose from 7.2 percent to 9.1 percent between 2007 and 2009, according to a new survey.

The survey, released Friday by the Minnesota Department of Health and the University of Minnesota School of Public Health, estimated 480,000 Minnesotans were uninsured in 2009, compared with 374,000 in 2007."

I have no problem with unions negotiating agreements to exchange benefits for wages or taking better health insurance as a make-up for frozen wages. I have no problem with unions negotiating for what amounts to retirment benefits under the same conditions.

But for the elected officials at both a State and Federal level - that's a horse of a different color.

Ever wonder if the rest of us would be better off if what was good for the elected goose was good for the voting gander?

I have an idea, lets all run for elected office as candidates of the "I Need Affordable Health Insurance Party".

INAHI. Has a certain ring to it, don't you think?

Simple platform. Simple message. Good party building potential (looks like we have 100,000 new potential members since 2007.)

We could each serve a day then retire with our affordable health insurance as our golden parachute. (Next please. Keep the line moving, we've got about half a million Minnesotans to get through their Senatorships.)

If it's socialism, then get your snout out of the trough. If it constitutes such a dire threat to the free market, then get your snout out of the trough (and while you're at it, repeal the anti-trust exemption for health insurance companies that has helped create highly concentrated markets in over 95% of the US markets.)

If, for whatever reason or excuse you have today, you can't get it done for us, get your snout out - of - the - trough.

http://www.minnpost.com/politicalagenda/2010/02/05/15680/minnesotans_wit...

http://www.health.state.mn.us/divs/hpsc/hep/publications/coverage/2009re...

Well, Phil Krinkie got that half right: What breaks the budget is not programs that ease the plight of the poor. It's "welfare for the middle class," says Krinkie, including Cadillac benefits for state employees making more than $100,000 per year."

What, Phil? Our loss of $1 billion in revenue per year because of our failure to tax the wealthy at rates that at least approximate those paid by the middle class had nothing to do with it?

Quality health care is, and should be recognized in law as, a human right and a component of the common good. John Marty has it right. The anti-taxers have it terribly, terribly wrong.

When Pawlenty said we cannot afford these high health care costs anymore, I knew right away that he should cancel his own participation in the state's generous insurance programs. Pawlenty is right, we can't afford health insurance for him and his family any more. The serpent should pay his own insurance premiums.