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January 2012 Policy Study, Number 12-1

   

Iowa's Privileged Class: Time for a Change!

    Retiree Health-Care Benefit Issues
   

 

On the retiree health-care benefit side, many states – 19 in FY2009 – have zero funds set aside to fund these benefits. Another seven have only funded 25 percent of their liability.[28] With the continuing growth in health-care expenses, this will be a significant problem for these states and their taxpayers in the future.

 

Only two states, Arizona and Oregon, have over 50 percent of their health-care liabilities funded. Iowa is one of the states, according to the Pew data, which has not set aside funds to pay retiree health-care benefits. Instead, state government has been paying these expenses from current tax funds.

 

As of FY2009, the amount anticipated for health-care expenses of current and future government retirees in Iowa was just over $538 million, or over half a billion dollars.

 

Based on this expectation, the “required” annual contribution for Iowa retiree health-care costs in FY2009 was $56.8 million. This money should have been set aside in reserves, as the IPERS money is, to grow and be available to pay the health-care costs of retirees. In FY2009 only 42 percent of that amount ($56.8 million) was paid in.[29]

 

Retiree health-care costs are a significant liability to future taxpayers, especially as the employee population continues to age and the Baby Boomers retire with high expectations for medical treatment.

 

Most Iowa State government workers do not pay for their health-care insurance. We are one of only six states that pay 100 percent of health-care insurance costs for employees and their families. Approximately 84 percent of state government workers take advantage of this major benefit and pay nothing.[30]

 

According to the 12th annual Iowa “Employer Benefits Study,” done by David P. Lind and Associates, the average amount paid by private-sector workers in Iowa for their family health-care plans is $346.66 per month, up from only $180 a decade ago.[31] The average amount paid by private-sector workers for an “individual only” plan is $70.

 

In contrast, those state government workers who are required to help pay for their individual insurance pay only $14 per month. This is $56 less per month than an average private-sector worker.[32]

   

 

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