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Health Insurance Changes Could Hit Faculty Hard

By Jennifer Berkshire, FSU Newsletter Editor


A plan to overhaul retiree health insurance for public employees is encountering stiff opposition, including from UMass Boston faculty members who say that the proposed changes will hit them hard. A raft of changes recommended by a special commission that included lawmakers, state and municipal officials, and representatives of the Massachusetts AFL-CIO and a group that represents retired public employees is currently before legislators and had been expected to be voted on by July. But the appetite for swift action on Beacon Hill is waning, says municipal health insurance expert Andrew Powell, who represented public employee unions on the special commission.

“There has been a lot of pushback by public employees who say that the changes penalize people who are currently working,” says Mr. Powell, a field representative for the American Federation of Teachers in Massachusetts. “People are also expressing concern about a substantial turnover of employees as well as the ability to attract new workers to our public universities and other state agencies.”

The changes would include raising the number of years an employee needs to be vested in the retiree health care system from 10 to 20, cutting the state’s contribution to health care premiums for many workers, and raising the eligibility age for health benefits from 55 to 60 for most employees. While the overhaul won’t affect workers who are already retireed, many current employees will be affected.

Jeff Kiesler (Professor, Management Information Systems) says that university faculty in Massachusetts are likely to be hit especially hard by the changes. That’s because professors typically start at UMass Boston at a later age than other educators start in the state system. “A typical tenure track hire, for example, might be around 35 or 40. Some start at UMB later, at 45 or even 50. This is in contrast to state employees in other professions like public school teachers, police, fire fighters, state administrative positions where people might even start right out of college in their early 20s,” says Kiesler. He notes that college level educators tend to require greater educational preparation in addition to, in many cases, professional work experience, post docs, and prior positions at different universities in institutions or even states where years of service would not transfer.

To help FSU members understand just how the proposed overhaul would affect them, Kiesler, who serves as the tenure track grievance officer for the FSU, helpfully prepared the following overview:

Under the current rules, after 10 years of service and at age 50, an employee leaving UMass Boston can retire from UMB and keep their health care coverage at the current rate, with the state covering up to 80% of the insurance payment. So, for example, a person on a family policy might pay $300 per month for a policy with a total cost of $1500 per month, with the university covering the remaining $1200 per month. For Prof. X who retires at age 50 with 10 years service, they could keep this coverage until age 65, at which point they would switch to the coverage that includes Medicare, which might cost a total of $300/month with the employee paying $60/month. So, between now and age 80, this employee would pay $3600 per year x 15 years (through age 65) + $720/year x 15 years, for a total of about $70,000.

Under the new rules, if Prof. X retires as soon as possible at age 60, the state would pay $7500 x 5 years + 1500 x 15 years = $60,000, or less than 1/4 of their obligation under the current rules.  That’s great for the state - $210,000 of “savings” but all at the expense of Prof. X, who may have taken a job at UMB at a lower rate than some alternative in part due to the attraction of the retirement benefits. 

In sum, other than a few employees near retirement today, 1) no one will be able to retire with health benefits earlier than 60, 2) many professors won’t be able to retire with health benefits even at age 65, 3) when many current employees become are future retirees who do qualify for benefits, the state will still be paying a lower fraction while the retiree’s cost could in some cases more than double from current rules above what they pay for health insurance prior to retirement until Medicare, and even when they are receiving Medicare, their supplemental state coverage could more than double in cost.

Powell says that since the proposed changes were announced, legislators have gotten an earful from public employees. “They’re hearing from their constituents that the changes shouldn’t penalize those who are already working.”