SANTA FE, N.M. (AP) -- More than 30,000 state and local government workers face a 15 percent increase for their health care insurance starting next month, but it could be only the beginning of higher costs as New Mexico's self-insurance program digs out of a financial hole.
There have been no premium increases for workers for the past five years as government struggled with tight budgets. But the fund covering health benefits was projected to be almost $70 million in the red next year if the state did nothing to the insurance program to deal with rising health care costs.
"That's why we had to make these drastic changes to stay solvent," said A. J. Forte, director of the Risk Management Division, which serves as the state's insurance company for health care, unemployment compensation for government workers and for liability claims.
To help stop the financial bleeding, premiums are increasing for workers and governmental employers. Health care plans were revamped to require employees to pay more for medical services. Deductibles more than doubled for some plans, and co-pays increased.
But Forte said another round of premium increases is needed to rebuild cash reserves, which help pay for the insurance program when — like this year — revenues from premiums are projected to fall short of covering expenses of about $340 million.
He's proposed an additional 15 percent premium increase in the fiscal year starting in July 2014, but top officials in Gov. Susana Martinez's administration haven't decided whether to endorse the proposal and include the higher costs in agency budgets that will be recommended to the Legislature next year.
"Anything less will end up flirting with insolvency," said Forte, pointing out that inflation for medical services and prescription drugs adds about $30 million a year to the insurance program's costs.
The state group health plan covers more than 70,000 people — state and local workers and their dependents. Public school employees aren't part of the plan, but some universities, such as New Mexico State University and Highlands University, are included.
For governmental workers, the possibility of another boost in insurance premiums is anything but welcome.
Eric Simon, who works at a state juvenile detention center in Las Cruces, said he hoped to work more overtime to cover rising household expenses, including for medical insurance.
State workers are in line for 1 percent pay raises starting in July — their first since 2008 — but Simon said it's not enough to offset the higher cost of living in recent years.
"The less money we have in our pockets the less money we're going to be able to spend to stimulate the local economy, the state economy," said Simon, president of an American Federation of State, County and Municipal Employees chapter in southern New Mexico.
But for health care, Forte said, most workers pay a small portion of the total premium.
Taxpayers cover 80 percent for workers earning under $50,000 a year, and the employee is responsible for 20 percent. Those workers account for a majority of state employees.
Workers with higher salaries pay more for their insurance, ranging up to 40 percent of the total premium for those with salaries of $60,000 and above.
The state pays an average of $10,667 a year for medical, dental and vision insurance for each of its employees, who can select from several health care plans with varying costs and benefits.
With the premium increase in July, a single employee earning less than $50,000 will pay an extra $5.13 each biweekly pay period — or $133 a year— for the most popular insurance plan, a managed care network by Presbyterian Health Plan. The employee cost will be $39.30 biweekly and the state will contribute $157.18 under the new rates.
There will be a yearly increase of $393 for family coverage for a worker with that salary —$15.11 biweekly. The employee will pay $115.92 biweekly and the state's share is $463.70 under the new premiums in July.
"Our plan is one of the richest plans out there because of the subsidies," Forte said.
Follow Barry Massey at https://twitter.com/bmasseyAP
- Budget, Tax & Economy