Budget Shortfall Could Trigger Benefit Changes in 2015

NOVEMBER 21, 2014: At its monthly meeting, the state’s Group Insurance Commission discussed a growing concern for the health plan administrators, as well as our Association – a growing multimillion dollar budget shortfall, combined with a downturn in state tax collections. 

This lethal combination was last an issue early in 2010, when, in the aftermath of the financial crisis, a budget shortfall led to some $80 million in GIC copayment & deductible increases that February. Since that time GIC enrollees have witnessed steady out-of-pocket costs and monthly premiums.

As we’ve previously reported, the GIC began Fiscal Year 15 with a structural budget deficit valued at some $50 million. The cause of the deficit is not higher insurance utilization or even medical inflation, but the fact that state appropriations have not kept pace with the increased enrollment in the GIC over the past several years.

“Over the past five years the GIC’s population has grown by 44,303 enrollees. These are municipal retirees and employees, county sheriffs, Turnpike and MBTA,” explains Association Legislative Liaison Shawn Duhamel. “However, the annual budget has not kept up with the increase in GIC membership. Hopefully this issue can be resolved through the supplemental budget process without the need to even think about impacting retirees and survivors with higher costs.”

There are signs that the state’s economic forecast could be improving. Just today, the Department of Revenue released its mid-November tax report showing an increase of $89 million above projections for the first half of November.

However, economists caution that such reports only represent a temporary snapshot of the health of the economy. Budget writers will want to see the results from the second half of November, as well as the full month of December before feeling comfortable that a positive trend has occurred.

“We’ll be working with the GIC, the legislature and the incoming Baker Administration in the months ahead to ensure that retirees are fairly treated,” said President Frank Valeri. “At this time, there is no reason for anyone to panic or assume the worse. But we do need to remain vigilant and make sure that information is being shared before any decisions are made.”