By Kathryn Watson — Watchdog.org Virginia Bureau
ALEXANDRIA — When it comes to funding health care benefits for retired state employees, Virginia is roughly $5 billion in the hole — a debt that doubled in the three years ending 2010, the most recent year for which numbers are available.
Despite those skyrocketing numbers, lawmakers are unlikely to do anything until after the U.S. Supreme Court decision on the Patient Protection and Affordable Care Act. That ruling is expected this month.
State documents reveal the Commonwealth funded just 23 percent of its retiree health care account in 2010. That number was 26 percent just a year earlier, and nearly 34 percent in 2007, according to studies by the nonprofit research group Pew Center on the States. Despite that abysmal performance, Virginia still outperforms most states.
In 2009, when Virginia was 26 percent funded, the average state was a staggering 5 percent funded, according to the most recent Pew study.
Nationwide, “retiree health benefits were not reported, were hidden, and were things that people were not necessarily aware of,” said David Draine, a senior researcher at Pew Center on the States, which has published two national studies on pension and health care unfunded liabilities since 2010.
Compared with the state’s roughly $17.6 billion unfunded liability for pensions, a $5 billion health-care deficit may seem unimportant. But experts say Virginians have cause for concern.
State officials “basically made false promises to public employees, and then didn’t fund those promises,” said Frank Keegan, public pension expert and editor at Statebudgetsolutions.org, a project of Sunshinereview.org. “So they’re going to be asking Virginia citizens who have seen their benefits cut or have no benefits at all in retirement …. to pay hundreds of thousands of dollars more.”
John Watkins, R-Midlothian, said he and other legislators are aware of underfunded retiree health care, but said they are waiting until after the Supreme Court’s decision on the Affordable Care Act to make a move.
“That will probably dictate in some manner how we handle public employee health care,” Watkins said. “If indeed there’s going to be a minimum benefits level that will be required for Medicaid recipients — recipients of care provided through health care exchange — we’re going to have to take close look at that and probably conform public employee health care to something similar.”
Unlike the state’s contractual obligation to pay for pensions, Virginia has far more “flexibility” to change state retiree health-care benefits, said Watkins.
Keegan said the state could stick retirees with health-care costs or drop benefits altogether.
“Check with the Native Americans on government promises,” said Keegan. “You can get a United States note that says it promises to pay you in gold. So basically, the state can change the rules anytime.”
Retiree health care works as a policy entitlement, in which money isn’t invested as it is in the Virginia Retirement System. Retirees pay the full monthly premiums, said Anne Waring, communications director for the Department of Human Resource Management, which oversees the benefits.
The state’s health care and other post-employment benefit liabilities, as listed in the 2011 CAFR, include a group life insurance fund, retiree health insurance credit fund, a disability insurance trust fund, a line of duty death and disability fund and a pre-Medicare retiree health-care fund.
Pew experts expect to release a new batch of reports on health care and pension liabilities at the end of June, said Draine.
But how could a problem so monstrous escape scrutiny for so long?
“It beats me,” said Keegan.