North Carolina Treasurer Dale Folwell warned legislators Friday that the state may be on the hook to pay more than $100 million to retired workers and teachers if a judge’s ruling stands that they were wrongfully required to pay heath insurance premiums.
“It is my duty as North Carolina State Treasurer to call your attention to a matter that may have severe financial and practical implications for the State of North Carolina,” the letter states.
Retired teachers and state employees, including former Chief Justice I. Beverly Lake, filed suit in Gaston County Superior Court in April 2012. The lawsuit became class certified and now exceeds 220,000 retirees, according to Folwell’s letter — all of whom will be entitled to premium-free health insurance for the duration of their retirement, according to a court order also issued last week.
Judge Edwin Wilson Jr. ruled that retirement health benefits are contractual and that the defendants breached that contract when class members began to be charged premiums for standard health insurance in Sept. 2011.
He ordered that they be reimbursed for the premiums they’ve already paid over the years, which grew from $21.62 per month for non-Medicare plans in 2011 to over $105 per month beginning in January.
The State Health Plan provides health care coverage to more than 714,000 teachers, state employees, retirees, current and former lawmakers, state university and community college personnel, and their dependents, according to its website.
The Associated Press reported the 2011 law that required class members to pay premiums was approved to rein in hemorrhaging expenses at the Health Plan. A retiree who still wanted to avoid premiums could get covered under a plan with less-generous benefits, the report states.
The court’s remedy will be on hold until all appeals are exhausted, according to the order.
Folwell said in his letter that the $100 million figure does not include what it would cost for the state to comply with giving retirees benefits moving forward. Folwell estimates that could add billions to the already $42 billion unfunded liability for retiree health coverage, and “would also considerably limit the State’s flexibility to reform the State Health Plan.”
“Should the Plaintiffs ultimately prevail, our current liability could increase dramatically, reaching an unsustainable level in the very near future,” he added.
Folwell says the situation calls for legislative action.