Higher Medical Costs for Retired State Employees in 2027
The recent decisions by the State Health Plan’s Board of Trustees will lead to higher out-of-pocket medical costs for nearly 180,000 retired teachers and state employees next year. Despite efforts to reduce costs for active workers through a new insurance system, their premiums may still rise for the second consecutive year.
Board members and the State Treasurer emphasize that these changes are crucial to addressing a projected $1 billion deficit for 2027 and the overall increase in healthcare costs. The State Health Plan's medical insurance for retirees is managed through Humana and Aetna. Employees retiring before age 65 can remain on Aetna’s 70/30 plan, also available to them through Medicare after 65 if they choose.
Retirees aged 65 or older can select between Humana Medicare Advantage options: a base plan at no cost for those with more than 20 years of service, and an enhanced plan at $81 monthly. Individuals with 5 to 19 years of service pay $68 monthly for the base plan and $145 for the enhanced option. Premiums for retirees' family coverage range up to $204 for the base plan and $435 for the enhanced plan, depending on years of service, with both plans featuring zero deductibles.
Starting in 2027, retirees will face higher expenses for services such as hospitalizations, specialist visits, imaging, and certain medications. Significant changes include a $500 increase in the annual out-of-pocket maximum for the base plan and a $400 increase for the enhanced plan. Additionally, copays for Medicare Part B drugs will be introduced at $50 per treatment session, impacting expensive drugs provided by healthcare professionals. Tom Friedman, the State Health Plan's executive administrator, stated that Part B drug costs contribute significantly to the financial challenges of healthcare for older adults.
The board expects these changes to save $54 million for the State Health Plan. However, the Retired Government Employees Association and the State Employees Association of North Carolina express opposition to the costs. The latter argues that without approved pension cost-of-living adjustments, retirees could face considerable additional annual expenses.
During a recent Board meeting, representatives raised concerns about the financial impact on retirees with fixed incomes. Although state legislative leaders have supported a one-time 2.5% bonus for retirees based on annual allowances, this is criticized for not being a permanent cost-of-living adjustment, absent since 2017. Final details, including dates for open enrollment in 2027, are expected this summer. Employees nearing retirement or already retired are encouraged to consult resources such as their Orbit accounts for comprehensive benefit information.