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F I S C A L I M P A C T R E P O R T

SPONSOR Grubesic

ORIGINAL DATE

LAST UPDATED

1/29/07

HB

SHORT TITLE Amending the Retiree Health Care Act

SB 502

ANALYST Propst

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total $1,012.0 $3,400.0 $3,808.0 $8,220.0 Recurring RHCA

Benefit

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Retiree Health Care Authority (RHCA)

SUMMARY

Synopsis of Bill

Senate Bill 502 amends the Retiree Health Care Act to include domestic partners and surviving

domestic partners as individuals eligible to participate in the provision of health care coverage

provided for retirees of certain public participating employers, their spouses and dependents.

FISCAL IMPLICATIONS

RHCA calculated the estimated additional net cost to RHCA in extending health care coverage to

domestic partners base on the actual number of domestic partners currently receiving health care

benefits through the Risk Management Division (5.03% of the lives covered). The FY07 net

cost to RHCA was used for the FY07 estimate, assuming four months of FY07 would receive the

same number of domestic partners as participants. For FY08 and FY09, a 10% increase in health

care cost was used with a 2% increase in the number of domestic partners covered (given that

there is no historical data on this population). This assumes RHCA will succeed in achieving a

certain degree of cost containment over the next several years. Based on budgeted FY08 claims

cost of $184,000.0, this $3,000.0 increase would result in an additional 1.8% in claims dollar

paid out by RHCA.

Senate Bill 502 – Page

2

The chart below is the calculation for providing health care coverage to the domestic partners of

employees at Risk Management Division that are currently receiving their health care coverage

through RMD. The costs used are the net cost incurred by RHCA for non-Medicare and

Medicare spouse participants in FY06.

Depending on the growth in number of domestic partners covered, an additional Customer

Service Representative may become necessary to accommodate the members. The approximate

cost of an additional CSR, including benefits, would be $33.7 per year. This amount was not

included in the table below or in the operating budget impact above.

Domestic Partner Estimate

Assuming NMRHCA allows domestic partner coverage for same retiree contribution as

spouse(1)

State RMD Domestic Partner coverage rate

5.03%

Count

Assumed

Participation

Domestic

Partners

RHCA Spousal

Cost Per Month

FY07

Projected

Annual Cost

Pre-Medicare Retirees 9,902

5.03%

498

$294.19 $1,758,079.00

Post-Medicare Retirees 16,490

5.03%

829

$128.41

$1,277,423.00

Total

26,392

1,327

$3,035,502.00

(1) If the domestic partner paid the full spousal premium for coverage with no contribution

from

NMRHCA the cost would be reduced, but not eliminated unless the spouse rates were

recalculated

to cover the full experience rates of spouses.

SIGNIFICANT ISSUES

According to RHCA, it is unclear at this time whether or not the 2% per annum growth in the

number of domestic partners assumed to receive health care benefits through the RHCA is too

conservative. If it were a higher rate of growth, it would negatively impact the increase in

expenditure for the RHCA.

ADMINISTRATIVE IMPLICATIONS

RHCA notes that, under the current Retiree Health Care Act, if a retiree becomes divorced from

a spouse, there is a divorce decree that is filed and it states that the spouse becomes ineligible for

health care coverage. Currently, there is no formal legal process for the dissolution of a domestic

partnership. The question remains as to whether the RHCA would be at risk for continuing to

provide health care coverage to individuals that are no longer the domestic partner of an eligible

retiree.

POSSIBLE QUESTIONS

1.

How does GSD handle the issue of dissolution of a domestic partnership and its impact

on beneficiaries’ eligibility.

WEP/mt