Most retired state workers will pay twice as much next month for their life insurance while many current government employees will see their policy costs go down after a Louisiana House committee gave final approval Thursday to a new contract.
The life insurance rates for about 44,000 retirees will increase by 141 percent — from $1.029 per thousand dollars of coverage to $2.48, under the terms of the deal. But state workers still on the job will be paying much less.
The monthly cost for a retiree will rise from $12.86 to $31 for a $25,000 term life insurance policy. For a state worker under the age of 30 that same policy would cost a $1 per month instead $12.86.
Speed was of the essence for state administrators.
After the prices were announced, 1,657 people, mostly retirees, dropped the coverage. But 1,320 working employees added life insurance coverage to their benefits package, according to the Office of Group Benefits.
Because so many of their retired constituents on fixed incomes howled at the increased prices, the House Appropriations Committee members balked last month at approving a new contract that would boost the monthly price for the term life insurance policies. The Senate Finance Committee approved the contract last month.
State officials were closeted behind closed doors Monday trying to find a way to keep monthly life insurance rates from dramatically rising fo…
Commissioner of Administration Jay Dardenne wrote Appropriations Chairman Cameron Henry, R-Metairie, saying if the committee didn’t approve the contract Thursday, the life insurance policies would lapse on Dec. 31.
The state is legally bound to offer life insurance to its employees.
Dardenne watched as the Appropriations committee members asked few questions, made fewer comments and approved the new contract without any member objecting.
Tommy Teague, chief executive officer at the Office of Group Benefits, said the policies will go into effect on Jan. 1. Premiums will be deducted from retiree and employee pay checks.
Prudential Life Insurance Co., which held the contract, lost $4 million a year for the past four years, Teague said. That’s mostly because younger employees didn’t sign up, leaving the elderly as the prime holders of the policies.
It’s easy to dismiss Jane Ellison.
When the contract came up for renewal, the insurer wanted to start linking rates to the ages of the policy holders, rather than the flat monthly fees charged over the years.
The state wasn’t interested in changing the form and accepted bids for a new insurer. But the proposals came in with dramatic increases. The state tried again, asking for for another set of bids, and accepted Prudential’s offer to sell insurance policies with prices graduated to the policyholder's ages, which allowed younger employees to pay less than retirees.
Term life insurance provides death benefits to beneficiaries if the policyholder dies during the time the policy is in force.
For state government retirees, life insurance is only available if they signed up during their working years. The basic policy is for $5,000 but an employee can buy supplemental insurance at a higher price that will pay up to $50,000 at death. When an employee hits 65 years of age, the value of the policy drops by 25 percent. At 70, the value drops another 25 percent.