Louisiana legislators will be asked Friday morning to approve doubling the cost of life insurance, starting Jan. 1, for most retired state workers.
But the 141 percent increase — from $1.029 per thousand dollars of coverage to $2.48 — being recommended for about 44,000 retirees is far less than the $9 average increase they were going to have to pay under the rates announced in mid-October.
State workers still on the job will be paying much less — $1 per month for employees younger than 31 for the same $25,000 policy — under the proposal before legislators.
“It’s much improved over the first version,” said Frank L. Jobert Jr., of Retired State Employees Association of Louisiana. “Under the circumstances, I think it’s about the best we’re going to get.”
“Even for those retirees whose rates are going up 100 percent or more, these new rates that they are getting are significantly lower than they could get on the private market,” said Korey Harvey, who chairs the Group Benefits Policy & Planning Board. A deputy commissioner at the state Department of Insurance, Harvey said similar policies would cost about $5 per thousand dollars of coverage.
Term life insurance provides death benefits to beneficiaries if the policyholder dies during the time the policy is in force. The contract expired on Dec. 31.
The contract to provide life insurance policies in 2018 included a sharp increase in premiums. Anxious seniors hit the phones asking legislators, administrators and others just how they could pay $90 more per month on their fixed incomes.
About 200 cancelled their policies beginning Jan. 1 and about 600 others downgraded to a cheaper policy.
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 on Nov. 3 rejected that initial rate increase proposal and ordered new bids be gathered.
Four companies proposed different rate structures and the Group Benefits Policy & Planning Board on Thursday chose one submitted by Prudential Financial, which holds the current contract.
If one of the legislative money panels doesn’t approve the rate increase Friday, “there’s a real risk of these policies lapsing,” Harvey said.
The state is required to offer life insurance to its employees and the Division of Administration needs some time to set up withdrawing the payments from employee checks and retiree pensions. “You can’t deduct money from people’s checks without a contract,” he said.
Should the House Appropriations and Senate Finance committees approve the new rates Friday, the Office of Group Benefits will extend the deadline for employees to sign or make changes to their life insurance policies. Even those who cancelled or reduced their coverage will have the opportunity to change their minds.
For a retiree over the age of 65, the original proposal would have cost $226 per month for a $25,000 policy. Since the state pays half, an elderly retiree’s monthly bill would have gone from $12.86 to $113.
Under the proposal being presented to the Legislature Friday, the monthly cost for a retiree would rise to $31 under the same scenario. For a state worker under the age of 30 that same policy would cost a $1 per month.
Tommy Teague, the chief executive officer for the Office of Group Benefits, said few companies were interested in selling the policies at the same flat rate that hasn’t changed in years. OGB oversees insurance for state workers, teachers and other government employees.
The reason for the reluctance, Teague said, is that insurance companies generally cover their costs by selling more policies to customers less likely to use the insurance than to those who do.
“We’re exactly opposite,” Teague told The Advocate Thursday. About twice as many elderly retirees bought the life insurance policies than active state workers.
Prudential has lost $16 million over the past four years because of Louisiana’s upside down demographics, he said.
The monthly premiums for health care coverage are not increasing for 2018 – just life insurance.