FRANKFORT — The Kentucky Chamber of Commerce recommended Monday that state employees and retirees pay more for their health insurance, a move that could shave $188 million from a potential $1.2 billion state budget shortfall over the next two years.
The business group said Kentucky can no longer afford to provide generous health benefits that dwarf what most private workers receive.
The average state worker pays for only 3 percent of his or her health insurance premium, compared to 20 percent for the average private employee in Kentucky, said Dave Adkisson, president and chief executive officer of the chamber.
The total cost to provide health coverage for 258,169 teachers, state employees, state retirees and their dependents is more than $1.2 billion a year — about $607 a month for each of 156,683 state workers and retirees, Adkisson said.
Since 2000, the percent of the state budget going to public employee health coverage has more than doubled — from 6.5 percent to 12.5 percent this year, he said.
Lee Jackson, president of the Kentucky Association of State Employees, immediately blasted the plan.
“We would oppose any attempt to tinker with state workers’ health care benefits,” he said.
Gov. Steve Beshear and legislative leaders voiced appreciation for the chamber’s work but took a wait-and-see approach on the proposal.
“We continue to research options for our own employees, and we always welcome additional input from our citizens,” Beshear said in a statement.
Senate State and Local Government Chairman Damon Thayer, R-Georgetown, said the state “is going to have to look at every option.
“We are not going to raise taxes, so we will have to look at reducing the size of government,” he said.
Thayer’s counterpart in the House, Rep. Mike Cherry, D-Princeton, said he would give the chamber’s plan “careful study … but I can’t say I’m endorsing it.”
Adkisson said in a conference call with reporters that requiring state workers to contribute $50 a month more for health coverage would save the state about $94 million a year.
Such a move would not actually cost employees the full amount of their contribution, he said, because those contributions are exempt from taxes.
Employees would be able to reduce their tax liability by $600 a year, a tax savings of up to $149 a year for an average state worker, Adkisson said.
A summary of the chamber plan also noted the “frequently heard argument” that state workers should get more benefits because they earn less than those in the private sector.
However, the chamber said the average annual salary of state employee was about $38,000 in 2008 — higher than the $36,855 average annual wage for all occupations in the state.
Another cost-cutting solution, Adkisson said, would be to provide employees with a fixed dollar amount indexed for inflation to buy life and health insurance and other fringe benefits.
This would require employees to contribute some additional amount for health coverage, depending on the level of coverage selected. Total savings would depend on the amount of subsidy provided.
Adkisson also suggested incentives to employees who participate in wellness programs.
He noted that Alabama will up its state health insurance premiums from $25 a month to $50 a month next year, but an employee can avoid the increase by participating in a health screening program and, if necessary, a wellness program.
Some states also provide cash awards and vacation time, he said.