Gov. Gregoire agrees to pay 85 percent of state workers' health-care premiums

OLYMPIA — Gov. Chris Gregoire told state workers for months that they'd have to pay a bigger share of health-care costs — equal to 26 percent of their health-insurance premiums — because of a looming multibillion-dollar budget shortfall.

That all changed when Gregoire's office agreed this week to have workers pay 15 percent of health-care premium costs, with the state picking up the other 85 percent in the next two-year budget. The state currently pays 88 percent of the premium, and state workers pay 12 percent.

Under the tentative agreement, the increase in the workers' share of the premium in 2012 would result in about a $27-a-month increase in costs for the average employee that year, according to the governor's office.

There would be no increase in out-of-pocket costs for workers in the Uniform Medical Plan, which covers more than half of state workers.

"Considering where we started in August, where they wanted our members to go from 12 percent to a 26 percent share of premiums, it was a substantial movement," said Tim Welch, a spokesman for the Washington Federation of State Employees, which represents about 40,000 state workers. "We're glad to have done that, but we're not happy to have our members sacrifice even more."

He noted workers haven't received cost-of-living increases for a couple of years, the Legislature made changes to health benefits last year that forced higher co-pays and deductibles, employees have been laid off and many have had their pay cut through furloughs.

There's likely more to come, given that the state faces a $1.1 billion shortfall in the current fiscal year, which ends in June, and a $5.7 billion gap in the next budget cycle.

"The other shoe hasn't dropped. Next week, we expect the governor to come to the table with proposals for wage cutbacks," Welch said. "When you put it all together in a package, the health-care settlement we got is reasonable."

State Sen. Joe Zarelli, the ranking Republican on the Senate Ways and Means Committee, feels differently. "I think it's not a smart way to do business in terms of controlling costs," he said of the health-care agreement. "I don't know what their thinking is."

The agreement, reached Thursday afternoon, has to be incorporated into the overall union contract, which is still under negotiation, and then ratified by the union. The Legislature also would have to approve funding for the contract.

If the deal goes through as is, the premium changes would take place Jan. 1, 2012, and would likely cover more than 100,000 state employees, both union and nonunion.

The governor's office said the tentative agreement would keep the state's cost to provide employee health care in the next two-year budget at around $1.2 billion, which is what the state expects to spend in the current budget cycle.

"That was our overall goal and we achieved that," said Glenn Kuper, a spokesman for the governor's budget office.

However, Zarelli, R-Ridgefield, noted that health-care costs for the state will actually increase. The governor's office, he said, is planning to draw down two health-care-related reserve accounts to make up the difference.

"This puts those reserve accounts in a very dangerous scenario in terms of the ability to cover unexpected costs," he said.

Kuper agreed that health-care costs are going up, but pointed out that part of the increase — about $55 million — would be covered by the boost in premiums paid by state workers. The rest would come from reserves.

The governor's office did not provide details Friday on how much health-care costs are projected to increase in the next two years. Her office also didn't provide information on the total amount of money that would be taken from the reserve accounts, although they say there would still be enough money to handle unexpected costs.

Kuper said the governor is comfortable with using money from reserves because recent research shows state workers are not using medical services as much as had been forecast.

"If less people are using it, it's less expensive for us to provide the coverage," Kuper said. "The models show usage leveling off, going down and so it's going to be a lot cheaper to provide the coverage than we thought."

In other words, the governor feels it's safe to draw down reserves because there's less of a chance they'll have to be tapped, he said.

Zarelli isn't so sure.

"It's a guess and a gamble. The whole downside is on the back of the taxpayer," he said.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com