Retiree Health Plans in the Public Sector

Retiree Health Plans in the Public Sector

Is There a Funding Crisis?

Robert L. Clark and Melinda Sandler Morrill

While retiree health plans are a dying benefit in the private sector, all US states and many local governments extend health insurance coverage to their retired employees. This book is the first to thoroughly examine public sector health insurance plans. Retiree Health Plans in the Public Sector provides a detailed description of the current plans offered and compares how they vary across states.

Chapter 1: Retirement Benefits in the Public Sector: The Role of Retiree Health Plans

Robert L. Clark and Melinda Sandler Morrill

Subjects: economics and finance, public sector economics, social policy and sociology, ageing


State and local governments must attract and retain quality employees if they are to provide the infrastructure, services, and educational programs that their citizens desire. Attracting capable individuals into public sector jobs requires competitive salaries and benefits. Historically, public employment often was associated with lower annual salaries but more generous employee benefits compared with similar jobs in the private sector. Among the most important benefits offered to public employees and teachers are health insurance and retirement benefits. In general, a larger proportion of public employees are in jobs that offer health insurance for active employees, health insurance for retirees, and pension benefits than are workers in the private sector of the economy. Virtually all full-time state and local workers have access to these important benefits (Bureau of Labor Statistics (BLS), 2009). These benefits often provide a more generous retirement income to workers who remain with their government employer for a full career. Employees who remain in their government jobs for 20 or 30 years are rewarded with relatively large pension benefits, often representing 35 to 75 percent of their final pay, and are typically covered by employerprovided health insurance in retirement. These plans are central to the human resource and compensation strategy for public sector employers. Retirement and health benefits play a major role in enabling state and local governments to attract high quality employees. These benefits increase in value with longer job tenure and help state and local employers to retain these workers. Lower turnover rates reduce turnover costs...

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