FRANKFORT, Ky. (KT) - Kentucky’s financially troubled pension system for state and local government employees got a big shot in the arm to its health insurance plan of over $42 million Tuesday.
Kentucky Retirement Systems reported it will receive a total of $42.8 million from Humana, the Systems’ Medicare Plan administrator, due to a COVID-19 premium credit and a partial refund in recognition of lower-than-expected health care costs KRS members incurred during 2019.
The COVID-19 premium credit will be more than $30.2 million. This credit is part of Humana’s recent effort to support its members during the pandemic.
KRS will also receive an additional payment of $12.6 million, which represents a partial refund of premiums paid by the Systems.
The plan’s retirees have taken advantage of the different wellness programs offered through Humana and are living longer, healthier lives, resulting in lower health care costs for both Humana and the insurance trust, according to the KRS. These cost efficiencies create savings that are shared between KRS and Humana in accordance with the terms of the Systems’ contract with the insurance provider.
“These cost-saving payments of nearly $43 million from Humana represent good news not only for the KRS system but also for the retirees and members who have lessened health care needs through healthier lifestyles and choices,” said Gov. Andy Beshear. “As we continue to fight COVID-19 in the commonwealth, the health of our people and the strength of our health care providers have never been more important.”
David Eager, executive director of Kentucky Retirement Systems, stated, “That money will go into the insurance trust and will make a meaningful improvement in the funded statuses of each insurance fund.”
The financial strength of all five of the Systems’ Insurance Funds continues to improve. As of the June 30, 2019, actuarial valuation, all except the Kentucky Employees Retirement System Nonhazardous Insurance Fund, were at least 70 percent funded while the KERS Hazardous Insurance Fund has a funded ratio of over 100 percent.
The Kentucky Retirement System pension plan itself is one of the worst-funded in the nation with an unfunded liability that reached $60 billion last year.