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States are cutting public retirees' health benefits

Some states have stopped paying for public retirees' health care benefits in response to rising health care costs and squeezed budgets, the Wall Street Journal reports.

By the numbers: There's about a $600 billion gap between what states have promised retirees — mostly in health benefits — and what they have actually saved up, according to government data compiled by Eaton Vance Corp.

The big picture: The decisions are separate from pension benefits. It's easier legally to cut retirees' health care benefits than pensions, which drives some of these decisions.

  • North Carolina will no longer pay workers' health benefits once they retire, starting with new workers hired in 2021.
  • Kansas has asked retirees to pay their entire premiums, which have jumped to as much as $1,000 a month. And Iowa has capped its flagship university's contribution to retirees' health care.
  • When Kansas made these changes beginning in 2017, three-quarters of enrollees dropped out. And the state's retiree health care liability dropped from $6.1 million to $508,000.

My thought bubble: The problem of rising health care costs is even more dire at the federal level, but states — unlike the federal government — must balance their budgets.

Go deeper: There is another pre-existing conditions problem — for seniors