MSU stops payments for retiree health care

Michigan State University President Lou Anna Simon issued a memo Tuesday announcing that the university will no longer offer health benefits to retired employees, faculty and staff hired after July 1.

Simon says in the memo that the university is facing mounting costs for health care.

The current estimate of this liability for Michigan State University is approximately $1 billion and is expected to double every fifteen years through 2040 if unabated (Attachment A). Similarly, the annual cost of retiree health benefits alone is expected to increase from $31 million today to $140 million by 2040 if unabated. Over time, these expenses will diminish available institutional assets, increasing reliance on annual budget reductions and tuition income. Further, MSU’s access to bond financing for critical projects will diminish. Because of these circumstances, the elimination of post- retirement health benefits for new hires is a necessary economic strategy to maintain stability in MSU’s long-term financial health and to preserve programmatic quality.

This is not the first step MSU has taken to reduce its health care cost crisis. In 2002, the university halted health coverage of dependents of retired support staff hired that year, and in 2005 that idea was applied to faculty hired after the implementation of the new policy.

In defending the decision, administration officials told the State News the move was about reflecting the reality of declining state revenues.

“It’s an increasingly difficult if not impossible expense for us to manage,” [Provost Kim] Wilcox said. “(We’re) trying to be as competitive as we can and be as wise with our management as possible.”