What happens to retiree’s life, medical insurance program if the Fund goes broke?

If you are a member of the Retirement Fund and have been reading and hearing about the dire condition of the Fund’s future financial stability and the very real possibility of it becoming bankrupt in a few years, then you should already be aware of the future effect on your pension. But there are other related difficulties many members will face that hasn’t been given too much attention.

These serious consequences concern two programs in which many members participate, namely, group medical and health insurance and life insurance, both of which could also be closed down along with pension payments.

Group health and life insurance plans have been sponsored by the government and made available to retirees while recipients of surviving spouse benefits may enroll only in the health insurance plan. Of course, they may enroll in any private plan of their choice assuming the private company will accept them at premiums they can afford to pay.

Retirees should be concerned as to what will happen to the member’s Group Life Insurance coverage when the Retirement Fund goes broke in a few years as many (including myself) believe will occur.

Members who have paid insurance premiums for years will lose coverage unless there is an alternate method for making premium payments other than by way of payroll deductions, which will no longer be possible with a bankrupt Retirement Fund.

The same is true of the present medical and health insurance coverage.

Considering that coverage for both life and medical insurance will probably not be transferable to just any firm of one’s choice or preference—and considering that the years of previous payments will count for nothing when new coverage is arranged by the individual member—I further doubt if any firm with experience will except government issued IOU’s as a promise for future payment even if presumably backed by the full faith and credit of the NMI.

Most people are aware that group coverage is quite a bit less expensive than that arranged by individuals and, in the case of life insurance, the government has been paying half of the cost of a retiree’s insurance premium so one can expect that program will be dropped and the cost of individually purchased life insurance will be more than double what it is now with even much less coverage for the price.

With respect to medical and health insurance—as is always true—the matter of pre-existing illnesses becomes a factor in applying for coverage. This is particularly true for those with existing conditions such as diabetes, high blood pressure, a heart condition, ulcers, tuberculosis, epilepsy, emphysema, kidney problems, cancer, high cholesterol, (LDL), glaucoma, HIV, Lupus Vulgaris, Lytigo and Bodig, Alzheimer’s, Parkinson, Hansen or any one of the numerous unseen ravenous vultures of the air and body that can strike one down with little warning and otherwise be deemed prohibited from medical or life insurance coverage. Seems to me there might be a whole lot of people with one or more of the above conditions.

When the Fund runs out of money to pay pensions those retired government employees who did not have the option of contributing to the national Social Security “safety net” will either be without income or they will need to rely on other sources—but most will probably suffer by experiencing much reduced income. This occurring at a time when inflation will likely be rampant and more severe as the future unfolds.

Section 606 of the Covenant addressed the application of the U.S. Social Security system to the NMI but the government elected to opt out in favor of its own retirement plan. For those who haven’t paid into Social Security, such people will not be eligible for monthly pension payments.

This is not to state that the Social Security System does not apply in the NMI. It certainly does for many in the private sector.

Because the NMI government decided not to participate in the U.S. Social Security system and instead formed its own retirement system, Commonwealth retirees are now particularly vulnerable if conditions in their own retirement program aren’t straightened out—and soon. Under it’s own system, CNMI financial contributions that should have been made to the employee’s retirement program by the central government—but haven’t been—does not bode well for the long-term interests of current retirees as well as those still working and not yet retired.

So when the Fund runs out of money after having cashed in its investments to pay pensions, look for the group medical and life insurance programs to be negatively impacted as well.

I can see where the matter can become a big problem for some people without medical coverage and eventually a problem for CHC—and by extension the U.S. taxpayer.

The Federal Insurance Contribution Act tax (FICA), more commonly referred to as “Social Security,” is paid by both employer and employee on gross income in the amount of 6.2 percent respectively for a total of 12.4 percent. Added to this is the Medicare portion (health and medical coverage) where both the employee and employer each pay an additional 1.45 percent respectively on gross income for a total contribution of 2.9 percent. The total payment for both in 2008 equaled 15.3 percent.

I presume those government employees who do not participate in the Fund’s defined benefit plan or the Fund’s group health and medical insurance plan as well as those who are managing their own retirement in a defined contribution plan are aware of the government’s matching FICA contribution.

[I]Editor’s note: For more information as to why many retirees do not have Medicare coverage see the Saipan Tribune Archives dated Oct. 27 and 28, 2008, for the article[/I] No Social Security ‘Safety Net’ for Many Govt. Retirees As The Legislature ‘Opted Out’ of the U.S. System In Favor of NMI’s Retirement Fund, (Two Parts).

[I]William H. Stewart is an economist, historian, and military cartographer.[/I]