In 2011, the Maryland State Legislature passed a pension reform bill which made changes to retirement benefits to control state costs. Employees were required to increase their contribution to the pension plan from 5% to 7%, without any increase in monthly allowance in retirement. The legislation created a lower benefit level for employees hired after July 1, 2012. The sixteen years an employee must work to qualify for health benefits in retirement was extended for new hires. The bill also eliminated prescription drug benefits for retirees age 65 or older effective January 1, 2020. The effective date was chosen to coincide with the closure of the “donut hole” in benefit coverage under Medicare Part D as a result of the Affordable Care Act signed into law by President Obama. In February 2018, President Trump signed a spending bill which will close the coverage gap in Medicare Part D prescription drug benefits a year earlier. Therefore, the State of Maryland decided not to offer prescription drug benefits for retirees age 65 or older after December 31, 2018.
The state agreed to extend prescription benefits for all retirees until January 1, 2020, due to a pending injunction by a judge in response to the lawsuit filed by a group of retirees last year. Since no decision has been reached, the state will continue to offer retiree prescription benefits for calendar year 2020.
Senate bill 946 as amended and passed established three different levels of coverage. 1) For those hired prior to July 1, 2011 and retired before January 1, 2020 the bill requires the establishment of a Maryland State Retiree Prescription Drug Coverage Program, which would reimburse retirees for out-of-pocket expenses beyond the current limits, and authorizes the state to increase the out-of-pocket limits for retirees. 2) For those hired prior to July 1, 2011 and retired after January 1, 2019, the bills would also establish a Maryland State Retiree Catastrophic Prescription Drug Assistance Program and a State Retiree Life-sustaining Prescription Drug Assistance Program. Both of these programs would provide reimbursement of out-of-pocket costs to retirees after they enter catastrophic coverage under Medicare Part D, which is $5,100 per individual but is reduced to approximately $2,500 per year due to discounts and rebates Medicare has negotiated with drug manufacturers. 3) For those hired after June 30, 2011, the state will not offer a prescription plan when they reach age 65 after retirement.