By Karen Gutierrez, Enquirer staff writer
and Charles Wolfe, The Associated Press

Kentucky Gov. Ernie Fletcher on Tuesday announced new insurance premiums for teachers and other state employees but also a pay raise to soften the blow of increases.

Fletcher, who took office in December, said he "inherited a disastrous, unsustainable mess" in health insurance, compounded by the General Assembly's failure to enact a budget this year.

But he said a sudden surge in tax revenue had enabled the administration to pick up $29 million more of the cost to employees. That would include $9.2 million to subsidize a greater chunk of premiums, especially for singles and for single parents with children.

Fletcher also said state employees, teachers and other school employees scheduled to get a 2 percent raise this fiscal year would get an extra 1 percent Jan. 1. That would cost $19.8 million. Fletcher said the extra money should cover added premium costs for many singles, depending on the coverage they choose.

But the raise didn't reassure Northern Kentucky teachers such as Matt Engel of Lloyd Memorial High School in Erlanger. It won't make up for increases in monthly premiums, deductibles and out-of-pocket expenses, he said.

"I'm distraught. I'm terribly upset. The teachers in our district are irate," said Engel, an English teacher at Lloyd.

Under the 2005 plan, he would have to pay about $513 a month to insure himself, his wife and child if he chose the medium level of coverage. That compares to about $429 a month this year.

In addition, the annual deductible for families would increase from $500 to $800 and out-of-pocket expenses from $2,500 to $4,000.

Family coverage is so expensive that Engel's wife and newborn baby are insured through her workplace, Engel said. The couple had wanted her to be able to stay home with the baby, but now she might have to work just for the insurance.

"I've really got some tough decisions I've got to make," Engel said.

Under Fletcher's plan, premiums for the first time would be based on employee salaries, helping those in the bottom pay grades, and would include discounts for nonsmokers.

The state's health insurance program covers 171,000 state government and school district employees. The state this year offered four types of coverage, including health maintenance organizations in most counties. Coverage in 2005 is to be limited to a single type - a preferred provider organization, or PPO.

There are to be four insurers - Anthem Blue Cross, Bluegrass Family Health, CHA Health and United Healthcare - offering three levels of coverage - "essential," which is basic; preferred and premium.

Deductibles will be higher as will some pharmacy costs and out-of-pocket costs - as high as $4,000 for family coverage at the "preferred" level, up from $2,500 at a comparable PPO plan this year.

Premiums will be higher for some employees next year but lower for others because of how rates varied among insurers.

Premiums for nonsmokers will be $15 a month less for single coverage and $30 a month less than for higher coverages. In addition, the state will pay $200 a year for each employee getting a physical examination.

Frances Steenbergen, president of the Kentucky Education Association, said she was "encouraged" by Fletcher's insurance plan but called it a "Band-Aid" for teachers' health care problems.

"I'll give him an 'A' for effort, but the proposal itself - I'm not sure it would deserve more than a 'C,'" Steenbergen said.