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If premiums aren’t increased or benefits reduced, the state employee’s health insurance plan won’t be able to pay its bills by 2012, the plan’s director said today.

Members of the Health Care Commission, the board that approves and oversees design of the State Employee Health Benefit Plan, heard little good news at their meeting Tuesday.

According to projections, the plan will be underfunded by about $70 million, if premiums aren’t increased significantly, plan director Doug Farmer said Tuesday.

The reserve fund for the health plan has been on a roller coaster ride the past few years. In 2007, it had an ending balance of more than $220 million.

In an effort to spend down the reserves, the HCC added benefits, such as annual wellness coaching.

In 2009, the plan spent $104 million more than it took in from revenues, said Secretary of Administration Duane Goossen, the HCC chairman. The former multi-million dollar buffer is gone.

“This hastens the day when we have to make tough decisions,” Goossen said.

Farmer laid out options the commission could choose to balance the fund and assure adequate reserves.

Among those options:

• Eliminate “Plan A,” the plan that covers about 85 percent of the 97,000 people covered in the state plan. Annual savings: $11 million.

• Increase co-payments from $20 to $25. Savings: $1.8 million.

• Increase deductibles from $150 to $300 for individuals and from $300 to $600 for families. Savings: $4.9 million.

Projections show that health care costs will increase by as much as 9.5 percent next year, a departure from the plan’s previous assumption that costs would grow about 6.5 percent over time.

“That was fine when we had a sizeable reserve,” Farmer said. “We no longer have the luxury of using those long-term projections each year.”

In order to be considered “actuarially sound,” the plan must have enough of a balance to cover six weeks of claims, Farmer said. But to be actuarially sound in 2011, if no other changes were made, premiums would need to increase by about 42 percent. They would need to increase by 31 percent in 2012.

According to KHI News Service estimates, that could mean as little as $12.42 less per paycheck for a state employee earning between $28,000 and $48,000 yearly and enrolled for individual coverage in Plan A. But an employee with family coverage could pay up to an additional $266.33 per paycheck.

State agencies pay 95 percent of individual coverage and 55 percent of dependent coverage.

No decisions about the makeup of the 2011 plan were made at Tuesday’s meeting. The group is set to meet again March 15 at the KPERS Boardroom, 611 S. Kansas Ave.