In the event the public employees insurance agency provides the above benefits for retired employees, their spouses and dependents, the public employees insurance agency shall adopt rules and regulations prescribing the conditions under which retired employees may elect to participate in or withdraw from the plan or plans. Any contract or contracts herein provided for shall be secondary to any hospital, surgical, major medical, prescription drug or other health insurance plan administered by the United States department of health and human services to which the retired employee, spouse or dependent may be eligible under any law or regulation of the United States. If an employee, eligible to participate in the public employees insurance agency plans, is also eligible to participate in the state medicaid program, and chooses to do so, then the public employees insurance agency may transfer to the medicaid program funds to pay the required state share of such employee's participation in medicaid except that the amount transferred may not exceed the amount that would be allocated by the agency to subsidize the cost of coverage for the retired employee if he or she were enrolled in the public employee insurance agency's plans.
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