HomeMy WebLinkAboutAgenda - 03-01-2012 - 2 1 ''
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: March 1, 2012
Action Agenda
Item No. o�
SUBJECT: Retirees Health Insurance Overview
DEPARTMENT: Department of Finance and PUBLIC HEARING: (Y/N) No
Administrative Services (DFAS)
ATTACHMENT(S):
1. Summary of Employee Health INFORMATION CONTACT:
Benefits Name, Phone Number
2. Summary of Comparative Retiree Clarence Grier, 919-245-2453
Health Cost and Benefits Katherine Cathey, 919-245-2553
3. Projected Post— Employment Benefit Diane Shepherd, 919-245-2558
Analysis
4. Current Monthly Retiree Health
Insurance Cost
5. Governing Magazine Article
PURPOSE: To provide information and an update on current employee and retiree health care
benefits for FY 2012 and 2013 and to provide feedback to staff regarding options related to
employee and retiree health care benefits.
BACKGROUND: The current Personnel Ordinance (Article IV, Section 28-36) requires the
County to provide health insurance, up to the same cost as active employees, for retirees who
have at least ten years of Orange County service upon retirement. Additionally, employees who
retire at age 65 or older and employees who retire due to disability with more than five years,
but less than ten years of Orange County service, are eligible for the 50% of this benefit.
Health coverage is provided differently depending on the age of the retiree. Retirees who have
not yet reached age 65 remain on the County's group health insurance and are eligible for the
dependent subsidy. In 2008, Commissioners approved a revision to the Personnel Ordinance to
stop subsidizing the cost of retiree dependent health care for employees hired after July 1,
2008. This has not had any noticeable impact on recruitment or on costs to date.
At age 65, retirees enroll in Medicare Part A (no cost to the retiree or County) and Part B
(premium is deducted from the retiree's Social Security benefit), and the County pays for both a
Medicare supplement (Plan F) and Part D. Plan F, is referred to as a "Medigap" plan because it
covers the gaps left by Medicare Parts A and B. Part D is prescription drug coverage. The
County has an arrangement with BlueCross BlueShield of NC (BCBSNC) whereby retirees
enroll in the BCBSNC Plan F and Part D, and the County receives and pays one bill for all
enrolled post-65 retirees. This reduces the administrative burden on the County but increases
the financial burden because there are lower cost providers for Medicare supplements and Part
D. While every Plan F includes the same benefits, Part D plans vary from provider to provider.
2 I
Like every Part D plan, the BCBSNC Part D plan does not cover every medication prescribed for
all retirees.
Medicare has made severai changes in the past few years, as has BCBSNC. Whenever
possible, the County has reduced costs for Plan F and Part D by making administrative changes
that did not affect the post-65 retiree benefits. The average cost of the County's cost for post-65
retiree Medicare coverage is less than half of the cost of the group health insurance individual
premium.
As of February 2012, more than 12% (more than 100 individuals) of current Orange County
employees are eligible to retire. As more baby-boomers retire and live longer, retiree health
insurance will become a greater cost to the County. In 2011, approximately 100 employees
were eligible to retire and receive retiree health insurance, and in 2012, the number of
employees eligible to retire will exceed 120.
Orange County's benefits exceed the average health insurance benefit in North Carolina
in terms of co-pays and deductibles. As a comparison, the following information is included:
• Attachment 1 - Summary of employee health care benefits from other of local
government employers throughout the state.
• Attachment 2 - Summary of Comparative Retirees Health Cost and Liabilities
• Attachment 3 — Projected Post-Employment Benefit Analysis through Fiscal Year 2017
' • Attachment 4 — Current Monthly Retiree Health Insurance Cost
Staff has previously identified a variety of options that lower the cost of employee and retiree
health care. These options were presented at the May 10, 2011 work session. Attached is an
article from GOVERNING that describes the best practices in reducing retiree health costs.
Each option has varying impacts on both retirees and the County.
FINANCIAL IMPACT: There is no financial impact associated with receiving information and
providing feedback on options related to employee and retiree health care.
RECOMMENDATION(S): The Manager recommends that the Board receive information on
employee and retiree health care and provide feedback regarding options related to
employee and retiree health care benefits. The FY 2012-13 proposed budget does not
include any specific changes at this time, but does expect to have to budget projected
increases (up to 15%) in premiums/costs.
We will discuss various approaches to addressing these issues as outlined in the GOVERNING
article. Each has a varying impact. As outlined in the article some of the options may not be
applicable in North Carolina.
Attachment 1 Comparison of Retiree Heaith Benefits � �
(February 2012)
Minimum Years of Service for Full Retiree Health provided for Dependent coverage?
Jurisdiction benefit Pre-65 Post-65
Yes,for retirees hired before 7/1/08.
Yes(Medicare supplement Dependent coverage for pre-7/1/08
Orange County 10 years Yes & Part D) hires ends when either the retiree or
the dependent turns 65.
25 years if hired after 7/1/08; 20
years if hired between 7/1/05- Yes. There is a maximum Yes,through group Yes
Alamance County
6/30/08; and 5 years if hired benefit of$1,000,000. insurance
before 7/1/05.
Yes, retirees(both pre-65 and post-
Yes(Medicare supplement o
Carrboro 20 years Yes 65) pay 100% of cost of dependent
&Part D)
coverage.
Yes, retirees pay 100%of cost of
Cary 25 years Yes Yes dependent coverage.
Yes, retirees pay 100�0 of cost of
Catawba County 30 years Yes NO dependent coverage.
Yes, if hired before
20 years if hired before 6/30/10. 6/30/10. Retiree may
If hired after 6/30/10, Yes,if hired before select either Medicare Yes, retirees pay 100%of cost of
Chapel Hill participation in a Retirement
6/30/10. Supplement& Part D OR dependent coverage
Health Savings Account is may remain on group
mandatory. insurance.
Chatham County 30 years Yes No Data unavailable
20 years if hired before 7/1/08. If Yes, if hired before
hired after 7/1/08, participation in Yes, if hired before 6/30/08. Retirees receive a Data unavailable
Durham, City
a Retirement Health Savings 6/30/08.' reimbursement allowance
Account is mandatory. based on age.
Yes(Medicare supplement Data unavailable
Durham County 20 years Yes and Part D)
w
Attachment 1 Comparison of Retiree Health Benefits
(February 2012)
Minimum Years of Service for Fuil Retiree Health provided for Dependent coverage?
Jurisdiction benefit Pre-65 Post-65
Yes, until either the employee or the
Hillsborough
20 years if hired before 2/9/09,30 Yes No dependent becomes eligible for
years if hired after 2/9/09. Medicare.
30 years at any age or 20 years at Yes Yes(Medicare supplement No
OWASA age 60 & Part D)
Person County 30 years Yes No Data unavailable
Yes, retirees under 65 pay the active
Yes, $100 contributed to a employee rate if hired before 7/1/07.
Raleigh 20 years after 1/1/07 Yes Medicare supplement only, Retirees over 65 may continue
no Part D coverage dependent coverage by paying 100%
of premium.
Randolph County 30 years Yes No Data unavailable
Only if hired before No,COBRA onl Yes, at same rate as active employees
Rowan County 20 years if hired before 1/22/12 1/22/12 y
Union County 20 years Yes Yes No
Yes, if hired before 6/30/11 Data unavailable
Wake County If hired before 5/15/94, 10 years; Yes, if hired before 6/30/11
if hired after 5/16/94, 20 years (group insurance)
.�
Attachment 2 �
Retiree Health Insurance Comparasion
Cost and Liabilities
Required Per
Total Current Annual Retirees & Retirees &
County Unfunded Unfunded Contribution Employees Employee
1 . 2 3 4 1 : 4
Orange $ 62,803,094 $ 19,635,851 $ 5,075,371 1,125 $ 55,824.97
Alamance $ 48,687,657 $ 9,294,210 $ 5,572,582 1,201 $ 40,539.26
Catawba $ 9,569,644 $ 3,999,264 $ 980,056 1,149 $ 8,328.67
Durham $ 92,462,774 $ 30,285,163 $ 7,169,139 2,274 $ 40,660.85
New Hanover $ 78,484,700 $ 18,550,944 $ 6,981,320 1,747 $ 44,925.41
Buncombe $ 67,179,939 $ 3,196,632 $ 6,026,531 1,688 $ 39,798.54
�
Attachment 3
Orange County
OPEB-Post Employment Benefits Analysis(Retirees Health Insurance)
Projected through Fiscal Year 2017
Adding 10 Employees and Retirees Per Year
Assumptions
Total Employees Retirees
2011 Pian Particpants 1,125 858 267
2011 Cost per Plan Particpant $ 5,165,174 $ 3,939,282 $ 1,225,892
$ 4,591 $ 4,591 $ 4,591 (1)and(2) (1)and (2)
Funded Unfunded
Projected Orange County Net Net OPEB OPEB
Year Emplovees Retirees Total Annual Cost Annual Contribution Increase (Decrease) Liabilit Liabilitv
2012 0 10 1135 $ 5,211,091 $ 1,432,004 $ 3,779,087 $ 23,414,938 $ 69,302,704
2013 10 10 1155 $ 5,302,917 $ 1,446,324 $ 3,856,593 $ 23,492,444 $ 73,159,297
2014 10 10 1175 $ 5,394,743 $ 1,460,787 $ 3,933,956 $ 23,569,807 $ 77,093,253
2015 10 10 1195 $ 5,486,569 $ 1,475,395 $ 4,011,174 $ 23,647,025 $ 81,104,427
2016 10 10 1215 $ 5,578,395 $ 1,490,149 $ 4,088,246 $ 23,724,097 $ 85,192,673
2017 10 10 1235 $ 5,670,221 $ 1,505,050 $ 4,165,171 $ 23,801,022 $ 89,357,844
rn
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:tachment4 Monthly Retiree Health Insurance Costs
(February 2012)
Pre-65 Costs # of Retirees
100% coverage $ 80,021 121
50% coverage $ 1,584 5
Total $ 81,604 126
Post-65 Costs
100% coverage $ 36,609 139
50% coverage $ 1 ,120 7
Total $ 37,729 146
Total Monthly Costs All Retirees) $ 119,334 272
Total Annual Cost (All Retirees $ 1,432,004
�Annual Average Per Pre-65 Retiree $ 7,772
Annual Average Per Post-65 Retiree $ 3,101
Annual Average Per Retiree $ 5,265
� Probfem Sofver � PUBLtC MONEY $
Attachment 5
By Girard Mi{!er
Slaying the �P�B Dragan �� � .
Retiree medical costs can be tamed, but it requires effort, � . `_��
,�o' `�� ��
_ �
here's a crisis in retiree health- benefits.IYs only fair that they pa}�part of ' . ��:�
care fitnding, and it continues the costs.If you are freezing salaries,you 'tO'
: a'>1'`
to get u•orse for state and Iacat can;'t ask for much,but a symbolic sliver of ' �--:;. .�:. ,
employers.IYs one thing to pay cost-sharing can be expanded later�vhen '�;�:,:`r;>,Tm�
this year's premiums,but it's even harder the economy gets better. '''`'-'�`�'��-:`�
to come up�vith the money for the future Fund the plan acfuarially.Most pub- ����x
costs of the benefits no�v promised to lic employers�vith massive OPEB liabili- _ �
tociay's employees—not with the costs of ries have not even set up a trust fund to ;' �_ ''
,: .
heatth insurance outpacingstate and local pre-fund the benefits. Tlus ostrich-like :��-. `•
revenues and the general i»fiatian rate. behavior guarantees that the problem _ ;
As other post employr,aent benefits wi31 tvorsen.Eveu if budgets are right,it .
�-
(OPEB)Iiabilities keep piling up,pubIic makes sense to make partial payments -�".
leaders are grasping for solutions. Sev- toward the actuaria�Iy required cont�ibu- �
.. �';:
;'� �' ;::_
eral states have taken action.Some of the tions and then"ramp up"a little each year. : •�t.��t>.,.
` 1�)f`'<`:; ,.ti
moves aze obvious and welt-accepted as Employees can'tbe asked ta contribute if ��r ':�u;:.;; �:s-•�
N"�::..._. u....,...:�=�:
�'W�::;::.<;;rS;;;:��t:a.�
the ne�v norm;others are at the cutting there's no trust fund in place. :�� �tr�;:.:�-:;�':°,�'..--„°;.-��j�,:[�;' _
o fi1��.
ed of inno��ation.Not eve ci or state Iustall a��narro�v nefwOrk"HMO. '`�-�'�` '��;}�.,''-
ge r5` tY �::' ,+� i��� �
a roach is re licable e1se��vliere—state Along tvith higher deductibtes and �!'�=" ,�` '. �� .
Pp p -.��i.�::, ��:sa: 1.. .;
la�vs maypreclude action and some soiu- co-pays,wiuch everybody seems to ;�` ��mry,:;,:.,y_k;_����� -
tionsmightnotbeviableforotherreasons. bedoingthispear,manyemployers �;,;. =::��;m;:�=::;`_::::~::��� �/
'`•��::`,:K>7;; :�t ( �
•;s4�:�..,,:�.
But here's a sumxnary of some of the cur- ha��e also installed a narro�v-net- .,�:.;�;��
ren#approaches to the OPEB ci7sis and ttrork HMO as the primaiy health-care - _.`�%�:�"f` }J
��r�^� :C.�..
how they are«orking out benefit for their employees. Naribw �'3'�-°- : ;
Change the p!an for netv hires.Tke nehvorks exclude high-cost medical ���,�"'���'
easiest long-term reform for retirement praviders and thus cut preznium casts.
benefitsistoreducethemforne�vempiop- Almost half of pri��ate emploSTers ha<<e fessionalassociationat��ardforitsuino��a-
ees.UnforCuuately that�wn't save mucti gone this route,a 200 percent inerease tive solution to sk}xockering OPEB costs.
money for yeaxs to come,but i�'s a start in just a fe�v years.This can then become The big idea:Get out of the business of
t�rrth private-sector emplo3�ers rapidly tl�ebasis far the retirees'OPEB benefit as guaranteeing retiree znedical benefits the
abandoningretiree medicalbenefits,there �vell,�vhich ean etzt costs by 25 percent city car�'t afford,Fiis�the cit3�set up a
is]ittle competitive pressure to xnaintain �in some loca4ions. defined-contribution OP�B plan for ne�v
tradirional OPEB plans.A modest defined Sell bonds to fund one-third o£OPEB employees.Then it sold a bond issue at
contribution plan for retirement health liabitities.Nabod}�cantellforsureivhether 4.5 percent and used the money to fund
savings is usually ali the market requires. the stock market's latest s;�oon ivas a bot a voluntaiy exchange program in tvhich
' Some employers are providing employee- tom,but interest rates are now near their current employees could cash out the
only coverage for ne�v hires. loivest Ievels in a cei�tuiy. That enables actuarial��alue of their previously eazned
Cap the benefi�VVith inedical costs some public employers to sell teaLable OPEB benefits and receive an employee
outstripping general inflation by t�Sro or municipal bands far as much as a third of health savings accou�it plus a package of
three times each year,the biggest move the totai OPEB planliability,aitd im�est the cash and deferred compensation. More
emplopers can make is to put a dollar ceil- money in tlie stock market at depi�essed thazi half of the eligibie employees made
ing un the benefit and index it to the CPI. leveis.For more on this strategy and pit this election,which wiil save the city mil-
This single action has huge actuarial cost- falls m a�roid,see my article,Benefirs Bonds lions o€dollars.It's been so popular that �
redaaingbenefits. Revisite�in the Public Money section on empio3�ees who didn't take the original
Require employee coniributions. Governing.com. deal no�vwantin.G
A�Iost public empiapees, especially the Buy out the benefits.Be��eriy�Iills,
older ones,kno�v the value of their OPEB Cali£,wo�i nationat attenrion and a pra Emait milterg@pfm.com
62 GOVERNING 4 December 2021