Commissioner Bridget Gainer - Path to Solvency II, Health Care Spend & Pension Solvency Current Employee Insurance Information

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  • 1. PATHS TO SOLVENCY IIHEALTHCARE SPEND & PENSION SOLVENCY June 19, 2012 Bridget Gainer Cook County Commissioner – Tenth District Chairman, Pension Subcommittee
  • 2. Cook County Healthcare Spend The annual cost to Cook County 2011 Cook County Healthcare Spend for employee healthcare is 2011 Employee Contribution $13,964 per employee. $13,964 There are 22,960 County employees and 32,454 dependents receiving healthcare for a total cost to the County of $304.4MM. $13,258.00 The average County employee contributes $706.00 annually, or 5.05%, for a total cost to employees of $16.2MM. $706.00
  • 3. Per Employee Healthcare Spend: Public Sectors $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Per Employee Cost US Private Sector $9,792 2011* City of Boston 2009 $11,044 Cook County 2011 $13,964 City of Chicago 2011 $12,000 Philadelphia 2009 $12,594 *National Study, October 2011
  • 4. Employee Contributions Towards Healthcare Spend: Private & Public Sectors 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% E m p loyee Cost S h are2011 Cook Cou n ty 5.05%2011 S tate of IL HM O 11.74%2011 S tate of IL P P O 12.55%2011 Kaiser S tu d y, P u b lic & P rivate; 18.00%S in g le2010 HHS , US P rivate S ector, S in g le 21.80%2012 Hewitt S tu d y, P u b lic & P rivate 22%2010 HHS , US P rivate S ector, F am ily 23%2011 Kaiser S tu d y, P u b lic & P rivate; 28%F am ily
  • 5. Healthcare Exchange & Paths to Pension Solvency Cook County spends $304.4MM on healthcare benefits and $195 million in retirement benefits annually. Thus of the $499.4MM in total employee benefits, 61% goes towards healthcare and 39% to retirement. The introduction of a Healthcare Exchange can reduce the County’s overall healthcare costs and free up revenue for increased contributions to the County pension fund. The County can also incorporate current retirees into a County healthcare exchange and take over the payment of retiree healthcare costs. The transfer of retiree medical costs to the County combined with a reduced COLA for retirees and current employees, plus a 1% increase in employee contributions, will result in a funded status that improves to 88.1% by 2050.
  • 6. Pension Fund and County Healthcare Costs Pension Fund Cook County 7,925 members with 22,960 members with 2,409 dependents 32,454 dependents Total Cost: $46.9m Total Cost: $304.4MM Cost per member under Cost per 65: $16,075 member:$13,964 Cost per member over Avg. EE cont.: $706 65: $7,128 (5.05%), total $16.2MM Retiree Cont: 45-50% Total Healthcare Cost: of premium, total $35.6 $320.6MM Total Healthcare Cost: $82.5MM Total Members: 65,748 Total Cost: $403.1MM Total Cost (less employee/retiree cont.): $351.3MM Pension Funded Status without HC liability in 2011: 62.5% Pension Funded Status without HC, a reduced COLA and a 1% increase in EE contributions in 2050 : 88.1%
  • 7. Structure of Healthcare Exchange Plan All active employees and retirees begin participating in a private healthcare exchange where all participating insurers offer a minimum level of coverage approved through negotiations with employee organizations. The County pays between $10,000-$12,000 in premium costs for active employees:  Active Employees 22,960  $10,000 per employee = $229,600,000  $12,000 per employee = $275,520,000 The County pays between $3,500 and $5,550 in premium costs for all Medicare eligible retirees and $8,500-$10,500 for non-Medicare eligible retirees:  Medicare Eligible Retirees: 5,291  $3,500 per retiree = $18,518,500  $5,500 per retiree = $29,100,500  Non-Medicare Eligible Retirees: 2,422  $8,500 per retiree = $20,587,000  $10,500 per retiree = $25,431,000 The total County spend in a defined contribution medical exchange healthcare system for all current employees and retirees would be $268.7MM to $330.1MM depending on the subsidy amount per member.  A County healthcare exchange can save between $82 to $21 million.
  • 8. Healthcare Exchange and Pension Reform Moving the retiree healthcare obligation from the fund to the County will reduce the pension funds total liability by $1.68 billion. The removal of the retiree healthcare obligation plus a COLA reduction for retirees and current employees to 3% simple or half of CPI and will decrease the overall pension fund liabilities by $2.95 billion. These changes plus a 1% increase in employee contributions and a 1.54% in County contributions will increase the Pension Funded Status to 88.1% by 2050.
  • 9. Pension Reform ProposalReduce COLA for Current Employees and Retirees, Increase EmployeeContributions by 1% (County Contributions Increase by 1.54%) and move thepayment of Retiree Healthcare to the County Operating Budget. Cook Count Pension Funded Status100.00% 80.00% 60.00% COLA reduced for all, 1% EE cont. increase, and transfer of 40.00% retiree healthcare costs to County Do Nothing 20.00% 0.00% 2010 2015 2020 2025 2030 2035 2040 2045 2050-20.00%-40.00%
  • 10. Sources Annual Healthcare Contract as approved by the Cook County Board on September 7, 2011. Additional Healthcare information provided by Lisa Walik, Director of Cook County Risk Management. Pew Center on the States, “Quiet No More: Philadelphia Confronts the Cost of Employee Benefits. June 2009 http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Philadelphia- area_grantmaking/PewBenefits_June2909.pdf Hewitt, “Average Cost of U.S. Health Coverage per Employee”. October 2011 http://ir.aon.com/phoenix.zhtml?c=105697&p=RssLanding_pf&cat=news&id=1612590 Commission on Government Forecasting & Accountability, “Liabilities of the State Employees’ Group Health Insurance Program Fiscal Year 2012.” March 2011 http://www.ilga.gov/commission/cgfa2006/Upload/StateEmployeesInsuranceFY2012.PDF Hewitt Health Value Initiative database HHS; Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends. “Table II.C.3(2010) Percent of total premiums contributed by employees enrolled in single coverage at private-sector establishments that offer health insurance by firm size and State: United States, 2010” http://meps.ahrq.gov/mepsweb/data_stats/summ_tables/insr/state/series_2/2010/tiic3.pdf HHS; Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends. “Table II.D.3(2010) Percent of total premiums contributed by employees enrolled in family coverage at private-sector establishments that offer health insurance by firm size and State: United States, 2010” http://meps.ahrq.gov/mepsweb/data_stats/summ_tables/insr/state/series_2/2010/tiid3.pdf