Commissioner Bridget Gainer - Path to Solvency II, Health Care Spend & Pension Solvency Current Employee Insurance Information
PATHS TO SOLVENCY IIHEALTHCARE SPEND & PENSION SOLVENCY June 19, 2012 Bridget Gainer Cook County Commissioner – Tenth District Chairman, Pension Subcommittee
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
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
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
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.
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%
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.
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.
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%
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