Retiree Health Insurance Review

Keith Dietze and Greg Clayton reviewed changes to the University of Nebraska’s retiree health insurance program that have occurred since 2002.  Several of the key drivers prompting plan modifications included spiraling health care cost, ability to offer affordable heath insurance to faculty, staff, and retirees, and proposed “Other Post-Employment Benefits” (OPEB) rules under GASB.

 Spiraling Health Care Cost

 ·        Late 1990’s and early 2000’s health care cost were increasing at double digit percentages.

·        Group Health Trust operations were losing over $1 million dollars a month as a result of medical, dental, and prescription drug claims exceeding premium revenue.

·        Deficit created a serious financial strain to the health insurance program since the university’s health plan was self funded.

 Ability to Offer Affordable Health Insurance to Faculty, Staff, and Retirees

 ·        Difficulty recruiting new faculty and staff without being able to offer an affordable and competitive health insurance program.

·        Complaints by campus administrators that the health insurance premium was too expensive and not reasonably priced for lower paid employees.

·        Concern with the financial stability of the Group Health Trust Fund due to the number of baby boomers projected to retire in the next several decades and the impact on the retiree subsidy built into the premium structure.

·        Unsustainability of the increasing indirect retiree subsidy contributed by active employees.

 Proposed OPEB Rules

 ·        Proposed GASB rules which required employers to account for “other post employment benefits” (OPEB) including retiree medical, dental, and prescription drug costs. 

·        Posting a liability to the university’s financial statement would significantly impact the bond rating for borrowing funds.

·        The university’s 2004 liability was estimated at $189 million with an annual contribution in excess of $10 million.

 Recommendations and Corresponding Action

 In December 2001, President Dennis Smith appointed a Health Care Advisory Committee to examine the structure of the university’s health insurance plan.  The committee was asked to provide the president with general guiding principles that should be considered in any future redesign of the plan with the goal of continuing to provide employees and retirees with a competitive, responsive, and affordable benefits plan.

 The committee was comprised of representatives from each of the four campuses and a retiree who was participating in the health insurance plan.  Chancellors nominated representatives who were knowledgeable or had expertise in health care.  An actuarial firm also acted as an advisor to the committee.

 UNL had 3 representatives on the committee; Robert Works – College of Law, LaChelle Bailie - Business, and Richard Fleming - Emeriti group.

 After extensive review and discussion, the Health Care Advisory Committee submitted several recommendations to President Smith for his review and consideration.  Two of the recommendations which impacted group health insurance pricing included the following;

 ·        Continue premium and rate setting to reflect both actuarial trends and the experience of the university’s own group.

·        Create separate rating categories for non-Medicare eligible retirees and Medicare eligible retirees vs. the practice of rating retirees and active employees together.

 These recommendations were mailed and distributed to all employees on May 17, 2002.  In addition, employee meetings were held at each campus to discuss the recommendations.  The UNL meeting was held on June 4, 2002.  The changes were also reviewed and discussed at the annual retiree NUFlex meetings held in November 2004, 2005, and 2006.

 In September 2005, President Milliken reconvened the Health Care Advisory Committee to review the various heath care issues facing the university.  The committee again was comprised of representatives from each of the four campuses and technical benefit consultants.  UNL had 2 representatives on the committee; Robert Works – College of Law and Warren Luckner – Actuarial Science.

   The committee made several recommendations including development of a university wide wellness program, expanded disease management program, and continued support of the previous recommendations made by the 2002 Health Care Advisory Committee.

 Other Discussion Topics

 ·        General plan administration

·        History and growth of expenses

·        Rating pools

·        Retiree subsidy

·        Proposed OPEB legislation