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1 Ohio Public Employees Retirement System Preserving OPERS Retiree Health Care for the Future A case study in collaboration between stakeholders.

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Presentation on theme: "1 Ohio Public Employees Retirement System Preserving OPERS Retiree Health Care for the Future A case study in collaboration between stakeholders."— Presentation transcript:

1 1 Ohio Public Employees Retirement System Preserving OPERS Retiree Health Care for the Future A case study in collaboration between stakeholders

2 2 National health care Trends at the time Private sector retiree health coverage is dropping % offered retiree coverage % offered retiree coverage 85% likely to increase cost sharing and retiree contributions 25% likely to terminate health care plans for future retirees Public sector trends at the time 64% of states likely to increase cost sharing and retiree contributions 10% of states likely to terminate health care plans for future retirees Sources: Kaiser/Hewitt 2004 Survey of Retiree Health Benefits and 2003 Kaiser study, “How States are Responding to the Challenge of Financing Health Care for Retirees” Health care crisis – Effects on pension systems

3 3 Minimum Service Requirements Increasing Source: Preliminary estimates from Watson Wyatt Survey of Large Employers’ Retiree Medical Benefits in 2001; 1984 estimates from Jonathan C. Dopkeen, “Postretirement Health Benefits,” Health Services Research (February, 1987) vol. 21.

4 4 What is OPERS’ Position? $0 Contribution No Retiree Medical Access Only Low Level of Coverage Plan Sponsor Contributions Fully Paid Low Level of Coverage Fully Paid 100% Coverage Retiree Pay All 100% Coverage Design OPERS Limited, NCR, Roadway Timken National City Goodyear Cooper Tire AEP STRS Ohio Cal PERS Wisconsin RS Texas TRS Colorado PERA Note: A snapshot in 2003

5 5 How other Ohio pension systems have reacted to this crisis Dramatic reductions in plan coverage levels Significant increases in premium contributions for current and future retirees Increase in years of service required for any coverage from 10 to 15 years Spouse pays full cost of coverage No phase-in of changes Health care crisis – Effects on pension systems

6 6 The OPERS health care crisis Primary causes Health care costs – rising at double digit inflation Baby Boomers – retiree population will double in 20 years Workers are retiring younger Workers are living longer

7 7 The retiree population will double in 20 years, from the current 140,000 to 280,000 by 2023 In just 10 years the retiree population will increase to 225,000. Baby Boomer impact OPERS Health care crisis – primary causes

8 8 Retirees – retiring younger, living longer

9 9 How OPERS benefits are funded Employee Contributions Employer Contributions Pension Fund Pension Benefits Health Care Fund Health Care Benefits The investment “pump” adds and takes away funding through income, gains, and losses Contributions can be diverted to health care only after pension benefits have been funded at the statutory funding level Statutory Funding Level Health Care Target Solvency Level

10 10 Health Care Preservation Plan Key Themes Rising health care costs are a national problem affecting all benefit plans. OPERS makes every effort to minimize increasing costs for members and retirees. Plan changes are balanced and ask all stakeholder groups to share in the solution. Plan tries to avoid significant cost increases for current retirees or near-retirees. Plan design allows maximum flexibility for adjustment if conditions become more favorable We must address the problem now. Doing nothing is not an option

11 11 Health Care Preservation Plan Plan philosophy Employees with less service will pay more for health care than those with more service Those who are retired or near retirement will be less affected by plan changes because they have fewer years to plan and save Retirees may share cost of health care inflation Changes will be phased in over 5 years Certain groups will be “grandfathered” Making changes now will prevent making drastic changes later

12 12 Additional Features of the new plan Annual Board review of benefits and solvency Re-employed retirees – OPERS secondary Establish Retiree Medical Accounts (RMA) Low Income Discount Program Promote health care consumerism Plan design indexing Health Care Preservation Plan

13 13 National Issues on health care OPERS is an advocate for affordable health care coverage. Taking an active role in shaping policies and legislation that affect health care costs. Efforts have already been effective – OPERS had significant influence on Medicare prescription drug benefit application to public systems Additional efforts are underway Public Sector Health Care Roundtable Coalition of public pension systems Pharma Futures Drug reimportation Generic drugs to market faster

14 14 National Issues on health care Currently working on the formation of a coalition called the National Public Sector Health Care Roundtable Includes public sector providers of retiree health care in states such as California, Texas, Michigan, Kentucky and Ohio The purpose of the Roundtable is advocate on critical, high level federal policy and legislative issues from the public sector view The Mission of the Roundtable is to ensure that federal health care policy supports the ability of public employers to continue to provide affordable quality health care to their employees and retirees For more information about the Roundtable or to join the Roundtable, please contact Jim Miller ( address

15 Preserving OPERS Retiree Health Care for the Future A case study in collaboration between stakeholders Marianne Steger, MSLS, CEBS Director of Health Care and Public Policy AFSCME Ohio Council 8 AFL-CIO

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17 Unions’ concern oOPERS is not legally required to provide health care, yet employees had come to rely on the benefit. oPublic Sector unions do not have the legal right to negotiate over retirement benefits. oOther pension systems in Ohio were severely reducing health care benefits or cost shifting.

18 Unions formed a number of coalitions oThe unions that represented employees in OPERS established a labor coalition to examine pension and health care benefits issues oThe coalition included union members who had been elected to the OPERS board and union staff with responsibility for health care, pensions or communications.

19 The Unions with members in OPERS  AFSCME Council 8 (city, county employees)  OCSEA AFSCME (state employees)  OAPSE AFSCME (non-teaching school employees)  SEIU 1199 (state employees)  FOP (county sheriffs)

20 Other Coalitions formed oA broader coalition of all the union folks in all the public pension systems began to form after the OPERS one did. This coalition eventually grew beyond the unions into the Ohio Retiree Health Care Coalition to include the following stakeholders: Key health care staff of the pension systems Representatives from the various stakeholder groups Other public employers, state of Ohio, OSU, county employees

21 Ohio Retiree Health Care Coalition oAll 5 public pension systems in Ohio, plus state, city, county and universities employers oMembers include pension system staff, active employer staff, unions and other groups

22 Purpose of the ORHCC oExplore public policy decisions to provide affordable retiree health care. oReduce retiree health care cost trends through creativity and collaboration. oWork together to shape national health care policy.

23 Goals of the ORHCC oProvide education, best practices and practical solutions to Coalition members. oSeek consensus around policy recommendations.

24 Dilemma for the Unions with regard to addressing health care problem oSome unions thought we should fight and not collaborate. oOPERS hadn’t increased co-pays, deductibles for 15 years. oWe knew if we did nothing the problem would get worse, and since a majority of the OPERS board members were from the unions, it would be getting worse on “their watch.” oThe longer we waited to make changes, the more drastic they would have to be. oMembers wanted the unions to protect their benefits.

25 The Health Care Workgroup established by OPERS oOPERS approach to the workgroup was sincere with regard to its commitment to involve all stakeholders. oOPERS was patient and put a lot of resources into educating this diverse group of participants on the problem. oOPERS listened to our suggestions and adopted a number of them.

26 The Health Care Workgroup cont’d oUnions were at first skeptical about whether this process could work. oWere our suggestions going to be taken seriously? oWas there even a solution we could support? oNonetheless the unions too committed significant resources to this process.

27 First step was to develop a set of Guiding Principles

28 Workgroup Guiding Principles as adopted by the OPERS Board 1.Preserve access to quality health care for all eligible members and their dependents. 2.Commit to a long-term solvency period. 3.Balance health care changes between current and future retirees. 4.Consider career service, membership status and affordability in determining health care premiums. 5.Balance OPERS responsibilities with the personal accountability and consumerism of our members to preserve benefits for the long-term.

29 Workgroup Guiding Principles as adopted by the OPERS Board 6.Manage the program using sound business practices consistent with industry norms and marketplace developments. 7.Review annual program adjustments to keep pace with increasing health care and pharmacy cost trends, which allow for a phased-in approach to benefit changes. 8.Support health and disease management activities that assist benefit recipients and hold vendors accountable for results.

30 Workgroup Guiding Principles as adopted by the OPERS Board 9.Pursue health care public policy changes and related advocacy activities. 10.Maintain affordability of health care for members through multiple plan designs while maximizing group purchasing power. 11.Educate and communicate with all interested parties as early as possible and on ongoing basis about all aspects of the OPERS health care program.

31 The guiding principles were the cornerstone to fostering a cooperative relationship during the process and key to shaping the final outcome of the HCPP. Important Cornerstone

32 Key Factors for the Unions oWhile we agreed enrollees needed to “have some skin in the game” we were opposed to major cost- shifting. oEspecially if all other avenues that could reduce costs were not pursued. oWe felt employees needed time to prepare for these changes. oWe felt the real solution was to work on more global issues.

33 Global issues oUse the rather large purchasing power of all the systems to demand the best price and practices from vendors. oWork on the national level to unite all the public pension systems to work for real reform in the system: Drug price controls Canadian drugs Meaningful health care reform

34 Key to the success — OPERS oOPERS was absolutely committed to working on the global issues, not just cost shifting. oOPERS really stepped up communications to active employees (regional meetings, teleweb, newsletters, survey). oOPERS actively pursued more aggressive vendor relations and collaboration with the other systems and the state for active employees.

35 Key to the success — Unions oThe unions were committed to learning what they needed to learn about this topic and lend their experts to work with the workgroup. oThe unions were prepared to take a leadership role with their members about the need to preserve health care benefits with a reasonable approach.

36 Aftermath oMost people accept that the changes had to be made, even if they didn’t like them. oOPERS continues to hold educational sessions for employees on the changes. oBiggest push back was from folks who had come to the state for only 10 years to get retiree health care benefits. oOhio Health Care Retiree Coalition continued its efforts for a while then stopped

37 Lessons Learned oReally get into the nuts and bolts of it. Solvency period Benefits Comparison Legal rights oUse experts oCommunicate to your members before, during and afterwards, not just at the end. oKnow what all your options are oContinue to work with coalitions

38 Update oWhile OPERS had gotten its solvency up for health care up to 27 years it has dropped considerably in this latest market down turn. oWe continue to reduce benefits (e.g. spouses under 55 no longer get a subsidy towards health care). oOPERS continues to meet with employees around the state to share info and listen. oWe have just revised our disability program with the hope of freeing up more money for retiree health care. oSo the work essentially never stops on this.

39 Questions: ? ? ? ? ? ?


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