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PATHS TO SOLVENCY II

HEALTHCARE 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 are
2011 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 le
2010 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 Proposal
Reduce COLA for Current Employees and Retirees, Increase Employee
Contributions by 1% (County Contributions Increase by 1.54%) and move the
payment of Retiree Healthcare to the County Operating Budget.

            Cook Count Pension Funded Status
100.00%


 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

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

  • 1. PATHS TO SOLVENCY II HEALTHCARE 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 are 2011 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 le 2010 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 Proposal Reduce COLA for Current Employees and Retirees, Increase Employee Contributions by 1% (County Contributions Increase by 1.54%) and move the payment of Retiree Healthcare to the County Operating Budget. Cook Count Pension Funded Status 100.00% 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