What makes our health care so special? So valuable? The answer is lifetime retiree coverage with premiums paid by the employer for both our eligible employees and their eligible dependents. By joining CalPERS Health Care, we can keep our valuable retiree health coverage affordable by significantly reducing retiree premiums while preserving a choice of excellent plans, including a Blue PPO, with no deductibles and minimal co-payments. If we do it now, we can negotiate HRA accounts to help future retirees pay their Medicare Part B premiums. The Demographic Risk in the LACCD Plans Our unique demographics are at the core of our current financial risk: 43% of all members in our health plans are already retirees. Their ranks will increase as the largest age group in our active population retires over the next 10 to 15 years. They all will be retired longer – as life expectancy has increased. Bottom line: before too long, and then for a long time, a minority of full-time actives will likely be supporting a majority of retirees in our plans. How Joining PEMCHA Mitigates Risk CalPERS group is much larger than ours: rather than 7,000 members, they have 1.6 million. Although every employer must agree to retiree coverage, our retirees would make up a much smaller percentage of the whole. CalPERS is also known for its professional team of administrators, health plan partners, and state-of-the-art automation tools, which help keep down costs. For example, CalPERS does not require retiree re-enrollment each year. Instead, retirees are tracked through the retirement systems and deaths are taken off the rolls monthly. Bottom line: LACCD retirees keep outstanding health care – plan choice, no deductibles, no co-insurance, and modest co-payments – with greatly reduced premiums:
The Out-of-Pocket Cost Risk to Retirees in the LACCD Plans The two biggest out-of-pocket cost risks to retirees in both the LACCD and CalPERS plans are Medicare Part B Premiums and Long-Term Care. In both plans, all retirees over 65 must pay their own Medicare Part B premiums. These have become a substantial cost, more than doubling from 2000 to 2009 to $96.40 a Moreover, since 2007, those with higher incomes pay more, e.g. Medicare beneficiaries with incomes above $80,000 ($160,000 for a couple). Their total monthly premium amounts increase as income increases between $134.90 and $308.30 a month. The formula Medicare uses guarantees that future Medicare Part B premiums will continue to increase as long as medical care costs continue to increase. Statistics on long-term care are alarming: 65% of the people over 65 are projected to need long term care; the average facility stay for older folks is about 3 years; 97% of people over age 85 require assistance in the last year of life; and singles are most at risk. The costs are also alarming: by 2018, a private room is projected to cost over $500 a day ($188,000 a year). Neither health plans nor Medicare pays for long-term care. Premiums for long-term care insurance are indexed for the initial age at which one begins to buy coverage. How HRAs Help Mitigate Out-of-Pocket Cost Risk HRAs are plans designed to reimburse employees for qualified out-of-pocket health care expenses with non-taxable dollars. They are funded solely by employer contributions. They take the sting out of increased exposure that members will be liable for on their deductibles and co-insurance. Best of all, district contributions to the HRAs roll over from year to year, and can be accessed even in retirement. Joining CalPERS Also Reduces our GASB Obligation In 2007, we agreed to divert 1.92% of COLA to begin to pre-fund a portion of our retiree health benefit liability (established at $623.2 million by the 2005 Actuarial Study). The money saved through this sacrifice of salary has created an ongoing annual stream of revenue in the district’s OPEB (Other Post Employment Benefits) trust managed by CalPERS. As of the Fall 2008, the balance in the trust was $11,518,103. The actuarial study, conducted every two years, which establishes our retiree health benefit liability uses a statistical calculation to estimate the total amount of the benefit promised. Mortality tables, health care inflation, and health care premiums are all part of the formula. Because the CalPERS premiums for retiree coverage are significantly lower than the LACCD’s (38% for Blue Shield and 25% for Kaiser), joining CalPERS Health Care will significantly decrease our total liability. Lowering our GASB obligation increases the security of our retiree health care. |
CalPERS Makes It More Affordable