States Unsure of How to Fund OPEB Liabilities
July 15, 2009 (PLANSPONSOR.com) - States have
unfunded liabilities for retiree health care of about $558
billion, according to a report from the Center for State and
Local Government Excellence.
Among the states whose actuarial reports the project
examined, North Dakota ($31 million), Wyoming ($72
million), Iowa ($0.2 billion), Oregon ($0.3 billion), Rhode
Island ($0.5 billion), and Oklahoma ($0.8 billion) have the
lowest reported unfunded liabilities. New Jersey ($68.8
billion), New York ($49.7 billion), California ($47.9
billion), North Carolina ($23.8 billion) Connecticut ($21.7
billion), Louisiana ($19.6 billion), and Texas ($17.7
billion) have the highest.
The report,
"At a Crossroads: The Financing and Future of Health
Benefits for State and Local Government Retirees," says
the
substantial variation in unfunded liabilities is a function
of the state workforce, the generosity of the retiree
health plan, and the portion of the total cost of the
program paid for by the state.
The report suggests that states do not yet have a clear
sense of how they are likely to try to finance their
unfunded other post-employment benefit (OPEB) liabilities.
Most use a pay-as-you-go method for funding. Of the
pre-funding methods suggested, the highest percentage of
states (28%) said they are likely to adopt a governmental
trust (Section 115 plan).
Sixty percent of states said they are very unlikely to
borrow from the state's pension plan.
States are currently using cost containment approaches
including hospital inpatient pre-certification (80%) and
disease management programs (84%), and many have turned to
cost sharing. Two-thirds have increased retiree premium
amounts (66%) and dependent premium amounts (68%). Half
have increased retiree deductible amounts (46%) and family
deductible amounts (50%). Two-thirds have also increased
co-payment amounts on prescription drugs.
According to the report, most states still see
themselves as unlikely to undertake drastic action to
curtail or eliminate retiree health care benefits, but 34%
indicated they intend to introduce plans to limit retiree
health care subsidies. Three states said they are "somewhat
likely" to terminate the health care benefits of current
retirees altogether.
The full report can be found
here
.
Rebecca Moore
editors@plansponsor.com