Category Archives: Benefits

Public-Sector Employers Find Alternative Medicine for Retiree Benefit Liabilities

Source: Cathie G. Eitelberg, Government Finance Review, Volume 24, no. 1, February 2008

From the abstract:
Governments have a spectrum of options to consider for managing OPEB liabilities, ranging from full funding of current benefits to benefit redesign or even elimination of benefits. The most important outcome is a strategy that balances cost, workforce management and wellness, and fiscal health.

In OPEB We Trust?

Source: John Ruggini, Government Finance Review, Volume 24, no. 1, February 2008

From the abstract:
One way of managing unfunded retiree health-care liabilities is through a trust. This article details the kinds of trust vehicles available and discusses the advantages, disadvantages, requirements, and implementation considerations of this approach.

Squeezed: How Costs for Insuring Families are Outpacing Income – A State-By-State Analysis

Source: State Health Access Data Assistance Center, University of Minnesota, April 2008

From the summary:
This article reveals how the cost of family health insurance nationwide is increasing dramatically for employees without anywhere near an equivalent increase in family income. If this trend continues, more workers are likely to become uninsured because of the expense.

Key Findings:

  • The amount workers pay for family coverage nationwide has increased by 30 percent from $8,281 in 2001 to $10,728 in 2005.
  • Employee income has increased by only 3 percent in the same time period.
  • The average cost employers pay for their share of family coverage has increased by 28 percent from $6,360 to $8,143.

Seventy-six percent of insured individuals in the United States receive health insurance from their own or a family member’s employer. It follows that the more employees and employers have to pay for that insurance, the more likely workers are to join the ranks of the uninsured. Risa Lavizzo-Mourey, M.D., M.B.A, president and CEO of the Robert Wood Johnson Foundation stated in a press release, “This study makes plain what every working parent knows–that providing insurance coverage takes a bigger bite from the family budget every year.”

Health Savings Accounts: Participation Increased and Was More Common among Individuals with Higher Incomes

Source: U.S. Governmental Accountability Office

The number of individuals participating in HSA-eligible health plans and HSAs increased significantly between 2004 and 2007; however, in all years, many HSA-eligible plan enrollees did not open an HSA. The number of individuals covered by HSA-eligible plans increased significantly between September 2004 and January 2007–from about 438,000 to approximately 4.5 million, according to industry estimates. Despite the growth, these plans represented a small share of individuals with private health coverage–about 2 percent in 2006. The number of tax filers reporting HSA activity also increased, nearly tripling between 2004 and 2005, from about 120,000 to about 355,000. Industry estimates suggest continued growth in HSA participation in 2006 and 2007. Despite the growth in HSA participation, nationally representative survey estimates from 2005, 2006, and 2007 found that more than 40 percent of HSA-eligible health plan enrollees did not open an HSA.

Tax filers who reported HSA activity in 2005 had higher incomes on average than other tax filers. Among tax filers between the ages of 19 and 64, the average AGI for filers reporting HSA activity was about $139,000 compared with about $57,000 for all other filers. The income differences existed across all age groups.

Full report

National Compensation Survey: Employee Benefits in State and Local Governments in the United States, September 2007

Source: Bureau of Labor Statistics

Eighty-nine percent of workers in state and local government had access to employer-sponsored retirement benefits in September 2007. Almost three times as many workers had access to defined benefit plans (83 percent) than to defined contribution plans (29 percent). Nearly all workers (96 percent) who had access to a defined benefit retirement plan chose to participate in it, whereas only 63 percent of workers with access to defined contribution plans chose to enroll in them. (See table 1.)

Eighty-seven percent of workers had access to medical care plans, greater than access to dental care (55 percent) and vision care (38 percent). Over four of five workers with access to a plan participated in the medical, dental, or vision plan offered by their employer. This summary presents information on the incidence and key provisions of these and other employee benefit plans by a variety of worker and establishment characteristics. (See table 5.)

The summary is the first release of data on benefits in state and local government since 1998. The National Compensation Survey (NCS) has been undergoing significant restructuring and changes in its approach to collecting, tabulating, and presenting its data. The NCS will begin publishing benefits data on the civilian economy every year, with separate estimates available for private industry and state and local government and for a variety of employer, employee, and geographic characteristics. Data for March 2008 will be available later this year.

Full report

The Price of Prevention

Source: Josh Goodman, Governing, April 2008

Woody Allen once described death as “a very effective way of cutting down on your expenses.” In the past decade, states all over the country have gone to great lengths to prove that the comedian was not only morbid but wrong. They have embraced the idea that keeping people healthy is both humane and fiscally smart; if the public is healthier, public spending will decrease. And they seem to agree that the way to keep people healthy is to prevent them from getting sick in the first place. They are investing in healthy-diet promotion and anti-smoking campaigns even as they cope with symptoms of diabetes and other chronic illnesses. “We’re trying to drive people to understand that health status is the goal,” says Marcia Nielsen, of the Kansas Health Policy Authority. “You don’t want more medical care and you don’t want more medical insurance, unless they’re a means to an end.”

To some hardheaded scholars and calculating critics, the problem is that, discouraging as it might seem, Woody Allen had a point. A large body of research suggests that preventive care may help people live longer, healthier lives (no small achievement) but doesn’t actually save money. As a result, governments may be forced to come to grips with the notion that, when it comes to health policy, the right thing to do and the thrifty thing to do are very different.

Full article

Who Will Pay the Cost of Government Employer Retiree Health Benefits?

Source: Harvey M. Katz, Labor Law Journal, Spring 2008

Who will pay the cost of government employer retiree health benefits? The short answer to that question is that the union worker will pay the cost in the form o decreased benefits, higher contributions, and/or fewer union jobs–unless they act now. This unequivocal statement may seem a bit extreme, however, thirty years of experience as a benefits attorney tells me that it is true. As explained below, my reasons for making such an extreme statement are sound and the cost of ignoring the impending crisis will be enormous.

Employer Health Insurance Costs and Worker Compensation

Source: Kaiser Family Foundation

Health insurance premiums have increased rapidly over the recent past, growing a cumulative 78 percent between 2001 and 2007 and far outpacing cumulative wage growth of 19 percent over the same period.1 These figures, which have been widely cited to demonstrate the growing burden of health insurance costs on employers and employees, illustrate overall trends in health benefit costs, but they do not show how this growing burden is affecting employers and employees in different settings. To address this issue, this analysis shows employer costs for payroll and health benefits over a six-year period for workers in different occupations and at different establishment sizes.

Our analysis focuses on employer costs for health insurance for workers with access to health benefits. Employer costs for health insurance increased significantly as a percentage of payroll between 1999 and 2005, and varied meaningfully across the workforce when viewed as cost per hour worked or as a percentage of payroll. Employer costs per hour for health insurance were higher for workers in higher wage occupations than for workers in lower wage occupations, but overall employer costs represented a lower percentage of payrolls for workers in high wage occupations than for workers in low wage occupations.

Study of Employee Benefits Trends: Findings from the National Survey of Employers and Employees (6th Annual)

Source: MetLife

The 6th annual MetLife Study of Employee Benefits Trends examines the attitudes of an increasingly diverse workforce toward financial and benefits-related issues. The Study also captures the benefits practices and perspectives of both small and large companies across a wide array of industries. Over a one-month period, MetLife surveyed 1,380 full-time employees and 1,652 benefits decision-makers nationwide about employee benefits and marketplace trends.

This year’s results suggest that U.S. workers are increasingly concerned about their financial prospects. The good news is that they are poised to take a more proactive role in planning for their financial future, and are turning to their employers for help.

This represents a prime opportunity for employers to strengthen employee loyalty and achieve greater employee retention. The Study’s findings suggest several possible courses of action available to employers, which are captured in the conclusion to each section as well as through a new feature toward the end of the Study entitled “What Employers Can Do Today.”

Full report (PDF; 1.3 MB)

Consumer-Directed Health Care

Source: PENNumbra

You won’t hear many health experts claim that the American healthcare system is functioning perfectly in terms of core considerations such as cost, access, and quality. The question that arises with the advent of any new policy approach seeking to improve the system is obvious: Does the change represent a step forward or backward? Professors Kristin Madison, of Penn, and Peter Jacobson, of the University of Michigan, take up this question in regard to the latest innovation in health care policy–consumer-directed healthcare (CDHC).

Professor Madison argues that while CDHC is not a panacea, “[e]ven if its shortcomings prevent its full diffusion through the American health care system, CDHC will still . . . help[] to establish a foundation for future reforms in health care finance and delivery, [and] has the potential to improve the health care system in the long run.” Professor Jacobson’s response? “CDHC is a direct attack on the idea that health care differs from other market commodities because of its moral aspirations . . . . For those who believe that equity should be a fundamental attribute of health care delivery, CDHC represents a huge step backwards.” Nonetheless, Professor Madison is convinced that CDHC will be a lightning rod that stirs the American health care system out of its complacency and “forces us to confront the tradeoffs inherent in any health care system in a resource-constrained world.” Professor Jacobson is not content to wait and see how the American public reacts to CDHC: “If the policy focus is on CDHC, equity will be subordinated. If universal coverage dominates, CDHC proponents are probably right that cost and quality issues will be subordinate. For me, it’s an easy choice–helping those without insurance to have a minimal acceptable level of care.”

Full Debate (PDF; 118 KB)