Source: Fitch Ratings, March 22, 2007
As the first deadline for implementation of Governmental Accounting Standards Board Statement No. 45 (GASB 45) approaches, Fitch Ratings has further developed its thinking on the credit implications for state and local governments of providing long-term funding for other post-employment benefits (OPEB). This report follows up on Fitch Research in June 2005 titled “The Not So Golden Years (Credit Implications of GASB 45)” (available on Fitch’s web site at www.fitchratings.com). It focuses on how the various approaches to managing and funding the liability will affect Fitch’s credit analysis, rather than on meeting the reporting deadlines set forth by GASB 45, as Fitch expects such compliance from issuers it rates. Failure to comply will be considered a weak management practice. This report also examines several governments that have taken prudent actions related to OPEB.
Source: Alan Zilberman, Bureau of Labor Statistics, November 29, 2006
The Bureau of Labor Statistics (BLS) recently reported that 6 percent of private industry workers have access to a health savings account (HSA), a relatively new kind of employer-provided health benefit. These data were published in the summary National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2006. Data on HSAs currently are available for 2005 and 2006. BLS plans to continue to collect HSA data on workers in private nonagricultural industries.
Source: Marilyn Werber Serafini, National Journal, Vol. 39 no. 11, March 17, 2007
The ink was barely dry on then-Gov. Mitt Romney’s bold new plan to achieve nearly universal health coverage for Massachusetts residents when Vermont Gov. James H. Douglas signed similar legislation into law last year. “We have a goal of 96 percent coverage within the next three years, and I think we can do that,” Douglas recently boasted to National Journal. “We’re going to be quite aggressive with enrollment.”
Other state officials had been closely watching this pair of Republican governors as they steered away from the safe political path to push plans requiring employers to either offer their employees health insurance or pay a compensating fee to the state. The Massachusetts Legislature went a controversial step further when it decided to require all residents to certify on their state income tax forms that they had health insurance — or face a penalty. Before Massachusetts and Vermont took the plunge, most politicians had spoken only in muffled tones about health care mandates, fearful of a backlash from constituents — voting constituents.
Source: Hewitt Associates: Frank McArdle, Amy Atchison, and Dale Yamamoto, Kaiser Family Foundation: Michelle Kitchman Strollo and Tricia Neuman, Findings from the Kaiser/Hewitt 2006 Survey on Retiree Health Benefits, December 2006
Employers continue to play an important role in providing health insurance coverage for pre-65 and age 65+ (Medicare-eligible) retirees. Employer-sponsored plans help bridge the gap in coverage for workers and spouses who retire before they turn age 65 and are eligible for Medicare. Today, an estimated 3.8 million early retirees (ages 55 to 64) and dependents receive health coverage from an employer or union. Without these benefits, early retirees often face significant challenges finding affordable coverage in the individual market, leading some to return to the workforce to gain access to health insurance. Employer plans also provide highly-valued supplemental benefits to more than 12 million retirees now on Medicare. For retirees on Medicare, employer plans remain an important source of prescription drug coverage, and provide additional cost-sharing protections, including limits on retirees’ out-of-pocket expenses.
Source: Craig Palosky, Larry Levitt, and Maurissa Kanter, Kaiser Family Foundation, Wednesday, December 13, 2006
Out-of-Pocket Costs for Retirees Continue to Rise for Employer Health Coverage
About One in 10 Firms Eliminate Retiree Health Benefits for Future Retirees
As the new Medicare drug benefit nears its second year, nearly eight in 10 large employers expect to continue to offer drug coverage to their retirees and accept subsidies from the federal government to offset some of those costs, according to a new survey of 302 large private-sector employers conducted by the Kaiser Family Foundation and Hewitt Associates.
Source: Joshua Joseph, David J. Group, Berenice Eberhart, Robert Combs, Daily Labor Report, BNA, no. 25, Wednesday, February 7, 2007
BNA’s 2007 survey on employer bargaining objectives is based on survey responses from 105 participating employers with contracts expiring in 2007 and covers wage adjustments and other pay provisions, insurance and health benefits, pension and retirement plans, paid leave, other benefits and services, and job security.
Source: Marie Gottschlak, New Labor Forum, Vol. 16 no. 1, Winter 2007
Today, health benefits are once again a major arena of labor-management strife. And once again universal calls for universal health care by labor leaders mask important differences between them over health care reform. Some labor leaders are advocating a bottom-up mobilization in support of a single-payer solution that would dismantle the system of job based benefits based on private insurance. Others are staking their health care strategy on wooing key business leaders to become constructive partners in some kind of unspecified comprehensive reform of the health system.
Source: Thom Reilly, Shaun Schoener, and Alice Bolin, Review of Public Personnel Administration, Vol. 27 no. 1, March 2007
The purpose of this study was to examine local government compensation practices across the United States and to explore possible correlations of these practices to service delivery. One hundred twenty of the largest cities and counties responded to a mail survey, for a response rate of 40%. The data suggest a large percentage (86%) of local governments faced financial difficulties in the form of a budget shortfall since 2000. In response to these shortfalls, local governments were more likely to reduce their workforce, reduce or eliminate services, and/or raise taxes or user fees rather than scale back wages and benefits. Because of this reaction, more than one half of the respondents experienced a decrease in full-time equivalent employment per 1,000 residents. Collective bargaining status, geographical region, and type of government (county or city) were found to be significant factors in determining compensation practices. Implications for practice and policy are advanced.
Source: Christopher G. Reddick and Jerrell D. Coggburn, Review of Public Personnel Administration, Vol. 27 no. 1, March 2007
Employer-sponsored health benefits are an important but relatively understudied area in public sector human resource management. This study examines the choices that state governments make in the United States and the views of state human resource directors (HRD) on health benefits. Survey data, gathered from state HRDs in fall 2005, reveal several important findings: In terms of choices, the most common plan offered is the preferred provider organization (PPO); less than one third of states offer health benefits to nontraditional partners; health benefits improve employee satisfaction and the performance of the state government; and cost to the state government is the most important factor that affects choice of plan. There is not a high level of agreement on what strategies state government should pursue to reduce costs of health benefits; however, there is some agreement that premiums will be increasing in the near future.
Source: Jonathan Walters, Governing, Vol. 20 no. 5, February 2007
Call it the six stages of GASB 45: anger, denial, sorrow, acceptance, study and action. That’s been the general response to a new set of governmental accounting rules that ask state and local governments to spell out the costs of their promises to provide retired employees with health care as well as other post-employment benefits.