Orange County NC Website
� Probfem Sofver � PUBLtC MONEY $ <br /> Attachment 5 <br /> By Girard Mi{!er <br /> Slaying the �P�B Dragan �� � . <br /> Retiree medical costs can be tamed, but it requires effort, � . `_�� <br /> ,�o' `�� �� <br /> _ � <br /> here's a crisis in retiree health- benefits.IYs only fair that they pa}�part of ' . ��:� <br /> care fitnding, and it continues the costs.If you are freezing salaries,you 'tO' <br /> : a'>1'` <br /> to get u•orse for state and Iacat can;'t ask for much,but a symbolic sliver of ' �--:;. .�:. , <br /> employers.IYs one thing to pay cost-sharing can be expanded later�vhen '�;�:,:`r;>,Tm� <br /> this year's premiums,but it's even harder the economy gets better. '''`'-'�`�'��-:`� <br /> to come up�vith the money for the future Fund the plan acfuarially.Most pub- ����x <br /> costs of the benefits no�v promised to lic employers�vith massive OPEB liabili- _ � <br /> tociay's employees—not with the costs of ries have not even set up a trust fund to ;' �_ '' <br /> ,: . <br /> heatth insurance outpacingstate and local pre-fund the benefits. Tlus ostrich-like :��-. `• <br /> revenues and the general i»fiatian rate. behavior guarantees that the problem _ ; <br /> As other post employr,aent benefits wi31 tvorsen.Eveu if budgets are right,it . <br /> �- <br /> (OPEB)Iiabilities keep piling up,pubIic makes sense to make partial payments -�". <br /> leaders are grasping for solutions. Sev- toward the actuaria�Iy required cont�ibu- � <br /> .. �';: <br /> ;'� �' ;::_ <br /> eral states have taken action.Some of the tions and then"ramp up"a little each year. : •�t.��t>.,. <br /> ` 1�)f`'<`:; ,.ti <br /> moves aze obvious and welt-accepted as Employees can'tbe asked ta contribute if ��r ':�u;:.;; �:s-•� <br /> N"�::..._. u....,...:�=�: <br /> �'W�::;::.<;;rS;;;:��t:a.� <br /> the ne�v norm;others are at the cutting there's no trust fund in place. :�� �tr�;:.:�-:;�':°,�'..--„°;.-��j�,:[�;' _ <br /> o fi1��. <br /> ed of inno��ation.Not eve ci or state Iustall a��narro�v nefwOrk"HMO. '`�-�'�` '��;}�.,''- <br /> ge r5` tY �::' ,+� i��� � <br /> a roach is re licable e1se��vliere—state Along tvith higher deductibtes and �!'�=" ,�` '. �� . <br /> Pp p -.��i.�::, ��:sa: 1.. .; <br /> la�vs maypreclude action and some soiu- co-pays,wiuch everybody seems to ;�` ��mry,:;,:.,y_k;_����� - <br /> tionsmightnotbeviableforotherreasons. bedoingthispear,manyemployers �;,;. =::��;m;:�=::;`_::::~::��� �/ <br /> '`•��::`,:K>7;; :�t ( � <br /> •;s4�:�..,,:�. <br /> But here's a sumxnary of some of the cur- ha��e also installed a narro�v-net- .,�:.;�;�� <br /> ren#approaches to the OPEB ci7sis and ttrork HMO as the primaiy health-care - _.`�%�:�"f` }J <br /> ��r�^� :C.�.. <br /> how they are«orking out benefit for their employees. Naribw �'3'�-°- : ; <br /> Change the p!an for netv hires.Tke nehvorks exclude high-cost medical ���,�"'���' <br /> easiest long-term reform for retirement praviders and thus cut preznium casts. <br /> benefitsistoreducethemforne�vempiop- Almost half of pri��ate emploSTers ha<<e fessionalassociationat��ardforitsuino��a- <br /> ees.UnforCuuately that�wn't save mucti gone this route,a 200 percent inerease tive solution to sk}xockering OPEB costs. <br /> money for yeaxs to come,but i�'s a start in just a fe�v years.This can then become The big idea:Get out of the business of <br /> t�rrth private-sector emplo3�ers rapidly tl�ebasis far the retirees'OPEB benefit as guaranteeing retiree znedical benefits the <br /> abandoningretiree medicalbenefits,there �vell,�vhich ean etzt costs by 25 percent city car�'t afford,Fiis�the cit3�set up a <br /> is]ittle competitive pressure to xnaintain �in some loca4ions. defined-contribution OP�B plan for ne�v <br /> tradirional OPEB plans.A modest defined Sell bonds to fund one-third o£OPEB employees.Then it sold a bond issue at <br /> contribution plan for retirement health liabitities.Nabod}�cantellforsureivhether 4.5 percent and used the money to fund <br /> savings is usually ali the market requires. the stock market's latest s;�oon ivas a bot a voluntaiy exchange program in tvhich <br /> ' Some employers are providing employee- tom,but interest rates are now near their current employees could cash out the <br /> only coverage for ne�v hires. loivest Ievels in a cei�tuiy. That enables actuarial��alue of their previously eazned <br /> Cap the benefi�VVith inedical costs some public employers to sell teaLable OPEB benefits and receive an employee <br /> outstripping general inflation by t�Sro or municipal bands far as much as a third of health savings accou�it plus a package of <br /> three times each year,the biggest move the totai OPEB planliability,aitd im�est the cash and deferred compensation. More <br /> emplopers can make is to put a dollar ceil- money in tlie stock market at depi�essed thazi half of the eligibie employees made <br /> ing un the benefit and index it to the CPI. leveis.For more on this strategy and pit this election,which wiil save the city mil- <br /> This single action has huge actuarial cost- falls m a�roid,see my article,Benefirs Bonds lions o€dollars.It's been so popular that � <br /> redaaingbenefits. Revisite�in the Public Money section on empio3�ees who didn't take the original <br /> Require employee coniributions. Governing.com. deal no�vwantin.G <br /> A�Iost public empiapees, especially the Buy out the benefits.Be��eriy�Iills, <br /> older ones,kno�v the value of their OPEB Cali£,wo�i nationat attenrion and a pra Emait milterg@pfm.com <br /> 62 GOVERNING 4 December 2021 <br />