Agenda - 04-24-2012 - 1 - Laserfiche WebLink

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I 2 Health Insurance Currently, the County pays approximately $6.6 million for health insurance across all funds for • employees ($5.5 million for the General Fund) each fiscal year. Additionally, the County pays approximately $1.4 million per year for all retiree health insurance related costs. For the upcoming budget year, Mark III Benefits and United Healthcare have informed us that we can expect up to an 11.5% increase in health insurance for employees and retirees for the fiscal year ending June 30, 2013. We estimate the increase and the effect on the FY2012-13 budget to be as follows: • Employee health insurance $.75 million • Retiree health insurance .85 million • Total $1.60 million Additionally, we anticipate, based on past experience that our health insurance costs will continue to increase by 15 to 20 percent per year as a result of claims paid in previous fiscal years, and the current average age of the County's workforce. Annually, this would represent an increase of $1.1 million to $1.5 million per year in health insurance for current employees and retirees. We must continue to explore options related to both funding and cost sharing health insurance expenses for employees and retirees going forward. Existing coverage and/or rate of increases to premiums are not sustainable within existing county revenue resources. • In the next few months staff and County insurance consultants will be bringing forth proposals from which the Board of County Commissioners can select an appropriate course of action. This will be a difficult decision for the Board. Other Post-Employment Benefits (Retirees Health Insurance Funding) As previously discussed, the County currently funds post-employment benefits/retirees' health insurance (OPEB) on a pay-as-you-go basis. Our required annual actuarial contribution is approximately $5.1 million per year. As a result, this leaves the County with a funding deficit and an unfunded OPEB liability of $62.8 million, as of June 30, 2011. Putting this in perspective, we recently issued debt to fund an elementary school, equipment, and refund existing County debt that totaled $58.9 million which represent the County's largest, most current, combined debt issuance. Our current unfunded OPEB liability is greater than that debt issuance. We will be proposing an approach to fund the liability beginning in the FY2012-13 Manager's Recommended Budget. If we do not start addressing this issue, it can and will, impact discussions with the bond rating agencies, impact our bond rating and the ability of the County to issue debt in the future. Additionally, as previously mentioned, the annual cost is increasing proportionately with the number of retirees. •