Agenda - 05-30-2013 - 2 - Laserfiche WebLink

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Retiree Health Care Background Retiree health costs continue to grow as the general population, including Orange County employees and residents, ages and lives longer. The current average age of all of Orange County's 297 retirees is 65.9 years, only 20.3 years older than the County's 820 active employees' average age of 45.6. The cost of retiree health benefits continues to increase as the number of retirees increases, combined with the increasing cost of health coverage benefits. The County provides health coverage based on the age of the retiree. Retirees who have not yet reached age 65 remain on the County's group health insurance and are eligible for the dependent subsidy. In 2008, Commissioners approved a revision to the Personnel Ordinance to stop subsidizing the cost of retiree dependent health care for employees hired after July 1, 2008. The earliest this change will have an impact on retiree health care costs is July 1, 2013. At age 65, retirees enroll in Medicare Part A (no cost to the retiree or County) and Part B (premium is deducted from the retiree's Social Security benefit), and the County pays for both a Medicare supplement (Plan F) and Part D. Plan F, is referred to as a "Medigap" plan because it covers the gaps left by Medicare Parts A and B. Part D is prescription drug coverage. As employee health care costs continue to rise, Orange County faces increasing liability for future retiree health insurance. The County has been paying premiums for both pre - 65 and post -65 retirees as the costs are incurred. The chart below shows the County's liability for retiree health care as determined by an independent auditor. Actuarial Valuation Date Unfunded Actuarial Accrued Liability (UAAL) UAAL as a Percentage of Covered Payroll 12/31/2011 $63,716,142 165.2% 12/31/2010 $62,803,094 163.5% 12/31/2009 $58,020,674 152.7% 12/31/2007 $54,382,277 145.6% Actions taken to Minimize the Cost and Liability of Retiree Health Care In 2012, the County addressed this liability by making changes to the Personnel Ordinance for employees hired on or after July 1, 2012. These changes increased the eligibility requirements for retiree health care for employees; require retirees eligible for Medicare due to disability to enroll in Medicare and receive the same benefit available to retirees eligible for the County's post -65 Medicare benefit; and capped the amount the County pays for Medicare supplements and Part D at 50% of the cost of the individual group health premium. In addition, $3.5 million in funds were set aside specifically for future retiree health care costs. 01110191