In recent months the Ohio Public Employees Retirement System Board of Trustees has been discussing potential changes to the health care coverage that we have offered retired members since 1974. The Board regularly reviews the health care program and makes adjustments when necessary.
While OPERS Board members have not settled upon any final health care changes, they have indicated preferences in many areas. Before the Board takes final action, OPERS staff will make presentations around the state and conduct a survey to gather feedback from members and other stakeholders. We will publish definitive dates, times and locations when the dates are set, and we encourage members to attend.
A final decision by the Board will be made this fall, with implementation beginning next year and final implementation in several years.
Although nothing specifically has been decided, the new health care plan may:
- Initiate a minimum age between 55-65 for members to become eligible for health care coverage.
- Increase minimum years of service for health care eligibility from the current 10 years to 15 or more years.
- Require more out-of-pocket costs for covered services.
- Increase premium costs.
- Eliminate coverage for spouses under age 65, and provide access, but no allowance, for spouses over age 65.
- Base premiums on age and years of service.
- Reduce or eliminate the Medicare B reimbursement.
- Introduce a new, personalized plan model for recipients with Medicare that will allow them more choices and greater affordability.
- Reduce the number of plans for non-Medicare participants.
- Transition some changes over time.
Why are we contemplating these major changes to our health care coverage?
The reasons include the continual rising costs of health care, the fact that life expectancies continue to grow, the doubling of the number of retirees over time because of the retirement of the baby boomers, and the lack of pension legislation passing.
One message is clear: OPERS cannot continue to maintain the same level of health care coverage to retirees and dependents over the coming years without rapidly exhausting all the money in the health care fund.
And without the passage of pending pension legislation that includes the Board’s proposed changes, the situation is even worse.
If pension legislation does not pass in 2012, OPERS will need to reduce the health care program by more than two-thirds, reducing annual expenditures from the current $1.5 billion to less than $500 million. This will result in drastic cuts to the health care program for current and future retirees.
OPERS currently directs a percentage of the employer contribution into the health care fund. In the absence of pension legislation, OPERS no longer will be able to set aside this money. Even with investment income, we project the value of the fund to decline to zero by 2020. By law, all of the employee contributions are directed toward pension benefits, not health care.
Even if legislation passes in 2012, the Board is planning to set our long-term health care funding rate at only 4 percent annually. Four percent is about half of what our current health care plan costs. We cannot support our current coverage levels at the 4 percent funding level.
However, the 4 percent funding level will allow us to retain our pension fund strength and still provide a meaningful health care coverage option for career employees. But it will not eliminate the need for us to make significant changes to health care.
Maintaining the status quo is not an option. As we stated in a blog last month, the challenges we face are too far-reaching to consider simply retaining the current plan.
We hope to soon provide details on our statewide informational sessions and our member survey. The feedback we receive from these meetings, and the survey results, will be shared with OPERS Board members so they can finalize the health care changes.
We understand that planning for retirement takes careful preparation, and one key component is health care. We encourage you to stay engaged with the process by attending a health care presentation, reading OPERS correspondence, and regularly checking the OPERS website for up-to-date information.