Capital Matters: Managing Labor s Capital

Transcription

1 Capital Matters: Managing Labor s Capital Harvard Law School-Labor and Worklife Program April , 2006 What is the Current Status and Future of Retiree Health Benefits? The Teamster National Retiree Health Program John Slatery, CEBS Director, Benefits Department International Brotherhood of Teamsters

2 Factors Affecting Retiree Health Costs, Quality, Uninsured Subsidization FAS 106, GASB 45 Decline in DB Pensions The Passage of the Medicare Part D and consumer driven health plans

3 Large Employers Offering Retiree Health Coverage, % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 46% 40% 41% 35% 38% 31% 35% 28% 29% 23% 28% 21% 29% 21% Offer coverage to pre-medicare-eligible retirees Offer coverage to Medicare-eligible retirees Source: Mercer National Survey of Employer-Sponsored Health Plans, 2005

4 Large Firms (200 or More Workers) Offering Retiree Health Benefits UNIONS Firm Does Not Have Any Union Workers 24% Firm Has At Least Some Union Workers 49% PART-TIME WORKERS Many Workers are Part Time Few Workers are Part- Time 24% 35% WAGE LEVEL Lower Wage 19% Higher Wage 36% 0% 20% 40% 60% Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 2005 Annual Survey

5 Expectation of Future Retiree Coverage by Union Status Results as a % of number surveyed Union 70% 66% Non-Union 45% 43% Source: EBRI Issue Brief No. 279, March Data is for 2002.

6 Probability of Receiving Retiree Health Benefits by Union Status Likelihood of Future Retiree Coverage Pre 65 (age 55-64) Medicare Supp (Age 65 &over) Union 50% 38% Non-Union 22% 21% Source: EBRI Issue Brief No. 279, March Data is for 2002.

7 Average Health Benefit Cost Per Retiree $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $8,178 $8,717 $3,543 $3, Pre-Medicare Eligibile Retirees Medicare-Eligible Retirees Source: Mercer National Survey of Employer-Sponsored Health Plans, 2005

8 Contribution Strategies for Retirees (Large Employers) Pre-Medicare-Eligible Retirees Medicare-Eligible Retirees 48% 38% 50% 32% 14% 18% Retiree Pays All Employer Pays All Cost is Shared Retiree Pays All Employer Pays All Cost is Shared Source: Mercer National Survey of Employer-Sponsored Health Plans, 2005

9 Factors Impacting Savings Requirements for Health Care in Retirement The source of insurance, premium levels and benefits covered Annual increases in insurance premiums Age at time of death Retirement age Rate of return on investments Out of pocket expenses and health status Medicare Part B premiums

10 Lump Sum Cost for an Individual Retiree to maintain Retiree Health for Life (EBRI notes 2003) Retiring today at age 55 requires a present value lump sum of between approximately $88,000 and $1.8 million to maintain retiree health coverage until death. Employer/Group based Retiree coverage is less expensive and ranges from $88,000 to $850,000 vs. $187,000 to $1.8 million for individually based Retiree coverage.

11 Teamster Health Funds Number of Funds Total Actives 532, , ,000 Total Retirees 107, , ,000 Total Participants 640, , ,000 Total Assets (Net Assets) $3.1 billion $2.8 billion $2.6 billion Total Liability $1.44 billion $1.3 billion $1.3 billion Administrative Expense $241 million $256 million $263million Total Expense $4.04 billion $4.3 billion $4.3 billion Employer Contribution $3.3 billion $3.5 billion $3.7 billion Expense/active/month $633.5 $693.4 $ % Retirees to Total $16.6 Source: IBT Benefits Dept

12 Retiree Health Coverage for Teamsters Private and Public Sector Problem Pension Plan income drained by retiree health contributions Database: 400,000+ IBT Pensioners not covered under Teamster Retiree Plans IBT Mailing List close to 500,000 Retirees 13,000 participate in Current Voluntary TeamStar Medicare/Supplement program Medicare Part D Pros and Cons

13 National IBT Retiree Health Plan IBT VEBA Trust Plan Sponsor Administration Marketing Any age under 65 Basic Coverage Insurer: United American Age 65 & Up Medicare Supp Stand Alone or w/drug Insurer: United American Sold with or w/o Med Supp Benefits superior to Feds Plan PBM: Prescription Solutions

14 Teamster Medicare Drug Plan Funding Sources Funding Sources Retiree Contributions 25% Medicare Subsidies 75% IBT VEBA Trust Risk Corridor/ Insurer Benefit Enhancement

15 Response to Medicare Part D Benefit Will keep current plan and apply for subsidy Will pay secondary to Medicare (Wraparound) Will drop drug coverage, but continue to offer medical Will drop all coverage for Medicare-eligible retirees All Large Employers 20,000 or more employees 44% 67% Will not make any changes 43 9 Source: Mercer National Survey of Employer-Sponsored Health Plans, 2005

16 Sources of Funding (Illustration) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Prior to Part D With Retiree Subsidy As Direct PDP Reinsurance from CMS Payment from CMS Copays Participant Contributions Sponsor Contributions

17 Standard Medicare Part D Plan Design Medicare Benefit (95%) 5% coinsurance (minimum $2/$5) $5, % Coinsurance ( doughnut hole ) ($2,850) $3,600 out-ofpocket reached $2,250 Medicare Benefit (75%) 25% coinsurance ($500) $250 $250 Deductible

18 IBT Medicare Drug Plans Silver Plan Premium: $25/month Retail (30 day supply) Mail Order (90 day supply) Generics $9 $18 Preferred Brand $26 $52 Non-Preferred Brand $52 $104 Platinum Plan Premium: $50/month Retail (30 day supply) Mail Order (90 day supply) Generics $9 $18 Preferred Brand $15 $30 Non-Preferred Brand $30 $60

19 Advantages of Teamster Retiree Health/Medicare Drug Plan Teamsters control: Profits/Losses, Plan Design, Retiree Premium, CMS subsidy & Reinsurance, Risk & Underwriting Provides Options to: Teamster Retirees/Members, Taft-Hartley Funds, Locals & Employers Not meant to replace Employer or Union sponsored coverage Will help to preserve Retiree Health and help maintain pension values