Transcript Retiree Health Insurance

Welcome to Today’s NACUBO
Webcast
Our program will begin shortly with a
brief introduction on how to use the
desktop interface.
Desktop Interface
Element
Toolbar
Media
Player
Element
Display
Quick
Question
Primary
Toolbar
CPE Credit
You must complete surveys to receive CPE credit
Resource
Page
Click directly in the
element area to answer
survey questions
How to Ask Questions
• Select “Expert” from
the dropdown menu
• Type your question
• Click on Submit
The Online Experts InBox button will illuminate when
you receive a response. To view the answer to your
question, click on this button and then select
“Answered Questions.”
Reviewing Elements
• To review elements, use the Review and Preview
buttons in the Element toolbar.
• Click on the Sync button to rejoin the presenter.
NOTE: This button appears “unplugged” if you are
not synchronized with the presenter.
Sync
Review
Preview
Enlarge
Buffering
• If you experience sustained
periods of buffering, click on
the Speed button and select
a lower stream rate.
• Contact the helpdesk at
1-800-462-4916.
Speed
Button
Managing the Faculty of the
Future:
Retiree Health Insurance
TIAA-CREF Institute,
NACUBO
and ACE
November 10, 2004
INTRODUCTION:
Health Insurance in Higher
Education
Dr. Robert Clark
Professor, North Carolina State University
TIAA-CREF Institute Director of Research
Challenges Facing Higher Education
• Budgetary Shortfalls
• Aging Faculties
• Rising cost of health and retirement benefits
Budgetary Shortfalls
• Declines in state appropriations
• Declines in endowment earnings
• Affect of economy on giving
Faculty Age Structure
60
50
40
younger than 40
40-54
55 and older
30
20
10
0
1987
1998
Causes of Faculty Aging
• Slow growth in faculty size
• Low turnover rates
• Low retirement rates
Health Insurance
• Virtually all faculty have health insurance
• Many institutions provide retiree health
insurance
• But costs of health insurance are soaring
Health Insurance
• Rapidly rising health care costs are placing
financial pressure on colleges
• Faculty pay more but still institutional costs
are rising
National Health Care Issues
• The cost of health insurance is influenced by
national trends
• Medicare is important to faculty as a benefit,
and as a cost
National Health Care Issues
• Cost of employer provided health insurance
rising by over 10 percent per year
• Projections of the cost of Medicare are so
large that they are not sustainable
Health Insurance
• Private sector firms are quickly dropping and
scaling back RHI
• Many organizations are finding the costs
unsustainable
• Need for policy changes and the development
of RHI savings accounts
Today’s Program
1. Describes the national health
insurance environment
2. Examines the future of Medicare
3. Highlights changes in RHI among
non-educational employers
4. Presents evidence on health insurance
trends at universities
Today’s Program
We begin with presentations by two nationally
prominent experts on health insurance
• Dr. Marilyn Moon
• Dr. Sylvester Schieber
Today’s Program
• Presentations will be followed by short replies then,
by taking your questions.
Polling Question #1
• Does your institution provide retirees with health
insurance benefits?
•
•
•
•
Yes, past and present retirees
Yes, but only for prior retirees
No, retiree health insurance is not provided
Unsure
SECTION ONE:
An Overview of Healthcare
Costs and Medicare Trends
Marilyn Moon, Ph.D.
Vice President and Program Director
American Institutes for Research
A Brief Overview of Medicare
• Has changed over time
• Reliance on many kinds of supplemental coverage
• Rising costs
 Compares well with private insurance growth
 Higher burdens on beneficiaries over time
Medicare Expenditures by Type of
Service: 1966 and 2003
Outpatient Hospital
1%
Home Health
4%
Physicians and
other Part B
29%
Hospital
62%
Physicians and
other Part B
33%
Skilled Nursing
Facility
7%
Home Health
1%
1967: 70% Part A; 30% Part B
Skilled Nursing
Facility
5%
Managed Care
13%
Hospital Inpatient
40%
Hospital Outpatient
5%
2003: 46% Part A; 41% Part B; 13% Part C
(Medicare+Choice)
Source: Health Care Financing Administration, 2000 and MedPac 2004
Sources
ofofSupplemental
Coverage
Sources
supplemental coverage
among
Among
Noninstitutionalized
Medicare
noninstitutionalized
Medicare Beneficiaries,
2001
Beneficiaries,2001
Medicare Managed
Care
16%
No Supplemental
Coverage
9%
Other Public Sector
2%
Medigap
28%
Medicaid
12%
Employer Sponsored
33%
Source: MedPac analysis of Medicare Current Beneficiary Survey, Cost and Use file, 2001
Out-of-Pocket Spending
as a Shareas
of Income
Out-of-Pocket
Spending
a Share of
Among Elderly Beneficiaries
Income Among Elderly Beneficiaries
30.0%
27.0%
25.0%
20.0%
21.7%
19.1%
15.0%
11.0%
11.2%
12.3%
14.3%
10.0%
5.0%
0.0%
1
96
5
1
97
0
1
97
8
1
98
4
1
98
7
2
00
2
0
00
4
y)
r
a
in
lim
e
r
(p
Source: Urban Institute Calculations Using NHE, CPI, CPS, and Trustees Report, MCBS
Cumulative Growth Rates
2500
Cumulative Growth in Per Enrollee Payments for
Comparable Services, Medicare And Private Insurers,
1970-2000*
Growth (%)
Private Insurers
Private health insurers
2000
1500
Medicare
1000
Medicare
500
Year
Source: Boccuti and Moon 2003; Based on Marilyn Moon’s calculations
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
0
Relative Health Status of HMO Enrollees,
1998
Non-HMO Enrollees
HMO Enrollees
89.9%
No ADLs
85.2%
4.6%
3 or More ADL
Limitations
8.2%
78%
Health Excellent, Very
Good, or Good
Health Fair or Poor
68.9%
22%
31.1%
Source: HCFA/Office of Strategic Planning: Data from MCBS, 1998
New Drug Legislation
• Not help by as much as many think
• The donut hole
Beneficiary & Government Share of Spending in
2006, at Individual Expenditure Levels, Under the
New Medicare Drug Benefit
100%
90%
80%
44%
34%
50%
70%
47%
63%
60%
70%
38%
28%
22%
61%
50%
40%
30%
56%
72%
66%
53%
50%
20%
38%
10%
30%
78%
62%
39%
0%
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$8,000
$10,000 $15,000 $20,000
Individual's Total Annual Drug Expenditures
Plan/Government Share
Beneficiaries Share
Source: Boccuti and Moon 2003; Based on Marilyn Moon’s calculations
The Future
• Demographics
• Higher costs of care per capita
• Unsustainable?
Growth in Medicare Spending as a Share of GDP
Growth in Medicare
as a of
Share
of GDP
and
and in Beneficiaries
asSpending
a Share
Total
Population
in Beneficiaries as a Share of Total Population
25.00%
23.4%
Medicare as a Share of GDP
22.1%
Prescription Drug Benefit as a share of Medicare
20.00%
Medicare as share of the population
15.00%
18.3%
14.8%
13.2%
13.8%
12.1%
10.00%
9.5%
8.41%
6.95%
5.00%
5.08%
3.66%
0.00%
0.70%
1.32%
1.90%
2.29%
1970
1980
1990
2000
0.78%
1.31%
1.84%
2.14%
2010
2020
2030
2040
Affordability
From 2003 to 2040
• Increase in GDP per worker - 63%
• Increase in GDP per worker if take out Medicare
burden - 55%
• To do this requires tax increase
Hold Line on Spending?
• No tax increase approach
42% cut
• Growth proportional to income
33% cut
SECTION TWO:
The Future of Retiree Health
Benefits in Higher Education in
the United States
Sylvester J. Schieber, Ph.D.
Vice President
Watson Wyatt Worldwide
Overview
• Background
• Context for considering employer-sponsorship
of retiree health benefits
• Health benefits for retired faculty from
institutions of higher education
• Conclusions
Background
Personal Health Care Expenditure
Patterns, 1960 through 2002
Percentage of expenditures
from out-of-pocket
Personal health expenditures
as percentage of GDP
60
14
55.2 %
12
50
10
40
8
30
6
20
4
% out-of-pocket
10
15.9 %
Spending as % of GDP
0
2
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
Source: Office of the Actuary, Centers for Medicare & Medicaid Services, U.S. Department of Health and Human Services.
Total Health Care Expenditure
Patterns, 1960 through 2002
Percent of GDP
16.0%
14.9 %
14.0%
Personal health expenditures
12.0%
Out-of-pocket expenditures
10.0%
8.0%
6.0%
5.1 %
4.0%
2.0%
2.0 %
2.5 %
0.0%
1960
1965
1970
1975
1980
1985
1990
1995
2000
Source: Office of the Actuary, Centers for Medicare & Medicaid Services, U.S. Department of Health and Human Services.
Employer-Sponsored Retiree Health
Benefits in Perspective
The Private Sector Story
• Retiree health benefits were not carefully thought out
• During the 1970s and 1980s, inflation soared
• During the 1980s accounting standards raised
awareness of the costs
• Also during the 1980s tax laws effectively precluded
funding
The Private Sector Story, Cont’d
• From 1980 to 1997—medium and large firms offering
benefits dropped from 80 to 40 %
• In 1984, 90 % of plans required 5 years or service or
less–by 2001 85 % required 10 years or more
• About 30 % of current retirees have service related
premiums—for future retirees it is 65 to 70 %
• About one-quarter of current retirees face premium
caps, 40 % of those close to retirement do & nearly
50 % of new hires do
Polling Question #2
• Has your university increased the share of retiree
health care costs paid by faculty or are you
considering it?
•
•
•
•
Yes, already increased the share
Yes, we’re considering it
No, not considering at this time
Unsure
Why Should Employers Care About
Health Care Benefits Costs?
Percent
100
Share of GDP paid as
compensation
80
60
40
Employers' health benefit
expenditures as % of wages
20
0
1948
1958
1968
1978
1988
1998
Source: Bureau of Economic Analysis, U.S. Department of Commerce, National Income and Product Accounts.
Increases in Employers’ Health Benefit
Costs & Wages for Recent Years
Year
Health cost
increases
Wage
increases
Difference
2001
10.9 %
4.1 %
6.8 %
2002
12.9
3.2
9.7
2003
13.9
3.1
10.8
2004
11.2
2.3
8.9
Source: The Kaiser Foundation and Health Research and
Educational Trust, Employer Health Benefits 2004 Annual Survey.
Employer Contributions to Private Health
Benefit Plans as a Percent of Wages
(Assuming Wages Grow 4 % a Year)
30
Employer costs grow 10 percent
per year more than wages.
Perecent of Wages
25
20
Employer costs grow
6% per year more than
wages.
15
10
5
0
1950
1960
1970
1980
1990
2000
2010
Projection assumes health plan cost growth exceeds wage growth by 6 or 10 percent per year.
Rough Characterization of Health Care
Utilization Under Typical Employer Plan
~ 75 % of
covered lives
~ 25 % of
covered lives
< 1 % of
covered lives
Occasional use
of health care
services
Chronic users of
health-care services
Catastrophic
use of healthcare services
~ 15 % of
plan costs
~ 60 % of
plan costs
~ 25 % of
plan costs
Health Benefits for Retired Faculty
Issues Facing Colleges and Universities
Different than Those for Private Employers
• Accounting issues
 FASB does not have domain on public entities
 GASB adopted rules for recognizing costs and obligations to
take effect for periods after December 15, 2006
• Funding issues
 Tax limitations on for-profit sector do not apply
 Still there has been little funding
• Benefit security issues
 Implications of failure to recognize costs
 Assuring benefits that are not funded
Private Schools in Survey Providing
Retiree Health Benefits to Retired Faculty
Current
retirees
Eligible
to retire
New
hires
Pre-65 coverage
Retiree
Spouse
34
34
34
34
27
27
Post-65 coverage
Retiree
Spouse
30
30
29
29
21
21
Source: Watson Wyatt Worldwide.
Public Schools in Survey Providing Retiree
Health Benefits to Retired Faculty
Current
retirees
Eligible
to retire
New
hires
Pre-65 coverage
Retiree
Spouse
21
21
21
21
20
19
Post-65 coverage
Retiree
Spouse
21
21
21
20
19
19
Source: Watson Wyatt Worldwide.
Sharing of Health Insurance Premiums for
Pre-65 Retired Faculty
Pre-65 plan
Current retirees
Private
Public
Number reporting
31
18
Eligible to retire
Private
Public
32
18
Retiree pays all
Percent of total
16.1
27.8
Percent of total
18.8
27.8
Share expenses
54.8
37.9
65.6
44.4
Employer pays all
29.0
33.3
15.6
27.8
Source: Watson Wyatt Worldwide.
Sharing of Health Insurance Premiums for
Post-65 Retired Faculty
Post-65 plan
Current retirees
Private
Public
20
Eligible to retire
Private
Public
Number reporting
29
Retiree pays all
Percent of total
13.8
20.0
Percent of total
13.8
21.1
Share expenses
51.7
45.0
65.6
47.4
Employer pays all
34.5
35.0
20.7
31.6
Source: Watson Wyatt Worldwide.
29
19
Level and Sharing of Health Insurance
Premiums for Pre-65 Retired Faculty
Pre-65 plan
Current retirees
Private
Public
Number reporting
31
Retiree pays all
Average spending
$5,030
$5,030
Share expenses
Retiree share
Employer share
2,023
2,717
950
3,480
1,958
2,574
1,432
3,345
Employer pays all
4,006
4,134
4,508
4,274
18
Source: Watson Wyatt Worldwide.
Eligible to retire
Private
Public
32
18
Average spending
$4,890
$5,030
Level and Sharing of Health Insurance
Premiums for Post-65 Retired Faculty
Post-65 plan
Current retirees
Private
Public
Number reporting
31
Retiree pays all
Average spending
$3,725
$3,562
Share expenses
Retiree share
Employer share
1,817
1,781
679
3,062
1,866
1,735
679
3,062
Employer pays all
3,625
3,513
3,644
3,644
18
Source: Watson Wyatt Worldwide.
Eligible to retire
Private
Public
32
18
Average spending
$3,725
$3,562
Polling Question #3
• How does your institution budget for the cost of
retiree health insurance?
• Costs commingled with active employees
• Separate line item in budget
• Unsure
Other Results
• Retiree health benefits for faculty are being curtailed
but not as rapidly as in the for-profit sector
• Private institutions use service requirements to
greater extent than public
• Public institutions vary premiums by service to
greater extent than private ones but neither do so at
rates that exist in the profit sector
• Ten to 15 percent of private institutions have
implemented premium caps compared to one quarter
of public ones, comparable to for-profits
Looking to the Future
• Retiree dependency ratios will increase in the
future—driving up pay-as-you-go costs
• GASB rules signaling and budgeting effects in the
public sector
• Rationalization issues the same in higher education
as elsewhere
 Recognizing costs as they accrue
 Securing obligations with funding
• The implementation of the Medicare drug benefit will
alter the needs and benefits from employersponsored retiree health insurance
Additional Resources
Available on Resource Page
• Research Dialogue #81 TIAA-CREF Institute:
“The Outlook of Retiree Health” by Dr. Syl Schieber
• Recruitment, Retention, and Retirement in Higher
Education: Building and Managing the Faculty of the
Future
 Edited by Robert L. Clark and Jennifer Ma
 Forthcoming, Summer 2005, Edward Elgar Publishing www.eelgar.co.uk
 Chapters of the manuscript are available on the TIAA-CREF
Institute’s Web site (link on Resource Page)
Managing the Faculty of
the Future:
Retiree Health Insurance
QUESTIONS?
Thank You For
Your Participation
Please complete our online
evaluation form