nmrhca stake holder meetings september 2013 1. nmrhca’s creation 2 nmrhca established by the...
TRANSCRIPT
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NMRHCA Stake Holder Meetings
September 2013
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NMRHCA’s CreationNMRHCA established by the Retiree Health Care
Act [10-7C-1 NMSA 1978] in July, 1990 with no initial appropriationNMRHCA began paying benefits in January, 1991 with
statutory limitations to premium increases until 2008NMRHCA was not prefunded in a similar manner as
PERA and ERB“Future benefits may be modified from year to
year in order to respond to changing financial exigencies” (10-7C-3B)
“Participating employers, employees and retirees are responsible for the financial viability of the program. The overall financial viability is not an additional financial obligation of the state” (10-7C-13-C)
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NMRHCA CompositionNMRHCA Currently serves approximately 300
public employers50% Public Schools 25% State of New Mexico25% Municipalities, Counties, Universities (not UNM or
NMSU), and other public entities (e.g. Housing and Irrigation Districts)
Approximately 100,000 active employees
54,460 Covered Retirees 31,058 Medicare eligible 18,233 Pre-Medicare5,169 100% retiree pay voluntary plans (e.g.
dental/vision)
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NMRHCA Finances**Excludes 100% Retiree Pay Plans
NMRHCA FY2014 Revenue$281,975,654
NMRHCA FY2014 Expenses$249,899,913
Retirees$100,759,0
6836%
Employers$83,129,299
29%
Employees$41,564,64
915%
Federal$25,923,79
89%
Tax Susp. Fund
$23,931,2978%
Misc.$6,667,543
2%
Medical / RX$236,354,286
95%
Health Plan Admin.$10,894,627
4%
RHCA Admin$2,651,000
1%
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Back From The Brink and as Important as Ever
2007 Trust Fund set to be exhausted in 2014 Money drawn from fund 4 out of 5 previous years Unfunded Liability (GASB) of $4.1 billion
2013 Trust Fund to stay positive into 2029 $80 million added to fund over last three years Unfunded Liability of $3.6 billion
Importance of NMRHCA Programs Retirement Planners Fidelity and Nationwide estimate that couples retiring
in 2013 at the age of 65 will need, on average, $220,000 to cover medical expenses throughout their retirement
NMRHCA reduces these expenses by well over 60% on average Average PERA Monthly Pension: $2,161
Average ERB Monthly Pension: $1,715
Average Monthly Social Security Benefit: $1,262
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All Stakeholders Have Shared In Improving Plan Finances
Cost Containment Strategies
Pre-Medicare plan deductibles have increased from an average of $195 in 2009 to an average of $600 in 2013
Pre-Medicare plan out-of-pocket maximums have increased from an average of $1,500 in 2009 to an average of $3,600 in 2013
Medicare Supplement plans now require all members to pay the Medicare Part B deductible
All prescription plans have shifted to members paying a percentage of totals costs (with minimums and maximums) and away from flat dollar copayments (retirees will be paying an additional 5% of total prescription costs)
Revenue Enhancement Strategies
Increased Retiree Health Care Premiums in accordance with medical inflation averaging 8 percent annually
Continued pursuit of increase in contribution levels for active employees/employers
All Stakeholders (Employees, Employers, and Retirees) have contributed to improved financial outlook
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Cost Management Efficacy
NMRHCA - Five Year Financial History
2009 Actual 2010 Actual 2011 Actual 2012 Actual 2013 Estimate 2014 Approved
Plan Costs$201,481,0
00 $205,328,000 $205,345,400 $223,991,700 $235,593,700 $258,318,900
Annual Increase Since FY2009 5.6%
Medical Membership 40,224 41,889 43,690 46,698 49,032 51,484
PMPM Cost $417 $408 $392 $400 $400 $418
Year Over Year Increase -2.1% -4.1% 2.1% 0.2% 4.4%
Annual PMPM Increase Since FY2009 0.0%
9$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
$200,000,000
$220,000,000
$240,000,000
$260,000,000
$280,000,000
$300,000,000
$157,062,118
$122,897,298
$296,548,499
NMRHCA Fund Balance History - July 2005 thru August 2013
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NMRHCA Program Is Manageable – But Significant Challenges
Remain
Recent improvements demonstrate that retiree health benefits can be managed in a responsible way over the long term
Fundamental imbalances will require additional changes over time
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NMRHCA’s Fundamental Challenges
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NMRHCA Current Fund Balance Projection
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
-$200,000,000
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
Revenue Expenses Surplus/Deficit Fund Balance
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NMRHCA Five-Year Strategic PlanPositive Fund Balance Through 2043
X Phase out “Family Coverage” subsidies for retirees with multiple dependent children
X Increase cost sharing on prescription coverage (stabilize plan/member share percentage)
X Increase cost-sharing of pre-Medicare Plans
Implement graduated minimum age requirement (to receive subsidies)*
Increase years of service required to receive maximum subsidy (currently 20 years)
Reduce pre-Medicare retiree subsidies
Reduce pre-Medicare spousal subsidies
Implement enhanced wellness programs (premium incentives for participation/health status)
Increase Employee/Employer contribution levels (requires legislative action)X indicates implementation starting in 2013
*NMRHCA will implement any minimum age requirement adopted by PERA and/or ERB
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Impact of Five Year Plan
Current Contributions Vs. Benefits
Contributions Vs. Benefits With Five Year Plan
Employee Contribution Employer Contribution Total Contribution Avg Subsidy Provided - Retiree
Avg Subsidy - Retiree+Spouse
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$10,375
$20,750
$31,125
$68,405
$99,619
Employee Contribution Employer Contribution Total Contribution Avg Subsidy Provided - Retiree
Avg Subsidy - Retiree+Spouse
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$18,883
$37,765
$56,648 $58,517
$78,517
1520
1220
1320
1420
1520
1620
1720
1820
1920
2020
2120
2220
2320
2420
2520
2620
2720
2820
2920
3020
3120
3220
3320
3420
3520
3620
3720
3820
3920
4020
4120
4220
43$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
2007 Projection 2011 Projection2013 Projection 2013 Projection w/ 5 Year Plan
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NMRHCA Current Events Board Action for 2014
Raised rates 6% - 8% Continued phasing out child subsidies Committed to alter plans to preclude payment of “Cadillac Tax” Medicare Advantage Plans added expanding coverage locally and
nationally Results
Reduced unfunded liability by $200 million Reduced solvency deficit of outbound year by $120 million
FY2015 Appropriation Request Membership Growth Medical Cost Trend Expansion of FTE’s to accommodate years of accumulated growth
2014 Legislative Session Working with Investments and Pensions Oversight Committee (IPOC) to
develop legislation in accordance with statutory requirements “..At the first session of the legislature following July 1, 2013, the legislature shall
review and adjust the distributions pursuant to Section 7-1-6.1 NMSA 1978 and the employer and employee contributions to the authority in order to ensure the actuarial soundness of the benefits provided under the Retiree Health Care Act” (10-7C-15-G)
Active Employee/Employer Contributions to NMRHCA
Effective July 1, 2012 contributions are made to NMRHCA as follows: Non-Enhanced Plans – 90% of membership
Employer: 2.0% of SalaryEmployee: 1.0% of SalaryTotal: 3.0% of Salary
Enhanced Plans* - 10% of membershipEmployer: 2.5% of SalaryEmployee: 1.25% of SalaryTotal: 3.75% of Salary
*Enhanced plans are defined by NMRHCA Statute as: (A) State Police member and adult correctional officer member coverage plan 1 (B) Municipal police member coverage plan 3, 4 or 5 (C) Municipal fire member coverage plan 3, 4 or 5 (D) Municipal detention officer member coverage plan 1 (E) A member pursuant to the provisions of the Judicial Retirement Act
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Increase employee/employer contributions from 3% of payroll to 5.25% over a 6-year period as follows:
Legislative Proposal
A B C D E
Fiscal YearCurrent
ContributionProposed Increase
Proposed Total
Additional Revenue
FY14 3.00% 0.00% 3.00% -$ FY15 3.00% 0.50% 3.50% 20,000,000$ FY16 3.00% 0.50% 4.00% 40,000,000$ FY17 3.00% 0.50% 4.50% 60,000,000$ FY18 3.00% 0.25% 4.75% 70,000,000$ FY19 3.00% 0.25% 5.00% 80,000,000$ FY20 3.00% 0.25% 5.25% 90,000,000$
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Summary Impact Upon full implementation
$90 million of additional revenue annually
Employee Impact Example: An employee earning $40,000 annually currently pays $15.39 per pay
period (1%)
Each .25% increase will result in $3.84 less in take home pay each pay period. A .75% increase will result in an increased contribution of $11.52 per pay period or $300 annually
Employer Impact Example: An employer (for each $40,000 employee) currently pays $30.77 (2%)
per pay period Each .25% increase will result in $3.84 increase in contribution. A
1.5% increase will result in an increased contribution of $600 annually
Each .25% increase in employer contribution will have an approximate $5 million impact on the general fund
Each .25% increase in contributions extends NMRHCA’s solvency by approximately 1 ½ years
20Employee Employer Employee Employer Employee Employer
ERB PERA NMRHCA - Current
30%
35%
40%
45%
50%
55%
60%
65%
70%
45%
55%
37%
63%
33%
67%
Retiree Programs - Contribution Ratios