GASB--Reporting Retiree Health Care Costs
Director, Governmental Research
Gabriel, Roeder Smith & Company
Laurie L. Burgess, MS
Executive Vice President
Bailit Health Purchasing
An NCPERS conference session on health care attracted a standing-room-only crowd to hear one expert talk about potential changes in accounting policies that could damage pension funds, and another talk about an innovative New Hampshire program that could improve the quality of health care while lowering its cost.
Paul Zorn, director of governmental research for Gabriel, Roeder Smith & Company, updated conference attendees on an accounting change the Government Accounting Standards Board (GASB) is considering for Other Post Employment Benefits. The 600-page document will “set the context for future discussions of the design, affordability and sustainability of retiree health care offered by state and local governments,” Zorn said. If adopted, the regulations could double the expense employers report for retiree health costs from 5-7% to 12-15%, Zorn said, and cause employers to reevaluate plan design.
Most Other Post Employment Benefits (OPEB) are for health care. Retiree health care is the largest component of OPEB, Zorn said.
Driving the proposed changes is GASB’s intent to provide an incentive for employers to hold money in trust and concerns over affordability and what constitutes sustainable plan design. It’s unclear whether GASB will make the changes it has suggested, Zorn said. NCPERS opposes such a change.
While accountants debate how to record health care expenses and obligations, a group in New Hampshire is working to provide better health care at a lower cost. It’s a timely subject. Moderator David Lang said that a family plan for a firefighter in New Hampshire costs about $12,000 annually. Assuming a 15% medical inflation rate, within nine years the plan will cost more than the firefighter will earn.
One way to deal with spiraling costs is through purchaser partnerships. Laurie Burgess, executive vice president of Bailit Health Purchasing in New Hampshire, said that rising health costs force employees to choose between health care benefits and pay increases. She also said that there’s no relationship between higher health care costs and better health care. “We desire low cost and high quality--and we’re not getting either,” she said.
Because of those reasons, among others, a coalition including employers, unions and health care providers is working to develop incentives to improve the quality of health care and decrease its cost.
“Providers lack incentives to provide quality health care, because there is no market incentive and few consequences if they don’t,” Burgess said. The central issue of the New Hampshire project is to “realign the market to improve quality and decrease cost.” The partnership is proposing a tiered co-payment product that they believe will cost 5-10% less than current standard HMO products.
The partnership hopes to implement its product in 2004.
Zorn specializes in research related to public retirement systems and employee benefit plans. In his 18 years of consulting experience he has conducted numerous studies of employee benefits.
Burgess is an expert in the design and conduct of procurement and evaluation activities, in long-term care program design and strategic planning for public and private agencies. She has also worked on several different projects for state health departments that have ranged from evaluating programs to assisting with the design of alternative reimbursement methodologies.