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Health Care Issues for Public Employees and Retirees
Mark Goldberg, Senior Vice President for Policy and Strategy,
National Coalition on Health Care
Paul Zorn,
Gabriel, Roeder, Smith and Company
Two health care analysts today presented compelling evidence of the need for health care reform. Mark A. Goldberg and Paul Zorn predicted substantial increases in health care costs in the next few years and urged support for reforming health care public policy.
 Goldberg said the National Coalition on Health Care’s (NCHC) research shows that by 2006 the average American could spend $14,000 a year for health care. Runaway health care costs will have a huge negative effect on the economy, he said, including state and local governments. Public employees will be asked to absorb more of their health care costs, Goldberg predicted health care cost increases will easily offset increases in pay and benefits.
The number of uninsured Americans has grown 10% in just the past two years, and “these number are going to explode” in the near future, Goldberg said. That situation will eventually harm those with insurance, including public sector employees. Most uninsured typically receive health care in emergency rooms, costs paid for by all taxpayers.
Goldberg said despite the depth of the current problem, he is optimistic about the chances of improvement. Any solution, he said, would require a major change in public policy. He believes a “policy window” will soon open. Those who support health care reform must be ready when that situation occurs, Goldberg said, by having policy ideas ready. NCPERS is a member of NCHC and working with other members of the coalition to develop a framework for health care reform.
Zorn reviewed recent work by the Governmental Accounting Standards Board (GASB) Ta sk Force on Other Postemployment Benefits (OPEB). The task force is a project to establish accounting standards for other postemployment benefits, including retiree health benefits.
GASB’s primary change would be to require measurement of long-term OPEB costs through an actuarial valuation. For employers, the OPEB cost would be the annual required contribution as established by the actuarial valuation. The employer’s net OPEB obligation (the measure of the employer’s liability) would be the accumulated difference between the annual required contribution and the employer’s actual contributions to the OPEB plan.
If GASB’s approach is adopted Zorn also believes there will be two immediate effects on retiree health care. First, increasing retiree health care costs could cause employers to reevaluate plan designs, with the goal of reducing the employers’ costs for covering retirees. Second, GASB’s proposals would encourage retiree health care plans to prefund the long-term costs of providing retiree health care, a practice few plans currently follow. GASB’s proposed standards offer significant incentives to prefund health care costs and hold the assets in trus t.
NCPERS opposes the GASB draft statement and believes requiring employers to carry postretirement benefits as a liability would have a negative effect on both retiree benefits and state and local government bond ratings. NCPERS continues to work to ensure retiree health care benefits are not negatively impacted by GASB.
Goldberg is a former faculty member at the Yale School of Management, where he taught courses on health care policy and business strategy, and was a member of the White House staff.
Zorn specializes in research related to public retirement systems and employee benefit plans for Gabriel, Roeder, Smith and Company.
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