Transcript Document

NMRHCA Stake Holder
Meetings
September 2013
1
NMRHCA’s Creation
 NMRHCA established by the Retiree Health Care Act
[10-7C-1 NMSA 1978] in July, 1990 with no initial
appropriation
 NMRHCA began paying benefits in January, 1991 with
statutory limitations to premium increases until 2008
 NMRHCA 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” (107C-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)
2
NMRHCA Composition
 NMRHCA Currently serves approximately 300 public
employers
 50% Public Schools
 25% State of New Mexico
 25% 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-Medicare
 5,169 100% retiree pay voluntary plans (e.g. dental/vision)
3
NMRHCA Finances*
*Excludes 100% Retiree Pay Plans
NMRHCA FY2014 Revenue
$281,975,654
Misc.
$6,667,543
2%
Tax Susp. Fund
$23,931,297
8%
NMRHCA FY2014 Expenses
$249,899,913
Health Plan
Admin.
$10,894,627
4%
RHCA Admin
$2,651,000
1%
Retirees
$100,759,068
36%
Federal
$25,923,798
9%
Employees
$41,564,649
15%
Medical / RX
$236,354,286
95%
Employers
$83,129,299
29%
4
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:
Average ERB Monthly Pension:
Average Monthly Social Security Benefit:
$2,161
$1,715
$1,262
5
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
6
7
Cost Management Efficacy
NMRHCA - Five Year Financial
History
Plan Costs
2009 Actual
2010 Actual
2011 Actual
2012 Actual
2013 Estimate
2014 Approved
$201,481,000
$205,328,000
$205,345,400
$223,991,700
$235,593,700
$258,318,900
5.6%
Annual Increase Since FY2009
Medical Membership
PMPM Cost
Year Over Year Increase
Annual PMPM Increase Since
FY2009
40,224
41,889
43,690
46,698
49,032
51,484
$417
$408
$392
$400
$400
$418
-2.1%
-4.1%
2.1%
0.2%
4.4%
0.0%
8
NMRHCA Fund Balance History - July 2005 thru August 2013
$300,000,000
$296,548,499
$280,000,000
$260,000,000
$240,000,000
$220,000,000
$200,000,000
$180,000,000
$160,000,000
$140,000,000
$157,062,118
$120,000,000
$122,897,298
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
$100,000,000
9
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
10
NMRHCA’s Fundamental Challenges
11
NMRHCA Current Fund Balance Projection
$1,600,000,000
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
-$200,000,000
Revenue
Expenses
Surplus/Deficit
Fund Balance
12
NMRHCA Five-Year Strategic Plan
Positive 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
13
Impact of Five Year Plan
Contributions Vs. Benefits With
Five Year Plan
Current Contributions Vs.
Benefits
$120,000
$120,000
$99,619
$100,000
$100,000
$80,000
$78,517
$80,000
$68,405
$60,000
$60,000
$40,000
$58,517
Total Contribution
Avg Subsidy Provided Retiree
$37,765
$40,000
$31,125
$56,648
$20,750
$20,000
$20,000
$10,375
$0
Employee Contribution
Employer Contribution
Total Contribution
Avg Subsidy Provided Retiree
Avg Subsidy Retiree+Spouse
$0
$18,883
Employee Contribution
Employer Contribution
Avg Subsidy Retiree+Spouse
14
$3,500,000,000
$3,000,000,000
$2,500,000,000
$2,000,000,000
$1,500,000,000
$1,000,000,000
$500,000,000
$0
2007 Projection
2011 Projection
2013 Projection
2013 Projection w/ 5 Year Plan
15
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)
16
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 Salary
 Employee:
1.0% of Salary
 Total:
3.0% of Salary
 Enhanced Plans* - 10% of membership
 Employer:
2.5% of Salary
 Employee:
1.25% of Salary
 Total:
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
Legislative Proposal
 Increase employee/employer contributions from 3% of
payroll to 5.25% over a 6-year period as follows:
A
B
Current
Fiscal Year Contribution
FY14
3.00%
FY15
3.00%
FY16
3.00%
FY17
3.00%
FY18
3.00%
FY19
3.00%
FY20
3.00%
C
D
E
Proposed Proposed Additional
Increase
Total
Revenue
0.00%
3.00% $
0.50%
3.50% $ 20,000,000
0.50%
4.00% $ 40,000,000
0.50%
4.50% $ 60,000,000
0.25%
4.75% $ 70,000,000
0.25%
5.00% $ 80,000,000
0.25%
5.25% $ 90,000,000
18
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
19
Retiree Programs - Contribution Ratios
70%
67%
65%
63%
60%
55%
55%
50%
45%
45%
40%
37%
35%
33%
30%
Employee
Employer
ERB
Employee
Employer
PERA
Employee
Employer
20
NMRHCA - Current