Retiree health care: GFOA members' perspectives.

• Author: Kohler, Dan
• Position: Government Finance Officers Association

The availability of retiree health care has become an area of increasing concern to both employers and their employees. Medical inflation, increased longevity and the growing percentage of retired to active employees, as well as fiscal constraints, have a significant impact on the ability of public-sector employers to continue offering retiree health benefits. Public employers are more likely to offer such benefits than their private-sector counterparts. (For example, the Bureau of Labor Statistics' surveys of employee benefits in state and local governments in 1992 and of employee benefits in medium and large private establishments in 1991 reported that employer-financed retiree coverage was available for 51 percent of full-time public-sector employees compared to 45 percent of full-time employees of medium and large private-sector establishments. Coverage is just 18 percent for employees of small private establishments.) While a significant percentage of public-sector employers provide retiree health benefits to their employees, many are reviewing their health care plans in an attempt to control costs and liabilities.

In order to obtain current information about the scope of retiree health care benefits provided by public-sector employers, the different types of plans offered, the financing methods employed, the use of funding arrangements and the expected future direction for retiree health care, the Government Finance Officers Association (GFOA) conducted a survey of its members. A questionnaire accompanied the May 1994 research bulletin State and Local Government Retiree Health Care: The Benefits and How to Manage Them, which was mailed to all GFOA members (approximately 13,000). By August 30th, 1,020 completed responses were received.

Of the 1,020 jurisdictions responding to the survey, 40 percent had a population of less than 25,000; 33 percent had a population between 25,000 and 100,000; and 26 percent had a population of more than 100,000. While 68 percent of respondents were municipalities, other types of governments also responded: 14 percent were counties, 8 percent were special districts and 10 percent were other categories.

Current Coverage

Of the 1,020 responding jurisdictions, 60 percent provide some form of retiree health benefits to their employees. (Employers reporting retiree health coverage include plans that are 100 percent financed by retirees.) A higher proportion of large jurisdictions than small jurisdictions provide retiree health care benefits. Seventy-seven percent of responding jurisdictions with populations of more than 100,000 offer retiree health care benefits compared to just 47 percent of jurisdictions with less than 25,000 residents. Fifty-seven percent of municipalities offer retiree health care benefits compared to 68 percent of counties and 61 percent of special districts.

The 40 percent of respondents that do not provide retiree health care benefits were asked if they were considering establishing such a plan. Virtually none of these employers (just 3 percent) indicated that a retiree health plan is under consideration.

Survey respondents who reported that they do not provide a retiree health care plan are excluded from the following analysis.

Retiree health care benefits tend to be offered through the regular employer health plan. More than three-quarters (78 percent) of respondents offering retiree health benefits responded that the employer health plan administered the retiree health plan. Other retiree health plan administrators reported include the statewide retirement system (8 percent), the employer's retirement system (5 percent) and the statewide health plan (4...