According to the United Methodist Church’s Book of Discipline, each annual conference’s board of pensions must submit a generally accepted financial valuation, of its projected medical liabilities for its population covered by its employer retiree health care plan to the General Board of Pension and Health Benefits, and must submit a similar report biennially thereafter.
A comprehensive benefit funding plan is prepared and submitted to Wespath Benefits and Investments every year. This funding plan and the financial valuation are exercises in examining the type of benefits we are currently offering and specifically, how those benefits are to be paid for.
Typically, a valuation study examines dollars that are being spent on a particular benefit, contrasted with the dollars that are either coming in or are currently sitting in an account. Simply put, the study looks at the long-term funding, generally ten years out, and whether we can afford it down the road.
In 2018, for the first time in several years, the Louisiana Conference underwent a retiree health benefit valuation. Willis Towers Watson performed the valuation with data provided by the Conference. The study covered both active member and retirees, including ages and our current claims data.
This study, based on Louisiana Conference data, the current census data, and our current benefits estimated that our accumulated post-retirement benefit obligation is roughly $33 million. The challenge is – we only have assets of $6 million.
“I knew something had to be done,” says Sandy O’Brien, Executive Director of Administrative Matters of the Louisiana Conference. “We’ve seen this coming and no one wanted to see the fund simply run out of money. We want to honor the commitment but to do that, we needed to find a solution.”
As much as the current financial outlook was grim, assets of just $6 million compared to a potential $33 million commitment, retirees in the Louisiana Conference began approaching Stevens and O’Brien with concerns over the existing plan’s value.
“We began hearing from retirees who would come to us and say, ‘this is expensive,’” recalls O’Brien. “They’d say to us, ‘you know, I can go out into the private health care marketplace and get something better’. We had two competing forces colliding at the same time. We had the Willis Towers Watson analysis saying we owed $33 million along with word from new retirees who were getting into the system saying, ‘this really isn't working’”
O’Brien approached Bishop Cynthia Fierro Harvey with a simple request – re-activating a healthcare task force.
“The task force would be tasked with studying the issue,” O’Brien said, “Because there's no way, as an accountant, that I would allow an obligation of $33 million to sit out there without at least talking about it.”
The Health Care Task Force is comprised of Joy Irwin, Chair; Omer Davis, Chair of the Conference Board of Pensions and Health Benefits; Rev. Elaine Burleigh; Rev. Betsy Eaves; Rev. Wayne Evans; Rev. Cheri Godwin; Rev. John Locascio; Marsha Hopper; Rev. Richard Humphries; Rev. Ben McGehee; Henry Stamper; and serving Ex-Officio are Rev. Dr. Van Stinson, Sandy O’Brien, Theresa Stevens and Rev. Todd Rossnagel.
This group was intent on finding solutions and relied on the assistance of Willis Towers Watson, the same firm that helped with the valuation exercise as well as a firm relied on by Conferences all across the United Methodist connection.
“Actually, they have helped 23 conferences who have a very similar problem to the problem facing us in Louisiana,” says Theresa Stevens, assistant benefits and pension officer of the Louisiana Conference.
O’Brien and Stevens both admit that, while they know plenty about the current plan in Louisiana, their knowledge of the healthcare industry is not as comprehensive as it needs to be.
“That’s exactly why we reached out for help. We owe it to the retirees to ask as many experts as possible,” O’Brien said. “We, along with the Task Force, need to know the best options going forward. Together with experts in the field, we will then know the most viable option for the entire annual conference.”
Before the Task Force or anyone in the Conference Office discerned the best solution, everyone had to do the proper work of investigating the options available.
There are essentially three options available to the Conference.
First, there is the option of doing nothing. This option could be the result of the proposed changes failing to pass at Annual Conference in June of 2019.
“If the Annual Conference votes against this proposal, nothing will change,” O’Brien said. “However, we will run out of money in approximately 5-7 years and, in some ways, the situation becomes even more complicated.”
The Conference could also choose to increase premiums and decrease benefits. However, this too is not a viable option.
Everyone agreed – the best option has to be one that works to contain the soaring health care costs but shall not sacrifice quality or coverage for Louisiana active and retired clergy, lay employees, eligible dependents and/or surviving spouses.
From consultation with health care experts, the Task Force and the Conference Office is asking for the Annual Conference to engage in what’s known as “monetizing the benefit”, which allows the Conference to reduce the cost without shifting the cost to the retirees. Further, it is a solution that gives plan holders the ability to choose from a wide selection of Medicare supplemental plans and Medicare Advantage plans and allows them to personalize Medicare benefits.
It will also provide eligible participants with a health reimbursement account (HRA) that helps offset the cost of an individual Medicare supplemental or advantage plan.
If passed, participants in the Louisiana system will now be responsible for choosing and paying for their own health coverage—but the HRA will help cover the cost.
The Conference Office understands important choices will need to be made about the various health care coverage plans and options. To help everyone make informed decisions with confidence, this proposed change comes with a partnership with a company called Via Benefits, licensed benefit advisors who will serve as advocates and will help participants choose the Medicare coverage plan that best serves their medical needs and fits their individual budgets.
These knowledgeable, objective advisors will be available to support and assist in making these decisions. They will guide participants through the entire process and their assistance is provided at no cost to the individual participant. To date, Via Benefits has helped numerous retirees evaluate and enroll in plans.
Via Benefits will provide personalized assistance, such as:
Via Benefits will also offer a customized website where you can learn about plan options available in your area, begin evaluating those options and get more details about the enrollment process.
The Conference Office, together with Willis Towers Watson, anticipate that nearly 95% of participants will find themselves in a cash-neutral or cash-positive situation as they are no longer having to pay $3,600 annually for out of pocket premiums.
Stevens put it this way, “On average, this will provide $400 a month to individuals. Money that is put straight back into their pocket every month, per person, to go out and buy Medicare supplemental insurance, drug coverage, plus vision and dental plans, that are best matched for them. That's the math.”
Much of this cost-savings is because Louisiana currently operates inside its own very small pool of participants, and the proposed plan consists of a much larger pool.
“That’s one of the biggest takeaways from this solution that I hope everyone can see,” says O’Brien. “The experts took all of the cash outflows by participant; the deductibles, the premiums, the copays and they estimated that we were paying over $6,500 a year per participant. Essentially, we were our own insurance company with a very small risk pool of participants. However, Via Benefits can put us in a pool where there will be a large number of participants and the risk is greatly spread out.”
While there is still a risk that 5% of the current participants will see an increase in costs, the Conference Office and the Health Care Task Force wanted to ensure that these participants not be left behind.
To do this, they will create a catastrophic prescription health reimbursement account based on the current data for those who fall into the cash-negative pool. These participants will be eligible to participate in a claims process with Via Benefits where up to $7,000 a year can be spent on their prescription drugs, which is the area where most of the higher costs originate.