Industry: Large city in the Los Angeles area
Amount of Employees: 3,000 employees
Type of Insurance: Group health for employees and retirees
Valued Client Since: 2009
The city had accumulated Other Post-Employment Benefits (OPEB) liabilities of $250 million as of the end of the 2015 fiscal year largely a result of the “hidden subsidy”- allowing retirees to pay the active premium for their coverage. Over the coming decade, projected liability was predicted to nearly triple, which could have led the city to bankruptcy. The challenge would be to find a workable alternative for providing health benefits to the city’s retirees separately from the benefits provided to the active employees.
AssuredPartners developed an approach to transition pre-age-65 and Medicare retirees from the city-sponsored plans into health care benefit exchange services. This allowed them to “unblend” the retiree costs from the premium rates for the active employee population.
The new benefit structure effectively reduced the City’s unfunded OPEB liability by $200 million and will permit them to affordably address the remaining liability under the GASB standards. Retirees received customized plans at lower cost. The active employees now pay lower contributions for their health benefits. The City and its residents will enjoy long-term relief to the municipal budget and greater fiscal flexibility to serve the community.