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Mercer Report Brief Synopsis

Recommend a phased in adoption of their proposal

Scenario 1 – Years of Service

All of their scenarios envision requiring more than 20 years of service to get the highest state subsidy of health insurance, and all envision retirees paying something toward that cost. To obtain the richest benefit a retiree would need at least 30 years of service; even the richest benefit would require retirees to contribute; dependent contributions are a percent of total cost just like the retirees; all enrollees contribute regardless of retirement date

Enrollee cost would range from about $5,000 (90 percent of cost) for those with the fewest years of service to $2,100 for those with 30 plus years (30 percent of cost).

Net savings to state: @ $260.8 million per year – a 35 percent reduction in cost to the state.

Scenario 2 – Benefit Points

Longer service employees, who delay the start of their benefits, would pay less than those who opted to start using them sooner. Points based upon age at retirement, plus years of service.

Enrollee cost would range from about $,4000 a year (65 percent of cost) for those with the fewest points, to about $1,100 a year for those with the most points (20 percent of cost.)

Net savings to state: @ $269.8 million per year – a 36 percent reduction in cost to the state.

Scenario 3 – Ability to Pay

Those with larger pension incomes would pay a higher percentage

Enrollee cost would range from $540 a year for those with the lowest pension incomes (10 percent of cost) up to about $6,200 a year for those with the largest pensions (90 percent of cost). Mercer points out several inequities to this approach.

Net savings to state: @ $267.3 million per year – a 36 percent reduction in cost to the state.

Scenario 4 – Benefit Points and Ability to Pay

A blend of 2 and 3 – this utilizes an eligibility grid that compares benefit points and pension income. The greatest cost is passed onto a retiree with fewer benefit points and higher income. The least cost is charged to someone with a greater number of benefit points and lower incomes.

Enrollee cost would vary dramatically based on the formula – from as little as $232 a year (5 percent of cost) for those with many years but very small pensions, to as much as $8,200 a year for those with very few years and a very high pension (100 percent of cost). This is Mercer’s preferred option.

Net savings to state: @ $297.2 million per year – a 40 percent reduction in cost to the state.

Scenario 5 – Benefit Points and Household Income

Same and Scenario 4, except that ability to pay is based upon total household income, not just pension income.

Enrollee cost would vary dramatically based on the formula. Those with the most years and the smallest household income would pay $232 (5 percent of cost). Those with few years and large household incomes would pay nearly $8,000 (100 percent of cost).

Net savings to state: @ $300.4 million per year – a 40 percent reduction in cost to the state.