RALEIGH — The shortfall in the state’s health plan related to paying for retiree benefits has dropped by over $7 billion, according to a report by The Segal Group, a human resources and benefits consulting firm.
The unfunded liability was expected to increase year over year to $32.44 billion but instead decreased from $30.92 billion to $23.75 billion between June 30, 2021, through June 30 of the current year, according to the report. Additionally, the funded level of the plan rose from 7.72% to 10.58% during the same time period.
Per a press release from State Treasurer Dale Folwell, The Segal Group’s report pegs the shortfall as having dropped $7.17 billion in the past year and the “Retiree Health Benefit Fund is at its highest rate of funding” since Folwell took office in 2017.
“This is a positive report, as we are benefiting from the tailwinds of high interest rates, but facing headwinds of inflation and the exorbitant costs of health care. Despite the progress more work remains to be done to achieve even greater stability in the fund,” Folwell said in the release.
“There is a long-term solution to decreased liabilities. Hospitals need to be transparent in posting their prices. And they should do the right thing by cooperating with us in reducing costs to the health plan by weeding out $300 million annually in waste and inefficiencies in health care delivery,” said Folwell.
According to the treasurer’s office, Segal researchers assessed the plan’s assets and net liability for postemployment benefits other than pensions (OPEB) as of June 30 for retirees and permanent, full-time, general employees who will claim the benefit once they retire.
“You can’t manage what you can’t measure,” Folwell said during a meeting of the OPEB Valuation Committee in late August.
“There are 609,448 retirees, spouses, surviving spouses, active, and vested but inactive OPEB plan members,” per Folwell’s release.
When Folwell was elected in 2016, the plan’s funding ratio was just 2.4% and according to the treasurer’s release, that put it “among the worst in the nation.” The most recent report now places plan’s funded level at 10.6%.
The improved outlook of the Retiree Health Benefit Fund is due in large part to higher discount rates. That lowered unfunded liabilities by $6.1 billion. Sharp contract negotiations to select the State Health Plan’s Pharmacy Benefit Management services was credited for a $2.57 billion reduction in liabilities. The new contract for managing the prescription drug benefits, is scheduled to take effect Jan. 1, 2023.
