Office of the Vice President for Global Communications

Tuesday, December 15, 2009

Committee on retiree health benefits to be formed

University leaders have appointed a new committee to recommend changes to retiree health benefits.

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The Committee on Retiree Health Benefits is the result of continuing efforts to contain the growth of benefit costs. Two previous committees recommended changes earlier this year that included new ratios for health care cost sharing and a waiting period before new employees receive university contributions to the retirement savings plan.

One of the recommendations of the Committee on Sustainable Health Benefits was that the university convene a special work group to examine various aspects of retiree health benefits, explains Laurita Thomas, associate vice president and chief human resource officer.

“The committee understood that the complexity of the retiree health care issue required more study, and their focus needed to remain on the cost-sharing adjustments to our health care premiums. Now that the cost-sharing changes are in process beginning in 2010, we are ready to act on the recommendation for further study of retiree health benefits with the formation of the new Committee on Retiree Health Benefits.”

The committee will be asked to provide guidance on better aligning retiree health benefits with those at U-M’s peer institutions. Committee recommendations will focus on eligibility requirements for employees to retire with benefits, and health care cost sharing for current and future retirees.

University findings show that U-M’s retiree health benefits significantly exceeded the market average. A 2008 analysis of 27 peer institutions found that U-M has the most generous retiree health benefits of all institutions in the study.

“We want to apply to retiree benefits the same approach to remaining competitive while spending responsibly that we are applying to health benefits for actively employed faculty and staff,” says Thomas. “Our charge to the committee includes remaining sensitive to the impact on those who are already retired by recommending changes with the least impact for those who may have less flexibility, but some degree of change will be inevitable.”

According to University Human Resources, projections show that U-M’s retiree population is growing at a faster rate than the faculty and staff population, and the number of retirees in U-M health care plans could double within the next 20 years. If that happens, expenses associated with retiree health care could increase from $37 million in 2008 to more than $186 million.

The committee, which will be chaired by Richard Hirth, professor of health management and policy, will make its recommendations to the university’s executive leadership by June 2010.