GASB Statement 75 guidelines will bring a number of changes beginning in 2018. It’s important for public sector employers to understand these changes so they can plan ahead and inform their retirees about how their health plans might be affected. This article is a brief overview to help you understand and prepare for these changes.
What Does Statement 75 Cover?
As noted by Anthem, the GASB (Governmental Accounting Standards Board) Statement 75 will change how public employers record, account and disclose all their retiree benefits except pensions. These benefits are often referred to as OPEB (Other Post-Employment Benefits). They typically involve health care benefits, but can also include disability, life insurance, legal services and more.
What Changes Are Coming?
The guideline changes will require that public sector employers record the full amount of retiree benefits except pensions on their balance sheets. This change is meant to create greater transparency and provide standardization of record keeping.
The result of this change is that public sector employer balance sheets may reflect a larger liability amount for health care costs which could make some public sector employers look weaker financially. This is a real concern, since most state employers in Anthem’s 14-state coverage area report less than 33 percent of their full liability costs, as of 2015.
Here are some examples of what these changes might look like:
- Before Statement 75, unfunded actuarial accrued liability could be recorded in a footnote. Now it must be on the balance sheet.
- Valuations were required every two to three years, depending on the number of plan participants. Now they’ll be required every two years no matter what.
- How many actuarial ways can the future liabilities be calculated? Previously: six. Now: one.
- Previously, no other disclosures were required. That’s no longer the case.
How Can You Prepare?
Public sector employers can prepare by focusing on reducing their liability. For example, employers might want to adjust the health care benefits they offer to retirees since these benefits are the greatest source of public sector OPEB liabilities. One way to do this is by offering Anthem’s Group Medicare Advantage plans. Medicare Advantage plans are fully insured which means the risk of these plans is borne by the health insurance company not the public sector employer, thus lowering reportable liabilities. Plus, these plans can also benefit your retirees, since they may offer more comprehensive benefits at a lower cost. Here are some of the ways they reduce long-term health care costs:
- Quality plans may receive a CMS reimbursement bonus which can drive lowers premiums.
- More robust clinical management, medical management, and care advocacy programs for retirees can reduce long-term medical expenses.
- Access to high-quality networks and doctors can allow retirees to receive comprehensive care at a lower cost.
- For many public sector employers, premium and liability savings can be achieved starting in the first year of a new Group Medicare Advantage plan.
While these changes may seem complex, they can be evaluated and addressed. If you’re a public sector employer, talk to your health care broker and ask about GASB Statement 75 guidelines. Share that you’d like to find ways to reduce your liabilities, including adjusting your health benefits with higher quality plans like those listed above
Stephanie Dwilson has extensive experience providing expertise on topics including health, law and marketing. She’s a science journalist published by Fox News, a marketing expert and a non-practicing attorney with experience in personal injury law. She’s also a small business expert featured by Businessweek and has worked as a PR lead for one of the largest churches in America.