Health Cooperative Impact on Your Organization’s OPEB Valuation Data Collection

Key Benefit ConceptsActuarial, Services

Valuation when you are part of a Healthcare Consortium (Requesting Data from Consultant, etc.)

Participating in a health insurance cooperative may impact your OPEB valuation. Per GASB Statement 75, the “projection of benefit payments should be based on claims costs, or age-adjusted premiums approximating claims costs.” Generally, those who are not a member of a cooperative have health insurance coverage, whether it be fully or self-insured, that is based on their own group’s experience. In other words, the premium rates are developed based solely on the claims costs of their group. Therefore, in an OPEB valuation, actuaries are able to rely upon premium rate history and claims experience of the single employer to determine the expected claims costs for the valuation.

However,  things become a little more complicated when the employer plan is a participant in a health insurance cooperative. Per Actuarial Standard of Practice (ASOP) No. 6, an actuary performing an OPEB valuation should develop expected claims costs “based upon the pooled health plan’s total age distribution and the pooled health plan’s total expected claims costs or premiums rather than based on the group’s own age distribution and its own expected claims costs or premiums.” In this context, the pooled health plan is the cooperative health plan. Once it is established that it is a pooled health plan, the next question is to what extent is the plan pooled? It could be that it is a fully pooled health plan wherein all cooperative members are charged the same premium rates. Or perhaps each cooperative members’ premium rates are a blend in that it is partially based on the entire cooperative’s experience as well as their own group’s experience (i.e., partially pooled health plan). It is also possible that the initial plan rates are based upon the individual employer’s plan experience, but annual rate increases are based upon the cooperative ‘pool.’

The total number of employer members of the cooperative and the total of all plans’ summary plan experience is essential to provide to the actuary, if the OPEB valuation is to be performed in full compliance with ASOP No. 6.

The Wisconsin State Employee Trust Fund (ETF) Plan upon becoming aware of this situation now provides annual summary plan experience so actuaries may properly value individual employer members’ OPEB benefits.  If your health plan meets the criteria of either a fully-pooled or partially-pooled health plan, it is likely that your actuary will attempt to request information for the entire cooperative in order to properly determine the expected claims costs for your plan’s OPEB valuation.