Investing October 25, 2000

State, Local Retirement Assets Hit Record

October 25, 2000 (PLANSPONSOR.com) - Buoyed by strong markets, retirement assets of state and local government employees hit a record high of $1.9 trillion in 1999, up more than 11% from the year before, according to the Census Bureau.
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Over the same period, total membership in those retirement systems went down 7,500 to 16.2 million.

More than $1.4 trillion was invested in nongovernmental securities, including:

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  • $708 billion in corporate stocks
  • $295 billion in corporate bonds
  • $226 billion in foreign and international securities
  • $182 billion in mortgages and other securities

Some $273 billion was invested in government securities, mostly federal government securities ($270 billion).  Just $101 billion was left in cash and deposits.

Of the 2,211 public employee retirement systems in the US last year:

  • Illinois led the list with 377 systems
  • Pennsylvania was second with 360
  • Florida, Massachusetts, Michigan, Minnesota and Colorado all had 100 or more systems

Twenty-one states had fewer than 10 systems, including Maine and Hawaii – which had only a single system that covered all state and local government employees in those states.

California had the most members and the greatest amount of assets  – 1.7 million, and $323.2 billion, respectively.

Benefits October 24, 2000

Double Digit Healthcare Costs in 2001 – Again

October 24, 2000 (PLANSPONSOR.com) - Employers should be planning for a 10-13% increase in healthcare costs next year, the third year of double-digit increases in a row. Employers may finally be ready to pass some along to employees, according to two new surveys.
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The M&R 2000 HMO Survey by Seattle-based consultant Milliman & Robertson projects a 12% hike in health maintenance organization premiums next year, on top of a 5-10% increase this year based on responses from a third of the nation’s health maintenance organizations (HMOs). 

Comparable projections come from Hewitt Associates, with average healthcare increases of 10-13% in 2001, compared with a 9.4% overall rise this year.  Next year HMO costs are expected to rise another 13%, with preferred provider organizations (PPOs) up an estimated 10% and traditional indemnity plans up 12%.

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Hewitt projects that the average health plan will cost $4,707/employee next year, up from $4,222 in 2000.  Hewitt also projects that employers will pass along at least 25% of the increase to employees.

HMO rates have increased 5-10% every year since 1998 after remaining relatively flat from 1994 through 1997.

HMO Profits Slip

Despite the increases, HMO profitability as a percentage of premium revenue was negative for the fourth year in a row, with an average loss in net income equal to 1.4% of premium revenue in 1999 according to the M&R survey.

Hospital days per 1,000 of insured members, a measure of the single largest HMO expense category, have dropped 4.2% to 230 days/1000 members in 2000, but average hospital charges per day have increased by 10%.

Physician reimbursement increased by roughly 4% this year as HMOs reported a 3.4% decrease in physician reimbursement relative to Medicare fee schedules. Medicare increased fee levels by roughly 8% in 2000.

HMOs also reported an increase in prescription drug costs of 27.8% over 1999 to $24.61/month per member.

Respondents to the M&R survey indicated that HMOs had:

  • reduced member benefits through increased member copays
  • shifted from flat to multi-tiered copays
  • identified and counseled physicians with abnormal prescription patterns and,
  • shifted some of the cost risk to physicians (in some cases)

The survey includes responses from more than one-third of the nation’s HMOs.

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