One of the highest impact assumptions in OPEB actuarial valuations is the participation rate.  This rate represents the percent of future retirees assumed to participate in the employer's health plan during retirement.

The participation assumption has a direct and leveraged effect on OPEB liabilities.  For example, if the assumption is that 60% of employees are assumed to elect coverage at retirement, but the actual "crystal ball" rate is 40%, then the plan's liability is 1½ times what it should be.  As a result of healthcare reform, similar examples may become a reality that employers and actuaries should address proactively.   

 How will healthcare reform affect participation rates?  That's kind of a grey area.  How grey?  "Charcoal" as Fletch would say.    Read more... 

Employers who offer retiree health benefits to their employees have something new to think about: How will proposed Medicare reforms impact my plan and its costs? Although changes to the Medicare system are likely a long way off, Medicare reform is a hot topic lately and changes to the program could have a dramatic effect on your retiree obligations if you aren't prepared for it.

A recent Governing article provides a good summary of the relevant issues for public employers. Many of these ideas are equally applicable to private sector retiree health and OPEB plans. I thought it would be useful to summarize some of these points and add a couple of other considerations.

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