Category: Benefits

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Insurer Goes After Surgery Centers for Out-of-Network Charges

A lawsuit in California is pitting a large insurer against a network of surgical centers over patient referrals to out-of-network specialists.

The issue is front and center for many employers seeking to suppress health care costs. Some large companies are prodding employees to shop around to find quality providers that offer the lowest rates for nonemergency procedures.

In this case, Aetna alleges that Bay Area Surgical Management of Saratoga, California, which operates six outpatient surgical centers, is grossly overcharging for its procedures. Physicians are suspected of waiving co-payments and other fees for patients who receive treatment, then billing Aetna the difference, the lawsuit claims.

The practice has cost Aetna $23 million for about 1,900 procedures in the past two years, of which those costs should have totaled about $3 million, Aetna says in the lawsuit, filed in California Superior Court in Santa Clara County.

Typically, a patient who chooses to go to an out-of-network provider for care will be billed the balance of what the insurer won’t pay for that noncontracted service. This type of bill often comes as an unpleasant surprise to patients.

The practice of so-called “balance billing” for emergency services for members of health maintenance organizations, or HMOs, has been banned in California. Physician groups, including the American Medical Association, hold the position that balance billing is an important tool to make sure providers are paid a fair rate.

The costs of using out-of-network providers get passed onto employers in several ways, says Sandy Ageloff, health and group benefits leader at Towers Watson in Los Angeles.

“The first impact is that when employees go out of network, there is no discounting of charges,” Ageloff says. “There’s a direct and ongoing impact of out-of-network utilization.”

Second, if providers aren’t collecting the full amount owed, the need for that funding will have to come from somewhere else. This can raise the cost of health care for private payers, she says.

Employers are addressing the issue in part by looking at their benefit design and increasing deductibles and lowering out-of-pocket maximums so workers must pay a larger share for going out of network, Ageloff says. In California, where provider networks are broad and access to good care is widespread, employers don’t feel the need to pay for care that is out-of-network, she says.

In the Aetna lawsuit, balance billing is described as an incentive for patients to seek treatment with contracted—or “in-network”—providers.

In this case, however, the Bay Area Surgical Management centers waived the 20 percent to 30 percent of out-of-network costs normally charged to Aetna members for services and instead passed the fees onto Aetna. In one instance, Aetna got a $66,100 bill for the “correction of a bunion,” the lawsuit says.

Aetna alleges that the referring physicians have a financial stake in the surgery centers and, unbeknownst to patients, received payment for telling them to have their surgeries at these facilities. The centers also “cherry-picked” patients with the best insurance coverage, the suit claims.

“We really want to make this more transparent for members,” says Aetna attorney Laura Jackson. “When a physician has an ownership interest, they should be disclosing that to the patient.”

Jackson says that the practice is “not ethical and not legal in California.”

Daron Tooch, partner at Hooper, Lundy and Bookman, and attorney for the surgery centers, says the physicians are trying to help their patients get the best care.

“In California, it’s entirely legal,” Tooch says of physicians referring patients to centers where they have a financial stake. Aetna “really got it all wrong. These lawyers have no understanding of health care.”

The surgery centers are giving the patients a break by waiving the copayments and other fees, and what they charge Aetna is irrelevant, because Aetna ultimately decides what it will pay for out-of-network services, he says.

“It’s not like Aetna is out of pocket for more money,” Tooch says. “It’s paying a percentage of what it deems reasonable and customary.”

Tooch says Aetna is using the lawsuit to force the surgery centers into unprofitable contracts. “I think Aetna is trying to bully providers into accepting contracts with low rates,” he says.

Aetna’s Jackson says, “It’s just absolutely not true.”

Jackson says that most patients believe that physicians are referring them to the best provider, and one that is covered by their insurance, not one where physicians have a financial stake.

“From our perspective, it’s a violation of the corporate practice of medicine,” she says. “Our concern over patient harm is that physicians are financially gaining.”

The lawsuit alleges that in one case, a participating physician received a bonus check of $980,000 for referrals to the center.

Aetna has filed several similar lawsuits on the issue of balance billing for out-of-network services in other states, including New York. In the California case, Jackson says Aetna has filed complaints with the California Medical Board, the U.S. Department of Health and Human Services, the Office of the Inspector General, and the California attorney general. It has also contacted the California Department of Insurance to create legislation around the issue of waiving copayments and coinsurance for out-of-network services, Jackson says.

Tooch says his clients have not been contacted by any state or federal authorities over any pending investigation on the issue.

The next hearing on the California case is scheduled for July.

Rebecca Vesely is a freelance writer based in San Francisco. To comment, email editors@workforce.com.

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Employers on Non-Calendar Fiscal Years Seek FSA Mandate Relief

An employer benefits lobbying group is asking the Treasury Department for transitional regulatory relief to ensure that participants in flexible spending accounts with non-calendar years can make the maximum legal contributions to their FSAs during the first year a health care reform law mandated FSA cutback goes into effect.

Under that provision in the Patient Protection and Affordable Care Act, which goes into effect on Jan. 1, 2013, the maximum annual contribution employees can make to their FSAs is $2,500. Under current law, there is no annual limit, though employers typically limit annual contributions to between $4,000 and $5,000.

Without regulatory relief, the new limitation would have an “effect of causing health plan FSAs that operate on a non-calendar-year basis to have to comply with the limitation earlier than the statutory effective date,” notes the Washington-based American Benefits Council.

In a letter sent last week to the Treasury Department, ABC cites the example of an employee in an FSA with a fiscal year that begins on July 1, 2012. The employee elects to contribute $3,600 during that plan year, making contributions of $300 a month from July 1, 2012, through June 30, 2013. FSAs typically are designed so employees make level contributions during the plan year.

If the employee elects to contribute $2,500 for the next plan year starting July 1, 2013, the employee would violate the $2,500 annual limitation for 2013, ABC notes.

That is because the employee would have contributed $300 a month for the first six months of 2013 and $208.33 for the last six months of 2013. That total contribution of $3,050 would violate the $2,500 statutory limit for 2013.

To prevent that from happening, ABC is asking Treasury to provide transition relief to make clear that FSAs with non-calendar years be exempt from the $2,500 cap on FSA contributions for plan years that begin prior to Jan. 1, 2013.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Health Savings Account Contribution Caps to Rise Slightly in 2013

The maximum contributions that can be made to health savings accounts will increase slightly in 2013, the Internal Revenue Service said April 27.

Under IRS Revenue Procedure 2012-36, the maximum contribution that can be made to an HSA in 2013 will be $3,250 for employees with single coverage, up from $3,100 this year. The maximum HSA contribution for those with family coverage will be $6,450, up from $6,250.

The maximum out-of-pocket employee expense, including deductibles, will rise next year to $6,250 for single coverage, up from $6,050. For family coverage, it will increase to $12,500 from $12,100.

Increases in the HSA limits are tied to changes in the cost of living.

However, the minimum deductible for a high-deductible health care plan to which HSAs must be linked also will rise in 2013 to $1,250 from $1,200 for single coverage and to $2,500 from $2,400 for family coverage, the IRS said.

Under IRS Revenue Procedure 2012-36, the maximum contribution that can be made to an HSA in 2013 will be $3,250 for employees with single coverage, up from $3,100 this year. The maximum HSA contribution for those with family coverage will be $6,450, up from $6,250.

The maximum out-of-pocket employee expense, including deductibles, will rise next year to $6,250 for single coverage, up from $6,050. For family coverage, it will increase to $12,500 from $12,100.

Increases in the HSA limits are tied to changes in the cost of living,

However, the minimum deductible for a high-deductible health care plan to which HSAs must be linked also will rise in 2013 to $1,250 from $1,200 for single coverage and to $2,500 from $2,400 for family coverage, the IRS said.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Ford to Offer Lump-Sum Pension Payouts to Ex-Workers



Ford Motor Co. said April 27 it will offer 90,000 U.S. salaried retirees and former employees the option to take their monthly pension benefit as a lump-sum payment.

The magnitude of the program, which is part of Ford’s long-term strategy to “de-risk” its pension plan, is the largest ever offered “by a U.S. company for ongoing pension plans,” the automaker said.

Pension experts say the program may be the first of its kind. Typically, lump-sum payments are offered as an option only when an employee terminates employment and is eligible for a pension benefit.

“Historically, lump sum distributions, which allow plan participants to exchange receiving periodic annuity payments for a single lump-sum payout, have been offered to participants only upon separation from active employment,” benefit consultant Towers Watson said in a statement.

When individuals take a lump-sum payment rather than continued monthly benefits, Ford no longer will face such risks as paying more than expected if the individuals live longer than expected. In addition, Ford no longer would face the risk of making additional unexpected contributions to its plans in the future to pay benefits if investment returns slump.

“Providing the option of a lump-sum payment to current salaried U.S. retirees and former employees will reduce our pension obligations and balance sheet volatility,” Ford Executive vice president and Chief Financial Officer Bob Shanks said in a statement.

At year-end 2011, Ford’s U.S. pension plans—including plans covering salaried and retired employees and union employees and retirees—had a funded ratio of 80.7 percent, with $39.41 billion in assets and $48.82 billion in liabilities. That compares with a funded ratio of 85.8 percent at year-end 2010, when the U.S. plans had $39.96 billion in assets and $46.65 in billion in liabilities.

Ford said payouts will start later this year and will be funded from existing pension plan assets. 

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

 

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Pharmacy Benefits Manager SXC Acquires Catalyst Health Solutions in $4.4 Billion Deal

SXC Health Solutions’ proposed $4.4 billion acquisition of a Maryland-based competitor would be the latest and biggest target in its acquisition spree of recent years.

The Lisle, Illinois-based pharmacy benefit manager has completed six acquisitions in CEO Mark Thierer’s tenure; the latest was the $250 million cash purchase of Denver-based health benefit manager Health Trans LLC, which closed Jan. 1.

The April 18 announcement, a deal with Catalyst Health Solutions Inc., outstripped that deal and would create a combined company that covers 25 million members nationwide.

That would still be a fraction of the total pharmacy benefits marketplace, which is dominated by companies like CVS Caremark Crop. and the combined company formed by the merger of ExpressScripts Inc. and Medco health Solutions Inc.

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With the acquisition of Catalyst, SXC could join the biggest players in the industry.

“You could start to say their name in the same breath,” said Charles Rhyee, a New York-based equities analyst at Cowen & Co.

The merger mania is likely to prompt insurers and large employers to switch prescription benefit managers, which could open the doors for SXC down the road, if not right away.

“In our view, the companies saw an opportunity to generate value given the dislocation in the space — although the impact on this selling season remains a question,” according to a note by analyst Amanda Murphy of New York-based investment firm William Blair & Co.

The combined company will remain based in Lisle, a western suburb of Chicago, and Thierer will continue as CEO and chairman of the combined company, the statement said.

The combined company expects $13 billion in revenue, rivaling the $13.9 billion in 2011 revenue reported by Deerfield, Illinois-based Baxter International Inc.

At that size, SXC would be the 15th-largest public company based in the Chicago area, according to Crain’s 2011 list of the largest local public companies.

Shareholders of Rockville, Maryland-based Catalyst are to get $28 in cash and 0.66 shares of SXC stock for each Catalyst share, according to the statement. That equates to a price of $81.02 for each Catalyst share and a premium of about 28 percent based on the two companies’ April 17 closing prices.

“This is an extremely compelling combination that brings together SXC’s industry-leading tools and technology with Catalyst’s full-service PBM, best-in-class service and growing client base to create a company that is even better positioned to compete in the marketplace,” Thierer said in the statement.

The deal is expected to be completed in the second half of 2012. After closing, SXC shareholders are expected to own about 65 percent of the combined company, with Catalyst investors holding the remainder, according to the statement.

SXC reported $5 billion in 2011 revenue.

Andrew L. Wang and Todd J. Behme write for Crain’s Chicago Business, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Humana Pharmacy Solutions Has New Offerings for Self-Insured Employers

Humana Pharmacy Solutions has announced two new offerings for self-insured employers, the pharmacy benefits management unit of Humana Inc. announced in a statement April 11.

The new options include the Wal-Mart Rx Network, which directs employees to fill prescriptions at the international retailer; and the Rx4Value formulary, which swaps certain name brand drugs for generic.

“This is all about predictability,” said William Fleming, president of Louisville, Kentucky-based Humana Pharmacy Solutions. He added that by influencing where drugs are purchased and which drugs are purchased, the new offerings give employers a guarantee of what their prescription prices will be annually.

The Wal-Mart-focused network averages 10 percent savings on annual prescription costs, while the formulary averages 15 percent. If employers choose to enact both plans, the average savings increases to 20 percent.

The program is available to self-insured employers with a minimum of 500 employees. By early 2013, Humana plans to offer similar options to fully insured employers, said Fleming.

For more information about the pharmacy benefits options, call (855) 605-6383.

Anna Gaynor writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Health Reform Law to Slightly Lower Number of Employer Plan Enrollees: CBO

The health care reform law will have only a modest impact on the number of people covered in employer plans, but it will significantly reduce the number of uninsured, according to a congressional analysis.

In 2016—two years after the effective date of key reform law provisions that provide subsidized coverage to the lower-income uninsured and impose financial penalties on employers that do not offer “affordable” coverage or do not offer any coverage at all—the Congressional Budget Office estimates that 155 million people will have coverage through employer plans.

That’s a coverage drop of 4 million, or 2.6 percent, compared with the 159 million people who would have had employer-sponsored coverage had the health reform legislation not been passed.

On the other hand, the number of uninsured will fall to 26 million in 2016. In 2012, the CBO, whose report was released March 14, estimates that 53 million Americans will be uninsured.

A key factor in the drop in the number of uninsured will be the creation of state health insurance exchanges, which in 2016 are expected to attract 20 million enrollees.

The exchanges will be available, among others, to lower-income uninsured individuals—those with incomes of up to 400% of the federal poverty level—who will be able to use federal premium subsidies to buy coverage from insurers offering policies through the exchanges.

An expansion of the federal-state Medicaid program also will reduce the number of uninsured, according to the report.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Consumerism Coming to Companies’ Health Care Plans

While large employers at the annual National Business Group on Health conference last week grappled with uncertainty around health care reform and its impact on their bottom line, one thing was clear: Employees will be asked to do more to keep costs down by staying healthy and becoming savvier consumers.

“No one gets out of being a consumer at TE,” says Erin Felter, director of U.S. benefits for TE Connectivity, a Berwyn, Pennsylvania-based electrical manufacturer formerly known as Tyco Electronics Corp.

Felter was on a panel titled Opportunities and Challenges for Consumerism and Health Accounts under the ACA, which is the shortened acronym for the Patient Protection and Affordable Care Act. Despite efforts to get the company’s approximately 100,000 employees to enroll in its high-deductible plan, about 70 percent chose a preferred provider organization, or PPO, plan.

“70 percent of our employees were in the wrong plan,” she says. Only 2 percent chose the consumer-directed plan even though it offered greater value. “Employees are paying 50 percent more to be in a PPO. No one should be in a PPO.”

Her frustration over getting employees to take more responsibility for their health care was echoed by many conference goers and supported by the recently released 2012 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care that shows a growing number of employers are taking a carrot-and-stick approach to changing employee behaviors.

According to the survey, 61 percent of employers now offer financial rewards to workers who participate in wellness programs, such as health screenings and smoking cessation classes, and to influence better health outcomes, compared with 36 percent in 2009. And 20 percent are using penalties—such as insurance premium or deductible increases—if employees choose not to make healthy choices, like smoking or not completing a health management program. That figure will likely increase in coming years.

And a growing number of companies are introducing high-deductible insurance plans that are often coupled with a health savings account, or HSA, giving employees more discretion over how they spend their health care dollars. Enrollment in these account-based plans has nearly doubled in the past two years from 15 percent in 2010 to 27 percent this year, according to the survey. Fifty-nine percent of companies have a high-deductible plan and another 11 percent expect to add one in 2013, the survey of 512 employers showed.

Consumer-driven plans have high deductibles and lower premiums and can save companies and healthy employees money, but critics argue that those with chronic conditions might not be able to afford the care they need. To encourage enrollment in these plans, some employers contribute to employees’ HSAs.

“There’s less of a willingness to pass through a defined health care benefit and more acceptance of the idea that we need employees to make healthier choices,” says Helen Darling, executive director of the NBGH, a trade association of large employers. “We’re just not going to keep paying endlessly without expecting the employee to do everything they can within their control to make their health better. If you look back 10 years, the idea that employers would be at this place would have come as a huge surprise. They would say, ‘Our job is just to pay the bills.’ But that’s changed completely.”

Tom Billet, a senior consultant at Towers Watson & Co. says that in the past few years “companies have gotten more aggressive” about using financial rewards and penalties to get employers to take more responsibility. They’ve moved beyond cost sharing through higher deductibles and are focusing on changing behaviors through rewards and penalties to get employees to undergo health-risk screenings and visit their doctor regularly. Those with chronic conditions are now expected to manage them effectively.

Billet says that incentives and deterrents are flipsides of the same coin. “You can position a smoking surcharge in two ways: On the one hand, you can tell employees, ‘You’ll pay more if you’re a smoker,’ or you can say that ‘You’ll get a discount if you don’t smoke.’ How you approach it depends on the company’s culture.”

In an effort to help employees make better health care spending choices, a growing number of employers plan to share cost information with their workforce. “It is a well-understood fact that health care does not function as an efficient market because consumers do not know price and quality before they purchase a service such as an MRI or mammogram,” the survey says.

Today, 15 percent of employers provide employees with price information and another 22 percent plan to do so next year. Also, more than one-third of companies require vendors to share claims data with employees.

“Employees need to be savvier consumers,” Billet says. “That’s most easily done at the point of seeking care. You can decide when to see your doctor and about what kinds of conditions. The second level down is deciding what sort of provider you need to see—a specialist vs. a primary-care physician. And the third and least easily done level of decision-making is based on price and quality. At the moment there’s not a lot of transparency out there.”

Despite these obstacles to improving health care consumerism, employers are committed to staying in the employee benefits business, at least for now. While most employers remain focused on improving their health plans through 2015, long-term confidence that they will continue to offer health benefits is low. According to the survey, 23 percent “are confident that they will continue to offer health care benefits for the next 10 years down from a peak of 73 percent in 2007.”

“The difference is health reform and the passage of health care exchanges,” says Billet, referring to the establishment of state health care exchanges in 2014. An exchange is a marketplace where people who are not covered by their employer will be able to purchase affordable health care insurance. “A lot of companies are saying that, in the short term, ‘Yes, we’re committed,’ but in the longer term they are saying that they’re less committed because there will be an alternative.”

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Obesity Problems Weigh on Workers’ Comp

The U.S. obesity epidemic is presenting difficult workers’ compensation challenges, complicating efforts to return employees to work and to full health.

Not only are obese workers comp claimants likely to miss more work days than healthy-weight co-workers with similar injuries, obese workers are likely to have higher medical costs and are more likely to become permanently disabled, research has shown.

According to the Centers for Disease Control and Prevention, the prevalence of obesity among U.S. adults and children remained steady in 2009-2010 compared with 2007-2008. Some 37.5 percent of adults and nearly 17 percent of those up to age 19 were obese, which health experts say increases the risk of co-morbid conditions that include hypertension, diabetes, stroke, coronary heart disease and cancer.

Co-morbid conditions complicate workers comp cases and make it difficult for treating physicians to help workers attain maximum medical improvement or permanent-and-stationary status, several sources said.

Obesity-related complications in workers’ comp claims are becoming more common, some workers comp managers say.

Doctors may recommend weight-loss programs or even gastric bypass surgery for such patients, which also can prolong the case, said Laurie Ogsaen, workers compensation manager for Evergreen International Aviation Inc. in McMinnville, Oregon. Then, workers compensation payers may be on the hook for the bypass surgery as well as related medical complications or adverse reactions, she said.

“It just opens up a whole can of worms,” said Ogsaen, who noted that she is seeing obesity-related claims “creeping in more and more” across the 38 states where Evergreen operates.

In one such case, for example, a worker weighing more than 300 pounds sprained an ankle. Even though he was in his mid-20s, the worker’s treatment dragged on for seven months without reaching maximum medical improvement, despite physical therapy and light-duty jobs.

“I was reading over the doctor’s notes, and the first thing that jumped out at me was that the doctor indicated after seven months that, in his opinion, this employee’s ankle would not get better and he would not become maximum medical unless he lost a significant amount of weight,” Ogsaen said. “As soon as (the doctor) mentioned weight I said, “Oh no.’ “

Ultimately, the claimant agreed to settle the claim, perhaps to avoid a weight loss program.

Obesity is an ongoing workers comp issue and can add costs to a claim, said William Zachry, vp-risk management at Safeway Inc. in Pleasanton, California. He cited the example of knee replacement surgeries that otherwise may not be necessary.

Research has documented some of the ways obesity adversely affects workers comp claims.

A 2007 landmark Duke University analysis, for example, found that obese workers filed twice the number of workers comp claims as their counterparts. Their medical costs were seven times higher and they missed 13 times more days of work due to their injuries than did employees who were not obese.

In late 2010, Boca Raton, Florida-based NCCI Holdings Inc. also released research that found “the range of medical treatments and costs, as well as duration, typically is greater” for obese workers than those who are not obese with similar injuries.

Treatments that tend to be primary cost drivers in claims where obesity is a factor include complex surgery, physical therapy and drugs, NCCI found.

Additionally, NCCI found that “there is greater risk that injuries will create permanent disabilities if the injured worker is obese.”

About 28 percent of claims handled by Sedgwick Claims Management Services Inc. involve workers who are overweight or obese, said Teresa Bartlett, the third-party administrator’s medical director in Troy, Mich.

“But then when we look at the top six most expensive claims—that (includes) musculoskeletal, fractures, strains and sprains—46 percent of those claimants are obese, so (they account for) the highest cost,” Bartlett said.

Such cases present an additional challenge for workers comp managers because the longer an injured worker is away from the job, the greater risk they will “decondition” and gain additional weight, making it even harder to help them return to work, several sources said.

According to workers comp claim experts, there also is the risk of increased mental health problems and challenging claimant behaviors, such as drug abuse, when claimants are obese, sources added.

For example, when a client asked him to evaluate their claim files on injured workers suffering from chronic pain—which often is treated with prescription pain drugs—Michael J. Shor said he noticed a high percentage of the claimants had body mass indices indicating they were obese.

Then looking through medical literature, the managing director of Best Doctors Occupational Health Institute in Boston said there was some correlation between obesity and chronic pain.

And injured workers’ social fears, due to their body image, can complicate efforts to help them through exercise programs that can aid in reducing their weight, said Julie A. Fortune, senior vice president and chief claims officer for Arrowpoint Capital in Charlotte, North Carolina.

“They may be extremely uncomfortable” participating in an exercise program, Fortune said. “It’s also a challenge for the doctor to put together an appropriate treatment plan and for the claimant.”

Roberto Ceniceros writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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State Public Sector Retirement Plan Roundup

Across the country states are introducing pension reforms as they grapple with shrinking coffers and growing pension obligations. In the Northeast, Rhode Island introduced sweeping changes to its pension system last November, including switching from a defined benefit to a hybrid defined contribution plan. In the South, states such as Florida and Louisiana have increased employee contributions and passed other significant measures. In the Midwest, Illinois faces a staggering pension shortfall as legislators work to pass a series of reforms. And in the West, California, the nation’s largest public pension system, is wrestling with a $612 billion debt—the largest in the country, according to the Pew Center on the States. Workforce Management examined some of the more noteworthy 2011 reforms from across the country, which were compiled from various sources.

CONNECTICUT: Broad changes included health plan and wage and salary modifications. Members saw benefit reductions for early retirement, increases in age and service requirements for normal retirement, and cost-of-living-adjustment reductions and vesting changes.

DELAWARE: The First State changed the normal retirement age and contribution requirements for future employees, and increased vesting requirements from five to 10 years for current members. Overtime payments will be excluded from the final average compensation calculation. And the early retirement reduction factor increased slightly.

MAINE: The retirement age for most state employees with less than five years of service on July 1 increased from age 62 to age 65. Post-retirement benefits, including provisions for return to covered service, were put in place. Retiree cost-of-living adjustments were frozen for three years. And a working group is tasked with closing the current defined benefit retirement plan and replacing it with a new plan that will supplement Social Security benefits.

MARYLAND: Changes to Maryland’s retirement plans included increases to employee contribution requirements for most members, and a 3 percent cap on retiree Cost-of-living-adjustment increases. Normal service retirement eligibility increased, as did early retirement eligibility. New members in the Deferred Retirement Option Program will earn a lower interest rate on their accounts, and the pension plan retirement formula is changing for future members. In addition, most retirees will now wait five instead of nine years to be exempt from a re-employment earnings limitation.

MASSACHUSETTS: Changes included increased employee contributions for all pension plan members with the exception of police and firefighters with more than 40 years of service.

NEW HAMPSHIRE: The state changed its pension benefits formula and increased the normal retirement age from 60 to 65 for future members. And in an unusual move, House Bill 491 called for New Hampshire to stop divestiture of retirement system assets relating to Sudan if it would result in economic harm to the system’s trust fund. The law originally was passed to protest reports of genocide in the Darfur region. In recent years, several states, such as Ohio and Arizona, have passed laws seeking to divest pension fund assets linked to the northeast African nation.

NEW JERSEY: Sweeping changes raised the retirement age for younger workers, increased employee contribution rates to 8.5 percent and added cost-of-living-adjustment reductions. Benefits formulas changes are in store for most members, and early retirement rules saw an increase in age and service requirements.

RHODE ISLAND: Rhode Island’s Retirement Security Act changed pension plan eligibility for most members, and increased contribution rates, while decreasing vesting requirements. Most state employees will be enrolled in a new 401(k)-style hybrid plan that has a 1 percent match. Cost-of-living-adjustment increases are suspended for future retirees until funding minimums are satisfied.

VERMONT: Employee contributions increased through July 1, 2016, or until the state’s retirement system is deemed to have assets equal to liabilities. During that time period, Vermont’s contribution to the plan will be reduced by up to $5.3 billion a year.

ALABAMA: Current and future members of the Retirement Systems of Alabama, excluding state police, will see increases of 2.25 percent to 2.5 percent in their required contributions to the plan. Employer contributions to the retirement plan will be reduced to offset the increased employee contributions.

FLORIDA: Employee contributions increased to 3 percent of salary, while state contributions will decrease this year and next for some employee groups. Interest rates on Deferred Retirement Option Program accounts will decrease for future plan members, and changes were made to vesting, service requirements and final average compensation rules for future pension plan members. Cost-of-living adjustments were eliminated for service after July 1, 2011.

LOUISIANA: Most employees will see increased contribution requirements, capped at 8 percent for some, to the pension plan. The benefits formula changed to prevent “pension spiking,” raising pay shortly before retirement to boost monthly benefits, in the calculation of final compensation. And ongoing efforts aim to reduce the unfunded liabilities of the Louisiana State Employees’ Retirement System and the Teachers’ Retirement System of Louisiana.

MISSISSIPPI: Future pension plan members will see contribution increases and increased years of service to receive full retirement benefits. Those who retire without meeting the age and service requirements will receive a benefit subject to an actuarial reduction based on their age and years-of-service requirements. Changes to the benefit formula include reduced percentage of salary and an increase in the number of years during which average compensation is calculated.

NORTH CAROLINA: Vesting requirements increased from five to 10 years for some plan members. In addition, the amortization periods for the accrued unfunded liabilities of the Teachers’ and State Employees’ Retirement System, Consolidated Judicial Retirement System, North Carolina National Guard Pension Fund and Firemen’s and Rescue Squad Workers’ Pension Fund increased from nine to 12 years.

WEST VIRGINIA: For members who joined the Public Employees Retirement System on or after July 1, 2011, the existing provision for retirement was amended to require five or more years of contributory service. Legislation also redefined the final average compensation formula to exclude attendance performance, recognition bonuses, or any one-time, flat-fee or lump-sum payment.

ILLINOIS: Pension reform has become a highly contentious issue among lawmakers as the state faces $139 billion in obligations owed employees in its five pension systems. The state has $63 billion in assets to pay for the retirement benefts. The Pew Center on the States has called it the worst-funded pension system in the country. Several bills are working their way through the Legislature.

INDIANA: In February, the state created a defined contribution plan for new employees. Workers can opt into the plan or go with the Public Employees’ Retirement Fund. For the defined contribution plan, participants contribute 3 percent of pay with a minimum state employer contribution of 3 percent.

KANSAS: A bipartisan commission study recommending the Kansas Public Employee Retirement System move to a defined contribution plan from a defined benefit plan was approved by the Legislature in January and will go into effect for new hires as of Jan. 1, 2013. The commission recommendations trigger certain reforms already signed by Gov. Sam Brownback in 2011, including increasing employer contributions to 1.2 percent by 2017, from the current 0.6 percent. Employees, categorized in specific tiers, will have to choose between increasing contributions and agreeing to a decreased final benefit.

NEBRASKA: Last May, Gov. Dave Heineman signed into law various contribution increases for members of Nebraska’s state school employees’, state troopers’ and Omaha school employees’ retirement systems. In December, about 400 state troopers filed a lawsuit in U.S. District Court in Lincoln, saying employee contribution increases were unconstitutional. Under the new law, troopers currently contribute 19 percent of pay. The Legislature will also study the costs of changing two state plans to cash-balance plans.

NORTH DAKOTA: Members of the North Dakota Public Employee Retirement System (including public employees, judges and troopers) will have their employee/employer contribution increase by 1 percentage point through 2013. Also, age and service requirements were increased for certain members of the Teachers’ Retirement Fund and participant contribution will increase to 9.75 percent on July 1 and 11.75 percent on July 1, 2014. Employer contributions will increase to 10.75 percent on July 1 and 12.75 percent on July 1, 2014.

OHIO: Opponents to an Ohio law—which was signed by Gov. John Kasich in March and stripped collective bargaining rights for state workers— similar to Wisconsin’s gathered 1.3 million signatures to force a referendum last November. Two-thirds of Ohio voters agreed with opponents and revoked the law. In addition to collective bargaining rights, the law, known as Senate Bill 5, would have banned public employers from paying contributions to any of the state’s public employees’ retirement funds unless employers reduce employees’ salary by the required contribution.

WISCONSIN: Gov. Scott Walker faced difficult choices in figuring out the $3.6 billion deficit in his state’s 2011-13 budget.

ARIZONA: As of July, employee contributions went up by 3 percent while employer contributions decreased by 3 percent. This was the first step in a series of reforms proposed by Gov. Jan Brewer after a 2010 investigative series in the Arizona Republic newspaper exposed widespread abuses in the public pension system. The state is considering moving to a defined contribution plan.

CALIFORNIA: Gov. Jerry Brown is proposing widespread reforms to the nation’s largest public pension system, including an increase in employee contributions and the creation of a hybrid pension plan that combines a 401(k)-style savings plan with an existing defined benefit system. The proposals will appear on the November ballot.

COLORADO: Lawmakers enacted sweeping public pension reforms in 2010, including raising employer and employee contributions and hiking the minimum retirement age from 55 to 60 for future employees. They also capped cost-of-living adjustments for current and future retirees at 2 percent, down from 3.5 percent, and froze them for a year.

MONTANA: Reforms were passed in July including a measure to prevent so-called “pension spiking.” In addition, retirement age increased from 60 to 65, and eligibility for early retirement increases from age 50 to 55 with five years of membership service for new hires. Employee contributions also went up from 6.9 percent to 7.9 percent.

OKLAHOMA: Lawmakers passed legislation to address $16 billion in unfunded liabilities—a gap that is more than twice the size of the entire state budget. Provisions include a ban on cost-of-living adjustments, an increase in retirement age for new employees, and the end of preferential retirement deals for elected officials over public employees. The law also requires municipal employees to forfeit retirement benefits if they have been convicted of crimes related to their office.

OREGON: Employer contribution rates doubled beginning in 2011. The state began offering a hybrid pension plan for new employees in 2003.

TEXAS: Last November, six months after legislation proposing a switch to a defined contribution plan was defeated, lawmakers ordered the Teacher Retirement System of Texas and three other pension funds to begin evaluating a variety of plans. The state is gearing up for sweeping pension reforms in 2013.

Lisa Beyer is a Workforce Management contributing editor. Patty Kujawa is a writer based in Milwaukee. Rita Pyrillis is Workforce Management’s senior writer. To comment email editors@workforce.com.

Workforce Management, February 2012, pgs. 9-12 — Subscribe Now!