Industry News

On September 17, 2019, S&P Global Ratings released its report, Retiree Medical Benefits Generate Unique Cost Drivers And Risks For U.S. States.  The report examines future risks for other postemployment benefit (OPEB) plans by focusing on: 1) what benefits are being offered; 2) to who are benefits being paid; and 3) how long do OPEB plans provide health care coverage.  S&P Global Ratings believes that the answers to these questions drive the scale of the liability and have extensive implications for the risks incurred by states, which affects their creditworthiness.

Key findings include:

• OPEBs offered by U.S. state governments have unique features that differentiate them from more clearly defined pension plans;
• Typically, state OPEB plans provide health care coverage to retirees and dependents for life, but reduces benefits at Medicare eligibility; and
• The structure of a state OPEB plan’s benefit offerings is essential to credit quality due to budgetary effects.

S&P Global Ratings conducted a survey of 48 of the largest OPEB plans offered within each state as measured by net OPEB liability (NOL).  The data for each state excluded Kansas and South Dakota since they do not report a liability for retiree medical benefits.

The report is available here.