Good News on Budget Agreement for TRS Retirees, BUT…

Last Minute Budget Maneuver May Have TRS Jumping Through Hoops

The long-awaited conference committee report on the state budget was released last night, with good and bad news for TRS retirees.

The Good News

Legislative conferees agreed to keep the funding for the TRS-Care health insurance program and TRS pension trust fund intact (this is the Senate version that appropriates more to TRS and TRS-Care).

As you may recall, the TRS-Care component is critical to prevent premium increases that could have been as high as 80 percent. TRTA members have worked hard to maintain the TRS-Care health insurance program and current cost structure. With Senate and House conferees agreeing to the funding for TRS-Care, we are close to ensuring that all TRS-Care participants will not have a premium increase in the coming biennium!

Conferees also agreed to the plan that funds the TRS pension fund at a higher rate in the second year of the biennium. The state contribution to the TRS pension fund drops to 6 percent in the first year of the biennium, but increases to 6.4 percent in the second year. This results in almost $100 million more in funding for the pension trust fund. TRTA members’ efforts have held legislators accountable for more adequate state funding for the TRS trust fund.

The Bad News

This is from the Conference Committee report on HB 1. Article IX, Section 18.27.

Sec. 18.27. Teacher Retirement System and Employees Retirement System: Pilot Program to Test Alternative Payment Systems. Out of funds appropriated elsewhere in this Act to the Teacher Retirement System (TRS) and the Employees Retirement System (ERS), TRS and ERS are each authorized to establish a pilot program under which physicians and health care providers who provide health care services to employees and retirees and their dependents participating in the group benefits programs administered by TRS and ERS are compensated under a payment system designed to test alternatives to traditional fee-for-service payments. To the extent practicable, the program must be based on nationally recognized quality of care standards and evidence-based best practices, and must include policies designed to promote provider collaboration and other policies and practices as necessary to ensure high-quality and effective health care services.

This section is the resurrection of an attempt last session to create a new method of payment for medical providers that is sometimes known as outcomes-based payments. This is a break from the traditional fee-for-service payment structure most common in traditional health insurance plans today.

TRTA has NEVER opposed having a discussion about new methods of care and payment models that may save retirees money while improving their overall quality of care. The issue with this budget maneuver is that it has removed all constituent groups from the debate on this important issue.

A nearly identical bill was proposed last session, and the House removed TRS-Care from the alternative method of payment study at that time. The proposal represented a major shift in how TRS-Care may be managed, and more importantly, how TRS-Care participants may receive care.

In addition, the implementation of a pilot program costs money. The language for this section states “out of funds appropriated elsewhere in this Act to the Teacher Retirement System…TRS is authorized to establish a pilot program.” There are no other funds appropriated in this act for TRS to implement a pilot program; that is, unless, the budget writers are suggesting funds appropriated to preventing TRS-Care premiums from increasing or dollars dedicated to the TRS pension fund (the same fund that the legislature is already underfunding) be used.

The state did not appropriate dollars for this study, and the pension fund cannot afford to pay for it. TRTA will resist any use of TRS-Care or TRS funds to be used for the study. These funds are designated for the benefit of TRS retirees. If this study is that important to state decision makers, they should involve TRTA and other constituent groups in open meetings and public hearings!

The bottom line here is communication: language has been added to the budget proposal and not one constituent group was able to participate in the debate.

This is bad politics and questionable policy. TRTA is more than agreeable to working with political and agency decision makers to develop new methods of efficient, high quality health care. Adding a study in a budget deal in the last days of session is an inefficient and suspect way of forcing something on to the people who served the state so faithfully.

As a final note, the State Employees Retirement System was NOT excluded from last session’s alternative methods of payment study. The lack of evidence offered to the Texas Legislature about how this alternative method of payment study saved the ERS health care plan any money is quite telling. If this plan was so successful, where is the proof and why was it not presented this session?

Now that this issue has been made public, TRTA will NOT let it go unchecked. In the final hours of the legislative session, we will communicate with Legislators about our concerns. However, the real fight over how this plan may be considered and who will pay for it likely will fall on the shoulders of the TRS Board of Trustees. TRTA has a tremendous relationship with the TRS Board and we will work closely with them to protect your TRS-Care insurance program!