As the Texas Retired Teachers Association (TRTA) reported last night, The Teacher Retirement System of Texas (TRS) Board of Trustees met yesterday and approved several changes to the TRS-Care retiree health insurance program that will go into effect in September of this year.
It is the first time in 12 years that TRS has introduced a benefit reduction to TRS-Care.
These changes include:
- increased deductibles,
- increased out-of-pocket maximum costs,
- new convenience fees for local pharmacy prescription drug fills,
- and new rules on Medicare D
TRTA Executive Director Tim Lee cautioned against major cost-shifting
as retirees already pay $1 billion in out-of-pocket costs for TRS-Care.
The plan changes are projected to cost TRS-Care participants more than $43 million.
TRTA reported a month ago that TRS-Care is facing an imminent negative balance of approximately $18 million by August 2017. At the time, TRS Executive Director Brian Guthrie could not say that the balance would increase or decrease in the coming months.
Yesterday we learned that the negative balance has changed to a small surplus of approximately $13 million. While this may seem like good news, $13 million covers only two to three days of claims. TRS believes that it must have more money in its end of year cash flow for claims due to the rapid fluctuations and unpredictability of medical costs. This increasing financial pressure caused the TRS Board to take immediate action.
In May, Director Guthrie stressed that the only opportunity to help prevent a negative fund balance is now, as waiting until 2017 to enact any changes is not enough time to have an effect. He also stressed at the time that there is no guarantee of receiving supplemental funding from the Legislature during the 85th Legislative Session. Mitigating the shortfall using methods that are within the purview of the Board of Trustees—actions that don’t require legislative action or approval—had to be considered sooner rather than later.
During yesterday’s meeting, TRTA Executive Director Tim Lee stressed the importance of working together with all stakeholder groups, including active school personnel and the Texas Legislature, to address the fundamental problems that continue to create fiscal crises for the health insurance plan.
TRS Board of Trustees Chairman David Kelly addressed Tim Lee’s concerns by
stating that TRS wants to work with TRTA to solve the TRS-Care issues.
As our members know, the program faces a much bigger shortfall for the coming legislative session than it faced in 2015. Last session, the Texas Legislature approved supplemental funding in the amount of $768 million for TRS-Care, intending to prevent massive premium increases for retirees living on fixed incomes. While much needed and appreciated, the funding was a temporary fix. TRS-Care is now projected to have a shortfall between $1.5 and $2 billion for the 2017-18 fiscal year!
TRS Executive Director Guthrie said, “I think we can all agree that the challenges ahead dwarf the challenges we discussed even today.”
TRS-Care Changes and How They Affect Your Pocketbook
Among the changes, TRS is introducing Humana as a new Medicare Advantage provider. Humana will now work alongside Aetna, the long-time administrator of the TRS-Care traditional plan. Humana contract negotiations are pending with TRS and will go into effect January 1, 2017. Humana brings a strong background in the Medicare Advantage market, and their broad base of providers may help TRS-Care improve and/or expand Medicare Advantage coverage.
Express Scripts will continue to manage pharmacy benefits. The TRS staff recommended that there be no increase in retiree premium contributions, noting that each 1 percent increase in TRS-Care retiree premium contributions represents approximately $4 million for FY 2017.
Please see the charts below, which summarize the changes being made to the TRS-Care plans.
Changes in Medical Deductibles and Out-of-Pocket Costs (Expected Cost to Retirees, $21.9 million)
The staff recommended increasing medical deductibles and maximum out-of-pocket limits within grandfathering limits, as well as increasing pharmacy copays within grandfathering limits.
The chart below shows the current deductible and out-of-pocket limit structure (FY 2016), as well as the newly adopted/recommended deductibles and out-of-pocket limits for FY 2017.
Changes in Medicare D and Pharmacy Co-Pays (Projected Savings and Cost to Retirees, $17.8 million)
The staff also suggested implementing a Retail Maintenance copay structure for maintenance drugs for the traditional prescription drug plan.
Effective January 1, 2017, the prescription drug plan for Medicare eligible members will be the Medicare Part D plan, with those who do not have either Part A or Part B remaining in the traditional plan. There will be no change to the current pharmacy co-pays on the Medicare Part D plan.
A convenience fee of $10 after the first fill for maintenance drugs dispensed at a retail pharmacy will be instated in order to create an incentive for members to utilize mail order for their prescriptions.
The chart below shows the current pharmacy co-pay structure (FY 2016), and the newly adopted/recommended structure (FY 2017).
When Will These Changes Take Place?
The changes adopted yesterday by the TRS Board of Trustees will go into effect on September 1, 2016 (excepting the change to Humana for Medicare Advantage, which will take place on January 1, 2017).
How the Changes Impact the Overall Fiscal Health of the Plan
Below is a chart demonstrating how the recommended changes will impact the program’s fund balance for FY 2017.
What can TRTA members do to protect their vital health care benefits?
Encourage others to join our fight and support TRTA. Our membership exceeds 81,000, but there are more than 240,000 people in TRS-Care! If all 240,000 participants united with TRTA, we would stand a much better chance at funding this program adequately now and in the future.
TRTA members must recognize that the battle for health care funding will be very difficult. We have many friends in the Texas Legislature, but many are saying that fewer dollars will be available. TRTA is a successful advocacy organization because we find ways to work with our elected officials and make good things happen.
It takes hard work and a consistent effort to tell our story. It takes dedicated members willing to call and email their elected officials and let them know our TRS-Care program is in dire circumstances.
The fight for more funding for the TRS-Care plan is already underway. The Texas Legislature must take a comprehensive look at how they fund this vital retiree health care program.
Yesterday’s decisions may be viewed as a modest reduction in benefits for retirees; however, if the Legislature does not act to deal with this health care crisis, TRS-Care plan design and premium increases may make the plan unrecognizable compared to how we know it today.
Thank you for your membership to TRTA. We will continue to follow the progress on TRS-Care, and provide you many more opportunities to get involved! If you are not yet a member, we need you to help us protect your retirement security. Please join TRTA today!