Today, the Texas Retired Teachers Association (TRTA) continues its discussion about the Teacher Retirement System of Texas (TRS) sustainability study of the retiree health insurance program TRS-Care.
In our first Inside Line article about the TRS-Care study, we reviewed Option 1: Pre-funding the long-term liability. We also discussed Option 2: Funding on a pay-as-you-go basis for the biennium. Option 3 covered funding for 10-year solvency.
Today, we will review Option 4: Retirees pay full cost for optional coverage.
By Texas state law, TRS-Care 1, which is catastrophic coverage, must be provided to TRS-Care participants at no cost to the participant (meaning the retiree pays no premiums, although they still pay deductibles and co-pays, etc.). Therefore, every TRS retiree is eligible to participate in TRS-Care 1. Many retirees opt out of TRS-Care entirely, but many prefer the benefits available in TRS-Care 2 and 3 and choose one of those as their coverage.
TRS-Care 2 and 3 are considered optional coverage. Though retirees pay premiums for these levels of coverage (as do their dependents who also utilize the coverage), TRS-Care 2 and 3 are still subsidized significantly. As you know, the state, school districts and active employees all pay into TRS-Care, and much of the funding provided by those resources helps to subsidize the costs associated with TRS-Care 2 and 3.
If Option 4 were to be put into place, all TRS-Care participants using TRS-Care 2 or 3 would have to pay for the full cost of their insurance above the actual cost for TRS-Care 1. Even with the subsidies from the state, school districts and active employees (the current contribution levels of 1.0% from the state, .55% from the school districts and .65% from the active employees), the total costs of TRS-Care 1 are not covered completely.
This means that benefits for TRS-Care 1 would be reduced in the Option 4 scenario, although the coverage for TRS-Care 1 would still be free (no premiums) to the participants. This could also mean benefit reductions for TRS-Care 2 and 3 in the future, and/or higher out-of-pocket expenses for deductibles and co-pays for all levels.
This would impact the non-Medicare population primarily, as Medicare is the primary payer for those who are Medicare-eligible and TRS-Care is secondary.
Examples of possible increases with Option 4:
For example, the current premium for TRS-Care 3 retiree-only coverage for a non-Medicare retiree with 25 years of service would increase from $295 per month to $616 per month (estimate based on best data available).
With a non-Medicare spouse, the rates would increase from $635 to $1,690 (estimate based on best data available).
Premium increases for optional coverage (again, in this case that means TRS-Care 2 and 3) would be required each year to keep pace with medical cost trends.
To summarize, Option 4 places the majority of the cost burden for TRS-Care on the participants who are utilizing more than just catastrophic coverage. This financial burden could be so significant that many participants drop out of the program entirely.
It is also possible that the higher premiums would force many participants to use TRS-Care 1 coverage only. If these participants have major medical procedures performed, they would struggle to pay the high out-of-pocket costs associated with those procedures.
As you know, TRS retirees do not receive regular cost-of-living adjustments, and an option such as this one does not take into the account the stagnant incomes of its participants.
Please bear in mind that as we review the TRS Sustainability Study on TRS-Care that no action will be taken on the program’s funding crisis until the Legislature convenes again in 2015. In the meantime, it is important to be aware of the possibilities, share your concerns with us and with each other, and let your fellow retirees and any active school employees who will retire soon know about the study.
Preserving our health care access and options is a responsibility that we all share and can achieve far more by working together! TRTA will continue to provide as much information as we can about the health care funding options being studied by TRS.
Thank you for being a member of TRTA. If you are not a member and would like to join, please contact our Membership Department at 1.800.880.1650.
Please continue reading the Inside Line over the next two weeks as we provide detailed updates about the remaining five options being studied by TRS to improve and sustain the TRS-Care health insurance program.
Our next update is about Option 5: Mandatory participation in the Medicare Advantage and Medicare Part D plans.
Share these articles with every retiree you know, as well as with active school personnel! Your input is important. Your membership and support are crucial. Thank you for all your help and support.
Contact us at email@example.com with your questions, thoughts, or concerns.