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 discussed Option 2: Funding on a pay-as-you-go basis for the biennium. Option 3 covered funding for 10-year solvency. We reviewed Option 4: Retirees pay full cost for optional coverage and Option 5: Mandatory participation in the Medicare Advantage and Medicare Part D plans, as well as Option 6: Defined contribution—Establish a Health Reimbursement Account (HRA) for non-Medicare Retirees.
Today’s Inside Line will cover Options 7, 8 and 9.
Option 7: Modify Eligibility for TRS-Care 3 Standard Plan.
Option 7, as presented by TRS, would grandfather the current enrollees and allow new enrollees over age 65 who do not have Medicare Part A to participate in TRS-Care 3. Retirees under age 65 would be placed in a hybrid TRS-Care 2 and 3 plan.
It is important to note that during the 83rd Legislative Session in 2013, Senate Bill 1458 included some modifications in eligibility for TRS-Care.
The passage of Senate Bill 1458 included the following changes:
- Requires a future retiree to meet the Rule of 80 with a minimum age 62 in order to participate in TRS-Care 2 or 3;
- Any active member who retirees prior to age 62 will have access to TRS-Care 1 and will be able to join TRS-Care 2 or 3 at age 62; and
- This TRS-Care provision grandfathers any current active member who meets the Rule of 70 (combination of years of service and age equal 70 or more) or who has at least 25 years of service as of September 1, 2014.
Option 7, like Option 6, has not been fully reviewed by TRS and is one that will be assessed throughout the summer as the sustainability study continues. The hybrid plan is one that TRTA would like to learn more about. The TRS Retiree Advisory Committee (RAC) did not rule out this option entirely, but had several questions as to how a hybrid TRS-Care 2 and 3 plan might come to fruition. If the plans were combined, in all likelihood, there would be increases premiums and deductibles for its participants.
Due to the fact that many changes were made to eligibility for TRS-Care just last session, TRTA believes that more stringent modifications for future participants would have a negative impact on active employees. TRTA worked closely with active educator groups last session to compromise on the eligibility requirements for TRS-Care.
The changes made last session effectively made it impossible for some future TRS-Care participants to retire with anything more than catastrophic coverage before the age of 62. Additional modifications, especially increased age modifications, could create a hardship for those employees.
The savings created by the changes made as a result of Senate Bill 1458 affect the program’s bottom line in the long-term, but had little financial impact in the near-term. Without stringent modifications that would affect active employees who are about to retire (the same people who were grandfathered from the changes through SB 1458), Option 7 does not provide a significant impact on the funding shortfall on its own.
Option 8: Steerage Plan Design for the Non-Medicare Population
Option 8 refers to a method for steering TRS-Care participants to the most cost-effective plan for them. Although this option is still in need of additional study, the general idea is that patients are referred to managed care procedures inside a contracted network of providers.
Steerage programs aim to motivate participants and their dependents to choose better health care providers. The challenge for employers and other payers is finding the right mix of health care services, communication and rewards to shift patients to health care providers that deliver higher value.
The Logic of Value-Based Network Design
- Allow broad networks but identify providers that offer the greatest value.
- Use differential cost sharing to steer patients to preferred providers.
- Those with the lowest willingness to pay for “non-preferred” providers will switch.
- The threat of switching may affect provider behavior in ways that are consistent with payer objectives.
Option 8 includes value-based plan design with reference-based pricing. For example, if a participant needs a knee replacement, the plan offers a certain amount for the procedure and the participant chooses the provider for the service. Option 8 also includes mandatory participation in a disease management program for participants with chronic conditions.
As TRS continues studying this option, we want to hear your feedback. Would a steerage plan design work for you? Why or why not? Please recall that this option refers to non-Medicare participants only.
TRTA is skeptical. Has the medical marketplace adopted a truly transparent billing system? We are also concerned because health care is often an immediate need. Like most items in life, some options are just better than others and not all providers are equal. These are complicated circumstances and we are not ready for our TRTA members to be the guinea pigs of experimental billing and care methodologies.
We doubt many lawmakers are interested in these type of steerage plans for themselves or their own families and employees, so we are not sure why they would work for our TRTA members. That being said, we certainly will continue to review all information provided by TRS and still need your feedback.
Option 9: Combine TRS-Care and TRS-ActiveCare
Option 9 suggests one of two possibilities: a. combining both Medicare and non-Medicare retirees with the TRS-ActiveCare insurance program for active school employees, or b. combining only the non-Medicare retirees with TRS-ActiveCare.
This option would spread the cost among a greater population of participants. Participation in TRS-ActiveCare has grown to over 477,000 employees and dependents. TRS-Care retiree participants and dependents equals 243,100.
Without additional funding, this approach would shift a significant amount of costs from the TRS-Care program to TRS-ActiveCare, and not provide any real savings.
Another major concern TRTA has with Option 9 is the critical condition of the TRS-ActiveCare program. According to the Texas Classroom Teachers Association (TCTA), “employees in TRS ActiveCare 2 pay 51% of their employee-only premium and 80% of a family plan.”
TCTA also notes that “ActiveCare employees have borne the burden of increasing health care costs since the program’s inception more than a decade ago.” The ActiveCare funding structure is different from TRS-Care. Funding shortfalls in ActiveCare simply are passed on to the participants, as the state has not changed the funding structure for years. ActiveCare premiums—which have been increasing for years—are becoming unaffordable. In fact, on June 6 of this year, the TRS Board voted to increase premiums for ActiveCare again. Read more here.
In addition to the premium hikes, benefits have been reduced. The fact is, though, that TRS is not to blame. They have done a great job managing a difficult situation. The Legislature is simply choosing other priorities over adequately funding the health care program. TRTA sees this as the issue for BOTH our retiree health care program and the active school employee situation.
At this time, TRTA does not support combining the plans until ActiveCare premiums are stabilized for current participants.
The TRS-Care Study is Ongoing
As a reminder, the information we are sharing in this special TRTA series on TRS options for sustaining our retiree health care program are part of a study. These options are NOT part of any absolute plan that is being implemented.
Could these options be implemented? Yes. Will TRS make these decisions? Not likely. Will this TRS study guide a conversation on how to deal with these important issues? Yes. Will the Legislature be involved in this TRS-Care crisis before any option or plan is implemented? Yes!
Does TRTA and its membership have an opportunity to lead on this issue and make the outcome better? Absolutely!!!
Ask yourself this one question and feel free to pose it to any other TRS retiree or future retiree you may know: Will the Legislature’s response be more favorable or less favorable to the TRS-Care crisis if we are not organized and TRTA does not play a part? We know the answer is that TRTA members MAKE A DIFFERENCE!
The Next Phase of this Discussion
TRTA is scheduled to provide expert public testimony about the TRS-Care funding shortfall on July 10, 2014 to a joint meeting of the House Appropriations and Pensions Committees. We will assert the many positive benefits of the TRS-Care plan, but focus on the lack of funding as the central problem in the TRS-Care crisis.
TRTA knows that many legislators want to help avert a major crisis with TRS-Care. We will work together to solve this problem, but it will require a tremendous effort by all TRS retirees. There is no way for us to predict the outcome, but doubling premiums or reducing benefits dramatically are not acceptable!
We need your help. If you are a TRTA member, you will soon receive the next issue of the The VOICE. We will feature a four-page advocacy guide along with step-by-step instructions on how you can get involved. Be ready to join our TRTA efforts, plan a meeting with a legislator, share this information with your fellow TRS retirees and work with our friends in the active school community.
There are 1.3 million Texans who are a part of TRS. We have the power. Let’s make sure we use it to ensure the integrity of our TRS benefits—you’ve earned it!
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. Remember, we need you!
Your $35 in annual dues enables us take a knowledgeable, expert team to the Capitol to defend your retirement benefits. For less than $3 per month, TRTA manages a statewide association focused on you, your retirement, and protecting and improving what you have earned. We truly appreciate every member and we value your support.
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 firstname.lastname@example.org with your questions, thoughts, or concerns.