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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. Our second article covered Option 2: Funding on a pay-as-you-go basis for the biennium. Today we will discuss Option 3: Funding for 10-year solvency.

As you know, the program faces a shortfall of $1 billion by the 2016-17 biennium if nothing is done to protect it. TRS-Care faced a similar major shortfall in 2003. Since then, TRTA has been able to work with the Legislature to maintain (even improve) TRS-Care benefits and operate the program with NO premium increases. This strategy was pursued by the Legislature and TRTA to help retirees when the pension fund was unable to provide cost-of-living raises.

In 2004, TRS faced a major challenge when the federal government closed the “Social Security Loophole.” That resulted in massive numbers of new retirees and put pressure both on the pension fund and TRS-Care. The Legislature responded with a higher state contribution to the program, with enough of a surplus to allow TRS to manage it more efficiently and use the funds to protect premiums.

These efforts have allowed TRS to manage cash flow and hold the crisis off until a later date. Unfortunately, that day has come, just as we knew it would.

Like any other TRS benefits situation that TRTA has faced in the past, we believe that our membership can and will make a difference! Now is the time to educate our members, legislators and friends in the active school employee community. If we work together, we will find ways to address this crisis. Our retirees’ health care is too important for us not to put every effort into dealing with this new challenge.

Now, let’s review TRS-Care Sustainability Study Option 3.

Option 3: Funding for 10-Year Solvency

Option 3 suggests an approach that would sustain the program for another 10 years, using one of the following methods:

• Increasing the state contribution only
• Increasing the state, school district and employee contributions proportionally
• Increasing the state, school district, employee and retiree contributions proportionally

You may notice that this option is similar to Option 1 (pre-funding the long-term liability). The major difference between these two options is that in Option 1, TRS-Care we would amortize the unfunded liability over 30 years (much like the way we pay for a mortgage). In Option 3, TRS-Care would be pre-funded for only 10 years.

The benefit to Option 3 is that it is less expensive than Option 1, meaning the contribution increases to TRS-Care would be lower than in Option 1. However, just as with Option 1, the $1 billion shortfall must be addressed first and then more funding will still be necessary to sustain TRS-Care for 10 more years. Option 3 is still an expensive approach, but the “bite at the apple” may be more manageable.

Currently, these are the contributions being made to the TRS-Care fund (a total of 2.20% of payroll):

• State: 1.0% of payroll
• School districts: .55% of payroll
• Active employees: .65% of payroll

In Option 1, TRS projected that the combined employer contribution (state and school districts) would need to increase from 1.55% to 5.21% to pre-fund the TRS-Care long-term liability. Recall, too, that these projections are from 2013 and do not account for the cost of the program for 2014 and 2015.

TRTA projected that if we include costs from 2014 and 2015, that 5.21% would need to be closer to 6% to adequately pre-fund TRS-Care.

In Option 3, because the goal is to pre-fund TRS-Care for only 10 years, we can make some educated guesses that the employer contributions (state and school districts) would need to increase to approximately 4% instead of 6%. We make this guess based upon the fact that the $1 billion shortfall must be addressed, and that enough money must be put into TRS-Care to pay for the program for the next 10 years.

As we mentioned with Option 1, 1% of payroll equals about $285 million today. If the employer contribution rates (state and school districts) increase from 1.55% to 4%, that is an increase of about 2.45%. That 2.45% equals roughly $700 million. That means we are looking at an annual contribution of $985 million, which would then increase each year.

As with Option 1, in Option 3 the projections assume that retiree premiums will cover at least 30% of the total cost of the program. This means that TRS-Care retiree participants would probably see annual increases in retiree premiums over time. At this time, TRTA cannot speculate on what those percentages might be.

Another downside to Option 3 is that we would have to approach the Legislature again in another 10 years with a shortfall that could be potentially larger than the one we are facing now. The benefit is that our retirees could be assured of having a health care plan for at least another 10 years.

More to Come

TRTA will continue to provide as much information as we can about the health care funding options being studied by TRS.

On Friday, TRTA volunteers and staff will attend the TRS Board of Trustees meeting. We will provide a recap of our public comments, as well as any other happenings at the TRS meeting. Look for our review of the TRS-Care options to resume next week.

For now, we need you to share these updates with friends, family, legislators, fellow TRS retirees and TRTA members, and our friends in the active school community.

Many of you know that TRS also administers a plan for active school employees known as TRS-Active Care. The premiums for TRS-Active Care have risen at alarming rates. Health care for hundreds of thousands of active school employees is rapidly becoming unaffordable. TRTA wants our friends in the active school community to know that we are ready to help advocate for your improved health care funding. We cannot lose quality education professionals because they cannot afford health care for themselves or their family.

Preserving our health care access and options is a responsibility that we all share and can achieve far more by working together. If you are an active school employee, please know that TRTA supports you and we want to help any way we can.

Thank You!

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 six options being studied by TRS to improve and sustain the TRS-Care health insurance program. Our next update is about Option 4: Retirees pay for the full cost of optional coverage.

Your membership and support are crucial! Contact us at info@trta.org with your questions, thoughts, or concerns.

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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!

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 info@trta.org with your questions, thoughts, or concerns.

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Last week, the Teacher Retirement System of Texas (TRS) held its regularly scheduled meeting of the Board of Trustees to discuss various issues, including the TRS-Care retiree health insurance program and the TRS-Active Care active employee health insurance plan.

Good News
The TRS staff shared some good, if not great, news with the trustees. The pension trust fund now has $126 billion, the most amount of money that has ever been held in trust for our public education retirees in the history of the fund’s existence.

The Texas Retired Teachers Association (TRTA) Executive Director, Tim Lee, had the opportunity to testify at the meeting, sharing his appreciation of the great work the TRS staff does to maintain and grow the pension fund as well as the concerns of TRTA members about the impending shortfall to the TRS-Care retiree health insurance program.

Tim also expressed his support for the active educator community and their health care plan, TRS-Active Care, which is also in need of additional funding.

Several members of the TRS Board of Trustees made impassioned statements about the Texas Legislature’s role in funding both health care programs and their own role in providing support for both active and retired teachers.

Although Texas statute prohibits TRS and the trustees from advocating a position or lobbying the government, the sentiment expressed by these board members was uplifting. They expressed a spirit of cooperation as TRS, the Legislature, and TRTA work together to preserve the health care plans and minimize hardship on retirees and active school personnel.

Your Concerns 

We have heard from many of our own members in regards to the sustainability study being conducted by TRS. Your concerns are being heard, not just by TRTA but by TRS as well. Please know that the study is being done to prepare the Legislature in advance of the shortfall crisis.

TRS is reviewing multiple options and sharing those options with us in an effort to educate and inform. TRTA has NOT taken an advocacy position on any of the options being studied yet and the Legislature has not received the results of the study (the study will be completed by September and presented to the Legislature in the fall).

If you are concerned about the options being discussed, the best thing you can do right now is to SHARE the information you are receiving with every retiree and pre-retiree that you know! Any changes that are made to the TRS-Care health insurance plan will impact all current and future participants.

What we do know is that without intervention from the Texas Legislature, everyone will be affected in an adverse way by either increased premiums, reduced benefits, or both. This means it is up to ALL OF US to be ready and armed with information well in advance of the legislative session. We must review the information now, formulate a plan together, and pursue it together!

Our best hope for protecting TRS-Care is a united front. Please encourage others to get involved now. As one TRTA member said, “it is time to wake up!” If we are not active next session, we could be facing the unacceptable outcome of losing one of the best benefits available to our public education retirees.

Remember too that TRS cannot lobby: it is up to TRTA and its thousands of members to represent your interests in the Texas Legislature. Join us, work with us, spread the word!

Medicare Advantage Update

TRS provided some updated information about the TRS Aetna Medicare Advantage plan. Betsey Jones, Director of Health Care Policy and Administration for TRS, provided the enrollment figures for the Medicare Advantage plan and the Medicare Part D prescription drug plan. The current participation rate in Medicare Advantage is 68%, while the Medicare Part D plan has 81% participation.

TRS recently began auto-enrolling TRS-Care participants who are aging into Medicare into the Medicare Advantage plan. This means that participants on TRS-Care who are turning 65 years old will automatically become enrolled in Medicare Advantage, with the ability to opt out. This process began in April 2014.

To improve enrollment in Medicare Advantage, TRS is considering new methods, such as mailing postcards to eligible members and offering to provide one-on-one phone calls to members to help them learn more about the program. They will also create an informational video to better explain the plan as well as the purpose of Medicare Parts A, B and D and how these insurances impact members financially.

TRS-Care Sustainability Study Update

Betsey Jones also reviewed the progress of the sustainability study for TRS-Care. The project will be completed by September 2014. She revealed that the non-Medicare population costs the TRS-Care program six times as much as the Medicare population. 32% of TRS-Care participants are non-Medicare.

As of April 2014, TRS-Care has 243,100 participants:

• TRS-Care 1: 30,100 (12%)
• TRS-Care 2: 55,000 (23%)
• TRS-Care 3: 158,000 (65%)

TRS-Care will be solvent through FY 2015, but will be insolvent by FY 2016. The shortfall, which was projected to be $1 billion, has improved slightly to approximately $900 million. This is due to a recent rise in active education employee payroll, which had been flat since 2009.

Options for helping resolve the TRS-Care funding crisis are not mutually exclusive and it will possible to combine some options. As we mentioned earlier, we do not know yet which of these options may be instated, whether it is one option, a combination of several, all of them or none at all. It is important, however, that we know how each option affects the participants and the program’s financial status.

The 9 options being reviewed in the sustainability study are (TRTA has reviewed four options so far and will continue its review of the remaining five options over the next two weeks):

1. Pre-fund the long-term liability
2. Fund on a pay-as-you-go basis
3. Fund for 10-year solvency
4. Retiree pays full cost for optional coverage
5. Mandatory participation in the Medicare Advantage and Medicare Part D plans
6. Defined contribution-establish a health reimbursement account (HRA) for non-Medicare retirees
7. Modify eligibility for TRS-Care 3 standard plan
8. Steerage plan design for the non-Medicare population
9. Combine TRS-Care and TRS-Active Care

Several board members expressed their desire to keep the plan affordable with good benefits for its participants and made suggestions for other elements that should be included in the study. The study is ongoing, and the final version will be made widely available to all members of TRS.

TRS-Care Premiums 

The Board also discussed premiums for TRS-Care. It is the intent of the Legislature not to increase premiums for TRS-Care participants for 2014-2015. The TRS staff provided the following information:

• A 1% increase in premiums for TRS-Care equals $3.8 million
• A 10% increase in premiums for TRS-Care equals $38 million
• If premiums were to increase by 10% now, TRS-Care would have a negative fund balance of $754 for FY 2016-17.

Following the intent of the Legislature, the TRS Board of Trustees confirmed that will be no premium increases for TRS-Care for 2014-2015. To see a complete list of premium rates, please click here.

However, there have been some benefit changes to TRS-Care 2 and TRS-Care 3, which can be viewed by clicking here.

TRS provided the following statement regarding the changes:

“Consistent with ACA requirements, the deductibles and coinsurance paid by TRS-Care 2 & 3 participants will now be counted to satisfy the out-of-pocket maximum beginning with the 2014-2015 plan year. Since this allows participants to reach their out-of-pocket maximum faster, out-of-pocket limits will be increased slightly to achieve the same approximate actuarial cost to the plan. This eliminates the need to increase our participants’ premiums for another year.

Also, when TRS-Care 2 & 3 participants have their medically necessary lab work done at a Quest Lab, they will have no out-of-pocket cost due to a special arrangement Aetna has with Quest. Even if you can’t go to a full service Quest lab, many providers can have your specimens sent to a Quest lab for processing via Quest couriers.”

Thank You!

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. We will resume with TRS-Care Sustainability Study Option 5 later this week.

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 info@trta.org with your questions, thoughts, or concerns.

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