Sign TRTA’s Petition requesting the Texas Legislature to fully fund the TRS Pension Plan!

The Texas Senate State Affairs Committee met on April 4 to discuss the state of public pension systems, including the Teacher Retirement System of Texas (TRS) pension plan and health care program, TRS-Care. Senators received testimony from the Executive Directors of several state agencies, as well as actuaries.

The Senate State Affairs Committee invited TRS Executive Director Brian Guthrie and TRS Chief Health Care Officer Katrina Daniel to provide an update on the implementation of HB 3976, the TRS-Care reform legislation passed during the 2017 legislative session.

Director Guthrie reminded the committee that TRS-Care entered the session with a $1 billion deficit. Although major changes were made in 2017 during the regular and special legislative sessions and an additional $700 million was appropriated from the state and school districts for the program, TRS-Care is still projected to have a deficit of $400 to $600 million dollars in 2019.

Chairman Joan Huffman (R – Houston) asked what the deficit would have been without the changes, and Guthrie replied $4 to 6 billion. Senator Huffman made clear that although many retirees are not happy with the changes, they did what they had to do to save the program from total collapse.

Guthrie went on to discuss implementation and communications issues, as well as the number of participants who left TRS-Care for plans in the private market. Aggressive marketing from the private sector to the Medicare population, combined with high premium increases for dependents in the plan, led to higher than expected numbers of participants leaving TRS-Care.

Guthrie made clear that TRS was not prepared with the resources needed for the high volume of participant calls driven by the changes. TRS carried out an assertive communications program that included 90 seminars reaching over 45,000 retirees, as well as mailings and social media announcements, and hired a third-party company to assist with phone calls. TRS has hired additional staff to serve the needs of members.

Senator Eddie Lucio, Jr. (D – Brownsville) said that constituents in his area were frustrated with not only cost increases, but also with the difficulty reaching TRS. The Senator said he expects TRS to document the issues.

Read the full TRS presentation here. Here are some highlights:

  • More than 37,000 retirees left TRS-Care as of February of 2018.
  • Ninety-percent of those who left were in the Medicare population, with a 60-40 respective split between retirees and dependents.
  • 10,000 of those who left were on the free TRS-Care 1 catastrophic plan.
  • TRS fielded over 100,000 phone calls per month from October through January.
  • TRS-Care will need an additional $400 to $600 million in the 2019 session to stay afloat.

TRTA Executive Director Tim Lee was invited to testify at the meeting. Lee discussed the pros and cons of the changes to the health care plan from the last session.

Pros:

  • TRTA members appreciate that the additional funding received last session made it possible to keep a group coverage program available for TRS retirees.
  • TRS-Care continues to provide a robust system of health care and adds tremendous value by negotiating group network discounts.
  • More than 200,000 retirees are covered by the program.
  • TRS is member-focused and connected to the educator community; they are working with stakeholders to meet the needs of retirees who have questions.
  • The prescription drug plan for retirees over 65 is good, as there is no “donut hole” in coverage like with a Medicare D plan in the individual market.

Cons:

  • High maximum out-of-pocket costs for retirees under age 65. This situation is made better by a lower deductible (TRS uses one of the lowest possible deductible amounts to still be qualified as a high-deductible plan). Originally, TRS was to use a $4,000 deductible, but TRTA and the Legislature worked together to get enough funding to lower it. Funding was also provided to lower the originally proposed out-of-pocket maximum.
  • Premiums and out-of-pocket costs can easily exceed a third of some retirees’ annual annuities.
  • Spousal costs for the over age 65 population are unsustainable for many retirees. Again, additional funding helped lower these costs for dependents, but many plans in the individual market may be offered for dependents with similar coverage and much lower premiums. Dependents who stay with TRS-Care and pay higher premiums are seeing value given back in the form of a no donut-hole prescription drug plan.
  • Many over age 65 plan participants have left or still may leave, which could alter the original assumptions made in negotiating the plan. These changes may be enough to further exacerbate the funding troubles with TRS-Care.
  • Many doctors and providers told retirees to leave TRS-Care if they were over the age of 65. Their information seems to have been based on the general distrust of Medicare Advantage plans by doctors and providers. TRS has a robust payment mechanism in place for providers that is better than a typical individual Medicare Advantage plan, but many providers are unaware and continue to suggest that their patients consider leaving TRS-Care and enrolling in an individual Medicare supplement plan.
  • Miscommunication and misunderstanding with providers. TRS is working diligently to explain their billing procedures and ways to work the Medicare Advantage plan, but some providers may not have that information or are unwilling to participate.
  • Many retirees left due to a distrust of Medicare Advantage, which is a poorly perceived plan within the community.

For 14 years, TRS-Care participants did not experience premium increases. TRTA and the Legislature worked together during these years, and a policy decision was made to keep health care costs stable for retirees, because the pension fund was incapable of providing cost-of-living-increases.

Lee said that in hindsight, it may have been better to have had small premium increases instead of the dramatic increases that occurred in early 2018.

The work of the Legislature to keep premiums stable should not be overlooked or undervalued, however. It was a sincere effort to keep TRS-Care affordable and accessible to retirees whose annuities remained stagnant even as medical inflation was hitting their program. It prevented the “double-whammy” of increased medical costs and no COLAs being provided.

Lee’s testimony also reminded the committee that more than a third of TRS members receive annuities of $1,000 or less per month.

Lee provided information on a vendor mix-up that created a major headache for thousands of TRS retirees. Sometime in late November or early December, a TRS vendor reportedly submitted an enrollment list to Medicare that included all TRS-Care participants, even those who had already chosen to leave the program and had selected a new plan.

Medicare rules required CMS to inform these participants that their choice of a new program had been voided and they were re-enrolled in TRS-Care. This mistake resulted in thousands of phone calls to TRS and very upset retirees who then had to go through the process of un-enrolling again. Many others simply gave up and were unwilling to go through the process of un-enrolling. Lee asked that this situation be looked into in a more in-depth manner so that these mistakes are learned from and never repeated.

Lee also suggested that some of the processes for un-enrolling could be made more efficient by using online resources. While these matters require a definitive process to ensure the integrity of a person’s decision, Lee stated that now is the time to find solutions for such issues so that they may be improved in the future.

Lee thanked the agency for looking into these problems and pledged TRTA’s assistance in helping TRS continue to meet the needs of retirees.

TRTA provided some recommendations that the Legislature and TRS could take now to improve the TRS-Care situation:

  • Replace family deductibles for pre-65 TRS-Care participants with dependents with individual deductibles. This change better reflects the reality that not every person in the plan has the same health care needs. Individual deductibles lower the out-of-pocket costs for retirees and their dependents.
  • Create a one-time opportunity for over-age 65 retirees to re-enroll in TRS-Care even if they enter the individual Medicare market after the effective date of HB 3976. This would allow retirees to determine if an alternative health care plan may fit their income needs better, without feeling trapped by the current policy that does not allow re-enrollment in TRS-Care if a participant leaves after becoming age-eligible for Medicare.
  • Re-evaluate implementing a group Medicare supplement plan. Many TRTA members have suggested they’d be willing to pay a higher premium for the option of a TRS-backed Medicare supplement plan.
  • Continue to provide education materials on why TRS-Care MA plan is better than plan in the individual market and provide updates on how this added value helps retirees. Work to eliminate fear (caused by the TRS policy for Medicare eligible participants of once you leave you’re out) as the motivator for people not wanting to leave TRS-Care.
  • Demonstrate value of the TRS-Care to the participants in real and tangible ways.
  • Create an Ombudsman within TRS to represent and address retiree issues.

Ultimately, the solution for TRS-Care will come down to funding. TRS-Care will require significant increases to its permanent base funding to prevent a future collapse.

TRTA will work with our members and the Legislature to address the difficulties we are experiencing in TRS-Care. We know our members are frustrated with these increasing costs. We also appreciate legislator perspective that they worked to keep TRS-Care from simply falling apart and provided over $700 million in additional appropriation to help sustain TRS-Care. TRTA appreciates Chair Huffman’s invitation to bring retirees into the conversation and to have us at the table.

TRTA urges its members, supporters, and elected official friends to focus on what we can all do to stay focused on the real issue, that is the funding mechanism for TRS-Care is just not enough to keep the program solvent. We have worked together through more difficult challenges in the past, and TRTA is convinced that by working collaboratively we will find good solutions to these issues now and into the future.