The Senate State Affairs Committee discussed a proposal today to make sweeping changes to TRS-Care, the state-run retiree health insurance program. Senate Bill 788 would eliminate TRS-Care 1, 2 and 3. The bill would require a high-deductible plan for participants under the age of 65 and a Medicare Advantage plan for all Medicare eligible participants. The Medicare Advantage plan would maintain a Medicare Part D Plan for prescription drug benefits.
Under SB 788, all Medicare eligible retirees will be moved into a plan with an estimated $146 per month premium. This includes retirees who aren’t Medicare Part A Plan eligible.
The bill also includes a tenet to ensure that Medicare eligible plan participants have sufficient access to health care providers and prompts TRS to develop a policy to facilitate provider access around the state, particularly in rural areas.
Senate Affairs Chairman Joan Huffman (R-Houston) authored SB 788.
For the high-deductible plan covering participants who are under 65, premiums would gradually increase over the course of four years, beginning in 2018. See an example of proposed premiums for the HD plan below.
- Calendar Year 2018: Retiree only – $250/month, or $3,000 annually
- Calendar Year 2019: Retiree only – $310/month, or $3,720 annually
- Calendar Year 2020: Retiree only – $370/month, or $4,440 annually
- Calendar Year 2021: Retiree only – $430/month, or $5,160 annually
* These are illustrative premiums; actual premiums will depend on funding and plan experience.
The proposed deductible for this plan is $4,000 for an individual. Prescription medication is also subject to the deductible, as there is no prescription drug coverage with this proposal. After the retiree has paid the first $4,000 in medical and prescription costs, the plan then pays 80 percent of in-network claims and drug costs, and the retiree will continue to pay 20 percent of those costs until they have hit their out-of-pocket maximum of $7,150.
The bill proposes to have no premiums for disability retirees who are not yet Medicare eligible for the first four years of the plan.
SB 788 includes a structural funding change, which would increase the state’s contribution from 1 percent of active teacher payroll to 1.25 percent, resulting in a permanent funding increase from the state. This would be about $170 million more in state funding.
In total, the Senate is proposing approximately $311 million in increased funding for TRS-Care. The remainder of the $1 billion budget shortfall will be paid for by retirees through premium increases and plan design changes.
Senator Huffman said that TRS-Care has experienced “dozens of design changes over the years,” noting that this is not the first time the plan has faced a shortfall. The Legislature covered a shortfall in 2015 in the amount of $768 million. Huffman said that there was “a better economic climate” during the 84th legislative session in 2015, but also stressed that despite the supplemental funding, no permanent solutions were made at the time to address the rising costs of health care.
“This solution is viable, but it is not perfect,” Huffman said. She emphasized that there are no easy answers given the state’s budgetary constraints. She also said if nothing is passed, the TRS board will have limited flexibility to address shortfall, and the shortfall would then be fully borne by retirees. The result would be a drastic increase in premiums, co-pays and deductibles.
Huffman also acknowledged that retirees are a vulnerable group who do not have rich pensions and live on fixed incomes. Senator Jane Nelson (R-Flower Mound) asked what happens if the state does nothing to address TRS-Care this session, and Huffman answered “the plan will collapse.”
Huffman also said SB 788 makes a substantial difference, but its passage does not mean that there will not be plan shortfalls in the future. A plan that would have prevented any future shortfalls “would be too draconian,” Huffman said.
The committee heard from several invited witnesses, including TRTA Executive Director Tim Lee. Lee thanked Senator Huffman for her leadership in this ongoing, difficult discussion. “TRTA believes the state needs to triple its contribution to TRS, or this program will not survive,” Lee said. Commenting that this may not be the session that such measures may pass, Lee suggested that prefunding the TRS-Care fund with an additional appropriation from the state Economic Stabilization Fund (ESF), also known as the Rainy Day Fund, may be a way to help make needed changes to the TRS-Care program, but also minimize the cost burden on retirees.
Lee said many retirees plan on having a modest income during retirement, but the ever-increasing cost of health care needs to be addressed.
Lee also said that retirees “know that if we want to keep TRS-Care alive, everybody is going to have to put more money into it.” He stressed that though there are fewer dollars to go around and it is a harder conversation to have, retirees hope that the state will be able to increase their contribution by more than the proposed .25 percent.
Lee said an affordable health care plan is a requirement for retirees, and that for many retirees, a $4,000 deductible is not feasible.
The current TRS-Care system does not allow retirees to return to the program once they have opted out. Lee suggested that this statute change if SB 788 were to pass. He recommended that retirees should be allowed to return once they became Medicare eligible.
TRTA is concerned that SB 788 doesn’t do enough to address retirees’ financial needs, but our position on the bill remains neutral as negations continue. Without this bill or similar legislation, TRS-Care will not survive. TRTA is working to secure more funding through the budget process. Without more money, TRS-Care’s direction will either bankrupt retirees or end the plan altogether.
The Texas House’s TRS-Care Proposal
The Texas House’s budget bill proposes to provide additional state funding for TRS-Care. The House’s funding would come from two sources: the Economic Stabilization Fund (ESF) and general appropriations. The proposed budget includes $500 million from the ESF to help fill the $1 billion TRS-Care budget shortfall, as well as raising the state’s contribution into TRS-Care from 1 percent of active educator payroll to 1.25 percent.
It is very likely that the House will debate whether to pass its budget this week. Now is the critical time to call your legislators and tell them that you support the House’s budget. Use the toll free legislator hotline 1-888-674-3788 to let your representatives know you support their efforts to keep TRS-Care affordable!
Thank you for your membership to TRTA. We are fighting ardently for your benefits every day at the Capitol. If you are not yet a TRTA member, please join here. Be sure to read our comprehensive Frequently Asked Questions about TRS-Care here.