The Teacher Retirement System of Texas (TRS) held a Town Hall Meeting on Thursday, October 22 to discuss the health care programs administered by the agency, including the TRS-Care retiree insurance program.
This meeting was just the first step in finding solutions to the program’s funding instability. Though we won one battle in securing additional funding for TRS-Care in 2015, the war is far from over!
TRS-Care’s projected 2018 funding shortfall is more than $700 million. This figure will grow to an astounding $1.7 billion by FY 2019 if nothing is done to protect the program and its participants!
The interim between now and the 2017 Texas Legislative Session will have a huge impact on proposed program solutions. Your participation in the various meetings and hearings that will occur is vital!
Now is the time for our members to get involved and be as vocal as possible! YOUR VOICE MATTERS. In fact, your voice matters more than any other voice in this process!
The decisions that are made between now and 85th Texas Legislature will affect your benefits, premiums and financial security.
We encourage you and your fellow retirees, as well as pre-retirees, to keep reading and sharing the Inside Line and to participate in meetings either in person or online when they occur!
Meeting attendees and online viewers were able to listen to various panels about the health care environment, strategies for cost containment and consumerism, as well as panels dedicated specifically to TRS-Care and TRS-ActiveCare.
Questions submitted by both live and online audience members were answered. While not all questions could be answered during the meeting, TRS will provide answers to all submissions on their website in the coming days. TRTA will be sure to provide this information when it becomes available.
During the panel “What is Driving Health Cost Growth and What Can You (or Anyone) Do About it?,” presenter Len M. Nichols, Ph.D. of George Mason University discussed why health reform was passed and the factors that continue to impact health care costs.
Nichols said that the fraction of family income designated for health care premiums has risen from 10 percent to 17.5 percent since the 1990s and continues to rise. In fact, health care costs are growing faster than anything else in the U.S. economy. Drugs and the administration/net cost of insurance have gone up significantly, as has utilization. Nichols reported that, in general, deductibles have risen 67 percent and premiums 24 percent, while workers’ incomes have increased by only 10 percent since 2010.
A panel discussion on strategies for cost containment in health care included Carl King (Aetna), David Ellis, M.D. (United Health Care), Dan McCoy, M.D. (Blue Cross Blue Shield), Glen Stettin, M.D. (Express Scripts), and Jane F. Barlow, M.D. (Caremark). The panel responded to questions posed by the TRS Board of Trustees about methods that may help control health care costs and what their respective companies are doing to achieve cost savings.
TRS-Care Panel Discussion
During the panel discussion on TRS-Care, panelists discussed the program’s history and structure, financial status, past recommendations for sustainability, and current strategies for cost containment, such as consumer outreach. The panelists were Bill Hickman, Eric St. Pierre, and Amy Cohen of Gabriel, Roeder, Smith and Co; and Katrina Daniel, Edward Esquivel and Yimei Zhao of TRS.
TRS-Care’s enrollment is expected to grow from its current 251,758 participants to 259,578 by 2016.
TRS-Care received more than $2 billion in revenue by multiple funding sources in 2015. Contributions from active employees, school districts and the state are based on active employee payroll, not medical trends.
Revenue sources for TRS-Care for 2015
Active employee contributions: 9.6%
District contributions: 8.6%
Retiree contributions: 18.6%
State contributions: 14.8%
Federal contributions: 9.8%
Supplemental contributions from the state: 38.4% (this is the $768 million approved by the Texas Legislature in House Bill 2)
TRS-Care Projected Shortfall Numbers
Although the state’s FY 2015 supplemental funding was intended to prevent any TRS-Care budget shortfalls through FY 2017, it is possible for a shortfall to be created by rising pharmacy costs. Those rising costs could generate an $81 million budget shortfall.
As of this fall, projected shortfalls to the program are as follows: FY 2018 – $738 million, FY 2019 – $1.7 billion and FY 2020 – $2.9 billion. The TRS Town Hall meeting and Texas Legislature’s interim health care committee are charged with finding a solution to either prevent or reduce these shortfalls.
What is Being Done?
Two sustainability studies have been completed on TRS-Care by TRS on ways to maintain the program for the long-term, including one in 2014. TRTA did a thorough review of the most recent study options in 2014.
During the interim, a Texas Legislature interim committee will undertake a study of both TRS-Care and TRS-ActiveCare. This committee is not yet fully formed, as we await the appointment of Texas State Senators. House members were appointed just recently: Representative Dan Flynn, Co-Chair; Representative Trent Ashby; and Representative Justin Rodriguez.
These members have all developed a strong relationship with the Texas school employee retirees in their districts. Representative Dan Flynn (R-Van) is well-known by many of our TRTA members, as he is presently serving as the Texas House Pensions Committee Chairman. He also attended the TRTA 62nd Annual Convention this past April and provided considerable insight into the 84th Texas Legislative Session.
Representative Trent Ashby (R-Lufkin) served as the House Appropriations Subcommittee Chairman on Education. Representative Ashby was instrumental in helping TRS-Care receive the $768 million to protect TRS retirees’ health care premiums this last session. We also were fortunate to see Representative Ashby at the TRTA Annual Convention in April, and we look forward to working with him on this committee.
Representative Justin Rodriguez (D-San Antonio) is a member of the Texas House Pensions Committee and has a great working relationship with the TRTA local units in his district. As a member of the House Pensions Committee, Representative Rodriguez has met numerous times with TRTA to discuss pension and health care issues.
Once established, this committee will examine the financial soundness of TRS-Care, assess the plan’s cost and affordability, and evaluate the sufficiency of access to physicians and health care providers.
TRS-Care Cost Drivers
Increases in medical and RX costs, increased utilization due to an aging population and the development of new biogenetic drugs are the primary cost drivers for not only for TRS-Care, but also health insurance programs across the nation. Particularly for TRS-Care, the increase in usage by non-Medicare eligible retirees is a concern. Medicare eligible participants have the majority of their insurance costs covered by Medicare, with TRS-Care as their secondary payer. For non-Medicare participants, TRS-Care is the primary payer.
Cost Containment Efforts
The introduction of Medicare Advantage has enabled TRS-Care to achieve cost savings. Through August 2015, Medicare Advantage and Medicare Part D have save TRS-Care $400 million. The Medicare Part D plan alone will help TRS-Care save $157 million between now and the end of FY 2017. Cost containment efforts will continue to be reviewed by the interim committee.
Today, Tom Rogers, an Austin RTA member and longtime supporter of retired school employees, provided powerful, factual and thought-provoking testimony with specific recommendations to make health care affordable and accessible for TRS retirees.
Rogers encouraged the trustees to work the Texas Legislature Interim TRS-Care Study Committee to provide retirees with a program that has “financial soundness, affordability, sufficiency of access to physicians and health care providers and sustainability of the plan.”
Rogers emphasized that the best solution considered in the TRS-Care Sustainability Study is pre-funding, saying that “in general pre-funding facilitates economic planning and efficiency in operation” and “takes the guess work out of budgeting.”
Although this option would “require a boom period in the state’s history to get it started,” Rogers says the state currently has the financial resources available to accomplish pre-funding and secure the long-term solvency of TRS-Care now.
Pre-funding TRS-Care would help not only retirees, but also help the education profession attract career-minded teachers to the state. Pre-retirees should also be concerned about the longevity of TRS-Care, as many will utilize TRS-Care as their primary or secondary health insurance program upon retirement.
TRTA Executive Director Tim Lee participated in a panel of association executives to provide stakeholder testimony. He was joined by representatives from the Texas Classroom Teachers Association (TCTA), Association of Texas Professional Educators (ATPE), Texas American Federation of Teachers (AFT), Texas Association of School Administrators (TASA), and Texas State Teachers Association (TSTA).
Lee spoke about how we will go into another legislative session in 2017 with many of the same problems we faced in 2015. While TRTA and its members are very grateful for the $768 million supplemental appropriation to TRS-Care, now is the time to address long-term solutions for the plan.
Something must be done differently this time in order to achieve an outcome more favorable to long-term solvency. Lee encouraged stakeholder groups, TRS and the Legislature to come together throughout the interim to work on viable solutions with a goal of achieving quality health care with reasonable benefits at an affordable cost.
School employees and retirees are amazing planners and problem-solvers. Your participation in the legislative interim committee study is important. The Legislature will be seeking ideas from the people impacted by their decisions.
The decisions that are made between now and the 85th Texas Legislature will affect retirees’ and future retirees’ benefits, premiums and financial security.
TRS Executive Director Brian Guthrie and Board Chairman David Kelley thanked the panel members for their participation and commended them for coming together to help solve the health care issues facing both active and retired teachers.
Your support helped us receive $768 million towards TRS-Care during the 84th Texas Legislative Session, but there is still more work to be done. Protecting TRS-Care is one of TRTA’s top priorities, and your help can make all of the difference. Be sure to stay tuned to our other digital mediums to keep informed on all the latest news and updates. Like us on Facebook, follow us on Twitter, and subscribe to our YouTube channel.