By Bill Rusteberg
In a 2016 report, the TRS ActiveCare financials for 2015 should cause concern among Texas lawmakers. Because the state and district’s minimum plan contributions have not changed since 2002, active employee contributions have been raised each year to cover the projected expenses and claim costs.
Paid loss ratio for 2015 was 97%. State contributions were approximately $237 million while employee and district contributions were approximately $1.5 billion. Administrative expenses were 7.2%.
There is a movement among some TRS ActiveCare participating school districts to petition the state legislature to allow districts to opt out of the program. Currently those districts in the program are locked in and cannot opt out. Last year a bill was introduced in the Texas legislature to allow just that. However, it was amended and passed and postpones further consideration until January 2017.
Allowing school districts to Opt Out of TRS-ActiveCare raises concerns among officials. They say if districts were allowed to opt out of TRS-ActiveCare, restrictions such as the following would be necessary for the sustainability and affordability of the plan.
Excerpt From TRS 2016 Report:
(1). Deadline for notification – A district must notify TRS in writing no later than March 1st that it will not be participating in TRS-ActiveCare for the upcoming plan year. This will ensure that the premiums for the upcoming plan year can be set appropriately for the remaining districts. (If districts were allowed to opt out after premium rates have been announced at the June TRS Board meeting, the premiums would not be adequate to cover the costs.)
(2). 10-Year Lock-in period – Districts opting into TRS-ActiveCare must commit to a minimum number of years of participation in the plan in order to minimize the impact of adverse selection.
(3). 10-Year Lock-out period – Districts opting out of TRS-ActiveCare are restricted from opting back into the plan 46 for a period of time in order to minimize the impact of adverse selection.
All agree that something must be done to maintain the sustainability of the program. The South Texas Coop (STHC) may be a good model for the state to consider.
The STHC is a health care cooperative that was established in 1998 for Texas school districts. The program offers comprehensive benefits at below market rates. Funding has essentially remained static for years, while benefits have been improved.
The next biennial budgetary process will be in full swing in the next several months. We expect interesting things will happen to health care in Texas in 2017.