Texas school districts of 1,000 employees and more may be forced out of TRS-ActiveCare and left to find their own alternative health care plans for employees. How are these districts going to find competitive bids without detailed claim experience? Will Aetna have market advantage? Will selected Aetna insurance agents/brokers have market advantage too? Will the state release claim information to each affected district? Has marketing already begun, with agents circling the TRS ActiveCare carcass with the promise of “a safe harbor?”
“Those with data win. Those with good data win a lot. Those with real time data win all the time.” – Molly Mulebriar
Interim TRS health care study offers grim prognosis
The Joint Interim Committee to Study TRS Health Benefit Plans released its report to the 85th Legislature this week. The committee was formed in response to 2015 legislation calling for a review of the health insurance plans administered by TRS and recommendations for reforms that would address financial soundness of the plans, cost and affordability, and access to health care providers.
Sen. Joan Huffman (R) and Rep. Dan Flynn (R) co-chaired the committee, joined by four additional members: Sens. Craig Estes (R) and Jane Nelson (R) and Reps. Trent Ashby (R) and Justin Rodriguez (D). The committee held two public hearings earlier this year, and ATPE gave invited testimony in April urging lawmakers to boost state funding in order to catch up with the increased costs that have been shouldered by educators for many years.
For TRS-Care, the state’s health care plan for retired educators, the committee observed predictions of “alarming” shortfalls over the next four years with about 20,000 educators retiring each year and the cost of health care steadily increasing. For the 2018-19 biennium, a funding shortfall is predicted between $1.3 and $1.5 billion, and the deficit for 2020-21 could be as much as $4 billion. The report states as follows:
“As there appears to be no end to the rising costs and financial woes of TRS-Care, long-term solutions must be pursued immediately. Providing supplemental funding each biennium to keep TRS-Care solvent is no longer feasible or fiscally responsible. Major plan design and/or funding changes must be sought in the 85th Legislative Session.”
The interim committee report outlines two options for retiree health care, both of which are likely to be controversial. The first is a Health Reimbursement Account (HRA) and Medicare Advantage Plan that would provide a defined contribution of $400 per month for non-Medicare eligible retirees into a reimbursement account in lieu of health insurance, forcing them to obtain their own coverage through the public exchange. For Medicare eligible retirees, the only state-sponsored option under this plan would be to enroll in a Medicare Advantage plan for medical benefits and a Medicare Part D plan for prescription drugs. The second proposal from the committee is a High Deductible (HD) and Medicare Advantage Plan. It features a high deductible ($4,000 in-network) health plan similar to TRS-Care 1 for non-Medicare eligible participants. As with the HRA option, Medicare Advantage and Part D would be the only benefits available to Medicare-eligible participants via TRS if the HD plan is implemented.
Even if such dramatic changes are adopted, the committee expressed lingering doubts in its report about long-term sustainability and a need for increased contributions going forward:
“With health care costs currently at an unsustainable level and continuing to rise, the state cannot continue to provide supplemental appropriations to keep TRS-Care solvent. Additionally, the financial contributions necessary to keep TRS-Care solvent in its current form will only increase infinitely. Therefore, the Committee finds that the HRA and HD Plans discussed previously are the most viable and realistic options to address the financial soundness and sustainability of TRS-Care. However, even if significant changes are implemented under the HRA or HD Plan, the TRS-Care fund would still face a shortfall moving forward, although dramatically less than the expected shortfall of $1.3 to $1.5 billion. Thus, to address long-term funding of the plan, the Legislature will have to review, and possibly modify, the current funding contributions from the state, school districts, and retirees, or continue to provide supplemental appropriations each biennium.”
For TRS-ActiveCare, the committee report focuses largely on affordability for actively employed educators, especially in the context of a dramatic rise in premiums. In a state as large and diverse as Texas, there are significant disparities in health care costs depending on geographic location. The committee observed that “employees who reside in lower cost geographic areas are subsidizing those in higher cost areas,” but “attempting to establish premiums based on age and/or geographic location would not achieve plan affordability for all members.”
The interim report details a proposed High Deductible (HD) Health Plan (TRS-ActiveCare1-HD) for school districts with 1,000 or fewer employees, with all other districts being forced out of TRS-ActiveCare and left to find their own alternative health care plans for employees. The remaining eligible districts would have an initial opt-out period before locking in their decision to remain in or out of the state’s plan. TRS-ActiveCare 2, TRS-ActiveCare Select, and HMO options would be eliminated. As recommended by the committee, state and district funding for employees would remain static at $75 and $150 (minimum) respectively. ATPE and other groups have long advocated for lawmakers to increase the state’s $75 monthly contribution, which has not changed since the inception of the program in 2001. The committee unfortunately declined to recommend an increase in the state’s share.
Ultimately, the committee concludes that its proposed HD Plan would be “the most viable and realistic option” for addressing health care affordability for active educators, noting however that more districts would be looking at offering their own health care plans in lieu of the state program. The report advises that school employees should drive decisions about TRS-ActiveCare changes going forward:
“However, if school districts and active public education employees adamantly oppose the proposed changes in the HD Plan to curb the affordability problem, TRS-ActiveCare may continue operating under the current model. The fact is, premiums for all plan options will continue to increase as health care costs rise. Nevertheless, districts and employees may still prefer the stability that TRS provides and the multitude of coverage options. The decision to make significant changes to the plan, or continue in its current form, must ultimately be left to the active public education employees. The employees are in the best position to recognize what is in their best interest and the legislature should support them in any way possible.”
Rep. Justin Rodriguez
Rep. Justin Rodriguez was the lone committee member who declined to sign the final report. He wrote in a letter to House Speaker Joe Straus (R), “I do not believe the solution requires a significant shifting of the burden onto our TRS retirees and active public education employees who have sacrificed and worked tirelessly to develop the next generation of Texans.” Rodriguez added, “I would hope that any proposed solution… would entail a shared, and meaningful, contribution of state resources.”
Rep. Trent Ashby
Committee member Ashby supplemented the report with his own letter aimed at offering additional insights to active and retired educators concerned about the proposals. First and foremost, he called the report “a starting point” for further discussions on how to proceed. Ashby wrote, “Though the report contains options I do not support, I look forward to the responses of active and retired teachers who have opinions on how we can best provide stable footing for the programs in perpetuity.” Ashby added his own warning that absent changes, “the result could be catastrophic. Without action, TRS-Care will eventually fail altogether.”
ATPE similarly cautions that the long-awaited interim study report is merely a recommendation and that no decisions have been made at this point for the future of TRS-Care and TRS-ActiveCare. The 85th legislature will have ample opportunity to solicit and consider feedback from education stakeholders before and during the 2017 legislative session, and ATPE will be there to weigh in and advocate for the very best options for active and retired educators.
Read the full interim committee report here, which includes a number of attachments. We invite you to share your feedback with us on this critically important ATPE legislative priority. As always, stay tuned to Teach the Vote and ATPE.org for further analysis and updates as the legislative session approaches.