Texas School Districts Face Decision Deadline

Texas school districts have until December 2021 to make a decision they haven’t had to make in the past 20 years. Do they stay with the TRS ActiveCare government health plan or do they choose coverage in the commercial market?

2022-2023 Health Insurance Options For Texas School Districts

With the passage of Senate Bill 1444 (SB 1444) Texas public school districts may elect to exit the TRS ActiveCare (TRSAC) program effective September 1, 2022. The District of Innovation loophole will be closed.

A school district must give written notice of intent to exit the program by no later than December 31, 2021.

Districts exiting the TRSAC program are prohibited from re-joining for a period of five years.

Over 90% of Texas public school districts participate in TRSAC.

Approximately 75 districts have never joined TRSAC. These districts tend to be larger districts averaging 800 employees or more. There are a total of approximately 147 districts in this size range leaving approximately half of them as likely candidates for exiting TRSAC due to their size.

Approximately 145 districts have used the District of Innovation (DOI) loophole to offer employees a commercial health plan option alongside TRSAC. Effective September 2022 the DOI loophole will be closed.

Below are four options districts may consider. Districts choosing to participate in TRSAC are prohibited  from leaving the program for five years (2027) which effectively leaves those districts locked in with only one option to 2027.  Districts opting out of TRSAC have multiple options to consider and may choose different options at the beginning of each plan year with the exception they are prohibited from joining TRSAC for five years (2027).

Option 1 – TRSAC

  • Large +400,000 member government risk pool with 20 year history of moderate rate increases
  • 8% overall pool rate increase effective September 2021
  • Benefit changes on High Deductible plan only
  • No participation requirements (Industry standard is 75% participation of eligible employees)
  • Minimal district administrative responsibilities
  • All control based in Austin – no local control of benefits or cost basis
  • Blue Cross Blue Shield – Nationally known health care administrator with vast provider network
  • Member districts bear no risk
  • Guarantee issue

Option 2 – Self-Insurance

  • Districts assume certain administrative duties
  • Minimum participation requirements as opposed to TRSAC’s no minimum requirements
  • District assumes risk
  • Stop loss insurance placement protects plan assets from large catastrophic claims as well as unusually high frequency of claims through pooling for economies of scale
  • Plan costs may be capped on a monthly basis for pre-planned budgetary purposes
  • District controls the plan, determines benefits to be offered and rating basis to be charged
  • Several districts may establish a risk pool to share in expenses and claim costs
  • A Community Health Plan may be established in partnership with other political subdivisions
  • Underwriting risk will be problematic since TRSAC is not required to provide claim experience.
  • No guarantee issue – stop loss carriers may decline to offer coverage due to high risk factors

Option 3 – Fully-Insure

  • Carrier assumes all risk on a pre-determined and guaranteed monthly cost basis
  • Benefit structure limited to carrier’s filing with TDI
  • Medical underwriting process may include health questionnaires from all members to be insured
  • Guarantee issue
  • Texas Insurance Code 1501 Sec. 1501.009. SCHOOL DISTRICT ELECTION. (a) An independent school district may elect to participate as a small employer without regard to the number of employees in the district. An independent school district that makes the election is treated as a small employer under this chapter for all purposes.

Option 4 – Individual Coverage Health Reimbursement Account (ICHRA)

  • Districts may pay all or a portion of the cost of individual health insurance policies
  • Employees may choose any carrier of choice
  • Employees may choose a plan of benefits that suits their individual needs
  • Coverage is portable
  • Guarantee issue

RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.