Texas School Districts Face Tough Insurance Decisions

Nostradamus’s December 2021 Prediction

By Bill Rusteberg

For the first time in over 20 years TRS ActiveCare member districts have the freedom to exit the program and seek coverage through the commercial market. What are they going to do?

Brief History of TRS ActiveCare

Over 20 years ago the Texas legislature stepped in to assist school districts seeking competitive health insurance for their employees. Small districts were having difficulty in finding competitive health insurance coverage. In some cases, high risk districts could not find  insurance companies willing to insure their risk at any price.

TRS ActiveCare was established to solve these problems. The program was well received with over 90% of all Texas school districts joining the government health plan representing over 400,000 member lives.

TRS ActiveCare Under Siege

At inception there was a fundamental inherent risk management flaw destined to affect the plan’s sustainability over time.  State funding of $75 per employee per month plus the minimum required district funding of $150 has remained unchanged for 20 years. Premium increases alongside static contribution rates eventually reach a point where more competitive options are often available in the commercial market.

The Affordable Care Act (ACA) changed everything. No longer are applicants for medical insurance subject to pre-existing conditions. Individual health insurance became a viable option for many. Since individual policies are age rated, the averaging used to develop composite group premium rates can make individual health insurance premiums a more competitive and attractive option for some.

The Revolt

Member dissatisfaction with the TRS ActiveCare program grew over time reaching a point where some member districts partitioned the state to allow them to leave in favor of commercial health plan alternatives. These efforts failed to get the Texas legislature to act.

In 2019 Stetson Roane, the Superintendent of Raymondville Independent School District, discovered what he believed to be a loophole which would allow his district to offer a competitive commercial health plan alongside TRS ActiveCare. He determined a District of Innovation designation, designed by the Texas legislature to bring back local control to Texas school districts, includes a district’s ability to gain local control over health insurance selection for district employees.

Effective September 2019 the Raymondville Independent School District rolled out a commercial health plan option for employees. (Texas School District Challenges TRS ActiveCare Plan Mandates) Over 90% of full-time employees moved from TRS ActiveCare to the commercial plan option including over 100 formerly uninsured employees. The El Paso Independent School District quickly followed.

By 2020 over 145 school districts have established commercial health plan options, causing concern among TRS ActiveCare officials.

TRS ActiveCare Fights Back

Concerned about the continuing impact of adverse selection exacerbated by the growing rebellion, TRS officials sought legislative relief to maintain their health insurance monopoly over district health care choices.

Texas Senate Bill 1444 was passed in May 2021 which closes the District of Innovation loophole effective September 1, 2022. No longer will school districts be allowed to offer a competitive commercial health plan option alongside TRS ActiveCare.

The bill also allows member districts to exit TRS ActiveCare effective September 1, 2022 only if they give TRS trustees a nine-month advance notice. Once a member district terminates TRS ActiveCare membership they are prohibited from re-joining for five years.

Texas House Bill 1334 requiring TRS ActiveCare to provide districts with their own claim experience failed to pass, leaving those member districts wishing to explore commercial options at an extreme disadvantage, severely limiting competitive choices in the open market.

Texas School Districts Face Tough Decisions

What will member districts decide to do as the December 2021 deadline requirement to provide notice of termination to TRS ActiveCare approaches? Particularly, what will those 145 school districts which have established a commercial health plan option do? All districts will have to decide between staying or leaving the TRS government health plan.

What are the options available to districts leaving TRS ActiveCare? Here are a few of them:

  • Self-insure
  • Establish a risk pool with other districts
  • Offer ICHRA’s
  • Community based health plan
  • Fully-insure

Unlike 20 years ago, all these options are guarantee issue and cover pre-existing conditions

Nostradamus Prediction

Most of the 145 districts currently offering a commercial health plan option will discontinue doing so effective September 1, 2022. From what we can determine, most of these districts have low participation in their commercial plan option which means most district employees have opted to remain on TRS ActiveCare. One district we visited has less than a 10% enrollment in their alternative plan. There are exceptions of course like the Raymondville Independent School District where over 90% of employees elected to drop TRS ActiveCare coverage in favor of a commercial health plan option.

Approximately 75 Texas school districts who have never joined TRS ActiveCare will continue their current plans. Most will continue to fail to control health care costs and will remain hitched to the managed care status quo horseless wagon.

A few pockets of small rural school districts will create risk pools on a similar basis as the risk pool we helped establish in 1998 and which still exists today. They will beat medical trend, improve benefits with essentially static rates over many years (We have the empirical evidence to support this wildly badass claim).

Less than 25 larger school districts will exit TRS ActiveCare and establish their own self-funded health plan. They will fail at controlling health care costs and will eventually look back at TRS ActiveCare with longing. (El Paso ISD’s $18,000,000 Health Plan Deficit)

TRS ActiveCare will remain the number one choice among the majority of Texas school districts but will continue to fail at controlling spiraling health care costs. TRS Trustees will conclude, in time for the next bi-annual legislative session, that Reference Based Pricing and Cash Pay plan strategies will be necessary to keep the program solvent.

District employees will continue to understand it can be significantly less expensive to place their family members on individual policies for better benefits. Insurance organizations will seize upon this opportunity and aggressively market to Texas educators.

RiskManagers.us will remain the number one risk management resource for Texas school districts willing to think and act out-of-the-box.

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.