Decision Time: TRS ActiveCare or Commercial Health Plan?

Senate Bill 1444 brings districts to a fork in the road. One takes them out of the health insurance business and the other puts them smack dab into it…..

By Bill Rusteberg

Texas Senate Bill 1444 passed by the Texas legislature this year allows, for the first time in 20 years, TRS ActiveCare member districts to exit the program. Districts wishing to leave must give written notice to TRS no later than December 31, 2021 for an effective date of September 2022 and will be prohibited from rejoining TRS ActiveCare for a period of five years.

Which path will TRS ActiveCare member districts choose, TRS ActiveCare or A Commercial Health Plan? Will they take the easy road and continue membership or seek competitive alternatives in the private market?

If it’s true history repeats itself, one would suspect most will remain in TRS ActiveCare. Over 90% of all Texas school districts representing more than 400,000 members have chosen the government health plan with only about 75 school districts statewide having never joined. There is a reason for that.

I’ve recently traveled around the state meeting with districts and have reached the conclusion most will continue with TRS ActiveCare. Among the 75 school districts that have never joined we know of several who plan to. One of those districts, having failed to control rising health care costs, intends to join TRS ActiveCare because under the TRS program they can limit their contributions to the minimum required whereas under their current self-funded plan they are at risk for more. Unfortunately this strategy won’t solve health care because cost shifting drives up health care costs, ultimately requiring plan members to pay more for less.

This may be surprising to some who believe the pent up angst among member districts clamoring for cheaper and better coverage will drive a mass migration away from the government risk pool to hoped for greener pastures.

To understand the reasoning behind our prediction one must understand school district culture. It’s a culture like no other, rarely in parallel with corporate culture driven business decisions. Governance is characteristically fragmented and transitory with strong central leadership a rarity. Business decisions tend to be politically based at the expense of traditional American business practices although there are exceptions.

One exception is a small district in deep South Texas. In my initial meeting with the superintendent, I asked if he relied upon an employee insurance committee to make benefit decision recommendations to his the Board of Trustees. His response, “I am the insurance committee!” That’s a sign of a strong leader, essential for taking the other road rather than the easy one.

Senate Bill 1444 brings districts to a fork in the road. One takes them out of the health insurance business while the other puts them smack dab into it.

Remaining in TRS ActiveCare means no pesky commission driven insurance agents and brokers to deal with, no insurance committees of complaining consumers wanting and screaming for more, no board level politics  to contend with, and no annual bid process for health care options. And the best part of all is blame for things gone wrong can be redirected to Austin saving the political hides of administration officials and board members. Life is good and jobs are safe when there is someone else to blame.

Exiting TRS ActiveCare means leaving the calm and tranquility of less than choppy political waters into a sea of unpredictability spurred in part from one board election to the next.

In my travels around the state I’ve found most districts contribute less than $300 per employee per month towards health insurance including the $75 state contribution. This is an unreasonable contribution rate that will not sustain most health plans due to adverse selection. Any district seeking a long-term solution to health care must be prepared to contribute more and that’s something most don’t want to do. It’s much easier to stay with TRS ActiveCare with low contribution rate requirements than to seek board approval for more money for health care.

TRS ActiveCare is a defined contribution plan rather than a defined benefit plan. The state requires participating school districts to contribute $150 per employee per month. Moving to a commercial health plan with comparable benefits will require a higher contribution rate to achieve minimum participation requirements fundamental to commercial health insurance plans. As a rule of thumb, single coverage range from $350-$500 per month, far more than the minimum state required $150. A few non-member districts are funding in excess of $600 per employee per month. So the reader can see the math under TRS doesn’t lend to the commercial market.

Yet we learn many districts give raises (taxable) every year, deserved or not, instead of increasing health plan contributions (non-taxable) when in the alternative they could better manage their health care benefits resulting in more take home pay for their employees.

School business culture puts strong value on relationships and trust. “Do you have other school districts as clients?” is one question that is always asked. “Do you have districts the size of ours?” is another. In a moment of rare honesty one superintendent told us  “I don’t know you except only by way of introduction. We in the school business must have a high degree of trust with who we do business with. We remember all the horror stories of the past, with self-funded school districts going broke. What you’re telling us sounds good, almost too good to be true.”

Some will argue that TRS ActiveCare membership will erode quickly now that Senate Bill 1444 has given districts freedom to choose between a government health plan and the commercial market. They point to the phenomenon of the District of Innovation loophole and the +145 districts who now offer a commercial plan alternative as a further indication.

On the surface this would appear so. However, that is not necessarily the case when you consider these commercial plan alternatives were offered as just another product through a Cafeteria Plan. First Financial and FBS, trusted leaders in voluntary benefits market with a combined school market share of 700+ school districts, simply offered their clients another voluntary insurance product (health insurance) alongside all the others. This was a once in a lifetime, easiest sale ever.

Now that Senate Bill 1444 requires these districts to choose between a commercial health plan and TRS ActiveCare, they will likely choose the path most employees have chosen. What we have found through our travels is commercial health plan alternatives have not achieved majority status in many districts. One district we visited with +300 employees has only 23 employees choosing the commercial health plan option. Most other districts offering commercial health plans alongside TRS ActiveCare average less than 50% participation. School district employees have effectively voted and the majority have chosen TRS ActiveCare.

The 300 life school district with only 23 commercial health plan participants will surely choose TRS ActiveCare membership.

There will be some districts exiting TRS ActiveCare but not as many as some suspect. Success or failure will depend on how they manage their plan and strategies to be employed, an enormous task without expert guidance and oversight.

Moving from TRS ActiveCare, a managed care plan (PPO / HMO) to a commercial managed care plan  (PPO / HMO) will not succeed any better in the long run than staying with TRS ActiveCare. Both will fail to reign in rising health care costs. Both will continue to cost shift to plan members and offer less choices. Doing the same thing over and over again is someone’s definition of insanity. Stop doing what doesn’t work is a lesson to be learned.

El Paso ISD is an example of a district offering a managed care plan along side another managed care plan (TRS) and ending up $18 million in the hole in less than 24 months. (El Paso ISD’s $18,000,000 Health Plan Deficit)  Districts across the state are aware and many are fearful the same could occur should they leave TRS ActiveCare. Any recommendation to exit TRS ActiveCare will likely beg the question, “What assurance do we have we won’t end up El Pasoed?”

Unless a district has strong leadership coupled with the commitment and discipline needed for a successful long term health benefit plan as well as a wiliness to try new and innovative risk management strategies by moving away from the status quo, they should remain with TRS ActiveCare.

And most will do exactly that.

RiskMangers.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.

The shared vision of RiskManagers.us and clients who retain our services is to establish and maintain a comprehensive employee health and welfare plan, identify cost areas that may be improved without cost shifting to any significant degree, and ensure a superior and sustained partnership with a claim administrator responsive to members needs on a level consistent with prudent business practices.

Plan costs, in all areas including fixed expenses and claims are open for review on a continuing basis. Cost effective plan administration and equitable benefit payment to providers are paramount to fulfilling our mutual fiduciary duties. As we proactively monitor and manage an entire benefit program we are open to any suggestions members may make or the dynamic health benefit market may warrant in order to accomplish these goals.

Duty of loyalty to our clients, transparency and accountability are essential to the foundation of our services. To that end, we expect our clients to realize a substantial savings based upon the services that we will deliver.

 

 

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