Monday, July 28, 2014

TRS Care and the Future

Do You have a spare billion dollars? If you do the TRS Care program would like to borrow it.

You see, the state health care program for retirees is currently a billion dollars in debt. In other words the TRS Care program will soon be broke and unable to pay the medical bills for retired teachers.

The state of Texas has belatedly decided to do something about this deficit by directing the Teacher Retirement System( TRS)  to study options for making the system solvent. You can read in depth about these options on the website of out teacher retirement association. The purpose of this blog is to briefly summarize these options for those who don't have the time to read the TRTA report and to give an opportunity to discuss your views on how to solve this crisis.

Option 1 Pre-fund the TRS Care fund. This would create a permanent fund much like the TRS Care pension fund. Currently the TRS Care is funded every biennium by a combination of contributions from the state, the school districts and the active teachers. Retirees are required by law to pay 30 per cent of the cost through premiums. Currently the state contributes 1% of payroll, the districts .55% of payroll and active employees .65%. TRTA estimates that if the state decides to prefund , the cost to the state and districts would rise from 1.55 % to 6% of payroll and the premium costs for retirees would rise by single digits. This is because the state law requires that retirees pay 30% of the cost of TRS Care.  My comment: I agree with TRTA'S comment that this would solve the long range funding problem but would be very expensive and painful, particularly to most retirees. I would suppose under this option here would be a fund which would be invested?

Option 2 Continue the pay as you go option. In other words, maintain the current system which funds TRS Care every biennium.  Even with this option costs for the state, active teachers and retirees would go up. As TRTA points out on their website, this would merely put off the long range problem for two more years. My comment: Of course the legislature could just decide to not fund the program at all during some future biennium. 

Option 3 Prefund the program as in option one but only for ten years, rather than 30. TRTA'S take is that this option will be less costly than option one but will still not be a permanent solution as option one would be. My take: I think this option deserves serious consideration. There will be added costs to the state, active teachers, the districts, and maybe even to retirees but less than option one. Plus given the changing world of health care , the situation in ten years may require a complete reevaluation anyway.

Option 4 Retirees pay full cost of "optional coverage". Most TRS retirees are aware that there are three tiers in the TRS Care program. Tier one is considered "catastrophic coverage" The retiree actually pays no premiums  for tier one but has a very high deductible. Under option two and three the retiree pays premiums but the state subsidizes the cost. Tier two and three are considered "optional" coverage. Option 4 would require retirees to pay the full cost of tier two and three. TRTA'S take is that this option would require the retiree to bear the full load of the needed reform. TRTA gives an example that a retiree on option three would find their premiums increased from $ 295 to $ 616! My take. Holy Batman! Any legislator who voted for this plan is no friend of  retired teachers.

Option 5 Make the Aetna Medicare advantage plan the "mandated" plan for medicare eligible retirees. Currently about  60 per cent of medicare eligible retirees have chosen the medicare advantage plan. TRTA'S take. This option would not in itself solve the funding problem but would be used in concert with other options.  My take: I question if TRS can force all retirees onto the Aetna Medicare Advantage plan. I think under Federal law all those eligible for medicare have the right to original medicare.

Option 6: Move to a health retirement account. Under this option, employers give a certain amount of money to the employees to buy insurance. The contribution is tax free to both the employer and employee. TRTA'S take: Trta is not even sure this is possible under the law because health savings account are usually given by employers and TRS Care recipients are not employees since they are retired. TRTA also comments that this would be a complete move away from the state's commitment to provide an accessible health care for retirees.     My take: While I understand TRTA'S concerns I suspect that in the long run the entire U.S. health care system is going to move increasingly toward the idea that the consumer be given some amount of money and will buy their own health insurance on  exchanges like the Affordable care exchanges. I think as retirees we need to assure if such a change does take place, that the state gives enough money to TRS Care retirees to make the insurance truly affordable and accessible. 

A couple of final thoughts and questions. 

               Why is TRS Care one billion dollars in debt. Someone obviously dropped the ball, whether, TRS, the Legislature, or the comptroller.

                the major cost of TRS Care is those retirees who are not yet eligible for medicare( that is the time period between the time a person retires and they reach 65). Changes to the law in the last legislature will basically require those who retire in the future to be 62 years of age, with those grandfathered out whose age and years of service add up to seventy at the time the law was passed. This should certainly strengthen TRS Care in the long run.

                 The law states that premiums from retirees must equal at least thirty per cent of the costs of TRS Care. Perhaps we should consider a two tier system such as medicare currently has and have retirees who have annuities greater than, say $90,000 pay a higher premium. Just a thought.

your turn I would be "pleased as punch" to have your comments. Which, if any of the six choices do you favor. Any other solutions would also be appreciated. Of course a correction to anything I have written above that is incorrect is also welcome. Just be nice, so as not to hurt my delicate self image. Just scroll down and click comments. Thanks for visiting my blog.