Retired teacher health program projects funding shortfall

The state’s health insurance program for retired teachers, TRS-Care, is expected to have a funding shortfall of $875 million in fiscal 2016-17, according to a recent presentation by the Teacher Retirement System of Texas (TRS) to the Legislative Budget Board.

TRS, which administers the program, is asking the 84th Legislature to appropriate funds in the fiscal 2016-17 budget to cover the shortfall. TRS Executive Director Brian Guthrie said at the Sept. 17 hearing that the requested amount is large but needed if the program is to continue.

TRS-Care was established by the Legislature in 1985. About 243,000 retired teachers and eligible dependents participate in the program.

Texas Insurance Code, ch. 1575, sets out requirements and funding for the retiree health plan. A basic coverage health care plan is offered at no cost to retirees. TRS-Care offers two optional plans, for which retirees pay premiums based on the plan selected, years of service, number of dependents, and Medicare status.

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Plan member premiums are projected to account for 38 percent of TRS-Care funding in fiscal 2015. Other funding comes from the state, which contributes 1 percent of active employees’ payroll; active employees, who contribute 0.65 percent of their salaries; school districts, which contribute 0.55 percent of active teachers’ payroll; and other contributions, including Medicare Part D subsidies and investment income.

Retirees under age 65 are a significant cost driver for TRS-Care. The 83rd Legislature in 2013 enacted SB 1458 by Duncan, which set a minimum age of 62 for retirees to be eligible for the two optional plans. That provision, which went into effect Sept. 1, 2014, does not affect current retirees and certain active employees who were “grandfathered in” under the previous requirements.

A study completed in 2012 by TRS at the Legislature’s direction discussed several options to improve the sustainability of TRS-Care, including:

  • pre-funding the long-term liability through higher contribution rates;
  • requiring retirees to pay the full cost for optional coverage;
  • requiring enrollees to purchase certain Medicare coverage when they become eligible;
  • raising the minimum age requirement to participate;
  • providing a stipend for non-Medicare retirees to purchase insurance in the private market; and
  • moving non-Medicare retirees to TRS-Active Care, the insurance program for working teachers.

The TRS board is conducting another study that will look at plan design changes and other options to address the anticipated shortfall for the Legislature and board to consider.

by Janet Elliott

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