A bill to make sweeping changes to TRS-Care, the healthcare provider for most retired teachers, was considered in the Senate State Affairs Committee Monday. Rising healthcare costs have made current funding streams for the program unsustainable and the state is faced with a difficult choice, said bill author and committee Chair Joan Huffman of Houston. TRS-Care shortfalls have become an annual expenditure to the state. This year, the Senate budget includes $760 million to cover the fund’s insolvency for the upcoming biennium, and that number is projected to rise to $2.2 billion by 2021. “As there appears, at this point, to be no end to the rising cost and financial woes of TRS-Care, long-term solutions must be pursued immediately,” she said.   “Providing supplemental funding each biennium to keep TRS-Care solvent is no longer feasible or fiscally responsible.”

According to agency testimony, TRS-Care serves more than 200,000 retired teachers in the state, but it’s those who are under the age of 65 that cost the system the most. That’s because once a person reaches 65 and qualifies for federal Medicare benefits, the state system ends up paying only about 10 to 20 percent of that person’s total health care bill. For the younger members, the state pays the entire bill. TRS Executive Director Brian Guthrie testified that under-65 retirees make up about a third of the total TRS-Care clientele, but account for two-thirds of the cost. Merely increasing premiums on plans would lead to more and more retirees selecting a zero-premium, high-deductible plan offered through the program, driving premium revenue down even lower and putting the program into a “death spiral”, said Guthrie.

Huffman’s bill, SB 788, seeks to deal with this problem on multiple fronts. First, it removes the requirement that TRS offer a zero-premium plan to its members.   Rather than the current three-tier system, TRS Care would be organized into pre- and post-65 plans. Before the age of 65, retirees would pay a high deductible, and would see premiums increase over a four-year phase-in. Medicare-eligible retirees would move to the Medicare Advantage program, which 60 percent of over-65 retirees already use. Guthrie told committee members that most over-65 retirees wouldn’t see a dramatic change in the coverage they receive today.  Finally, the state would increase its share of payments into the program, from one percent of active teacher payroll to 1.25 percent. “This is a permanent funding increase from the state, which will help long term solvency and contribute an additional $167 million this biennium,” said Huffman. The state will also cover the remaining shortfall for this biennium.

Huffman recognized that this proposal isn’t perfect and there are no easy answers to the problem, especially with the tight budget facing the state this year.   She says, however, that the other option is the possible total failure of TRS-Care. Without changes, Huffman says the entire burden of the annual TRS-Care shortfall will be borne by retirees in the form of increased premiums, co-pays and deductibles. More and more retirees will move to the zero-premium, high-deductible plan, further decreasing revenue and TRS could have to cancel the plan. “Thus, it remains clear that [this bill] must pass to ensure our TRS retirees continue to receive health care benefits,” she said. “Because retirees are on fixed incomes and greatly depend on their health care benefits, interested parties must embrace changes that make TRS-Care sustainable.” The bill was approved by the committee and will now go to the Senate for consideration.

The Senate will reconvene Tuesday, April 4 at 11 a.m.