TRS report shows significant healthcare savings, but not enough to stunt the impacts of rising premiums and drug costs

Last week, the Teacher Retirement System of Texas (TRS) submitted its analysis on what was driving healthcare costs in Texas to the House Select Committee on Statewide Health Care Costs. The examination found that primary factors in cost growth for most years include payments to doctors and hospitals and the cost of pharmaceuticals. The size of TRS membership has helped TRS counteract these cost increases through negotiations with large providers, and that has resulted in significant discounts.

Those discounts represented the single largest healthcare savings, $5.2 billion for 2018. TRS provides health coverage for more than 710,000 active and retired public education employees and their families and has managed to keep the cost for its coverage below what other self-funded employers pay in Texas. Other providers saw a 24% increase in rates on average from 2013-2019, while TRS health plans only saw a 7% increase.

TRS still faces many of the challenges seen by any provider, and active employees and retirees may not be feeling these savings as much as one would hope, since healthcare inflation has still outpaced the growth in employer contributions from school districts.

When TRS-ActiveCare was created, the $225 total minimum contribution required from the state and employer per employee was intended to allow TRS to offer a $0 premium for employee-only coverage. However, the required contributions have not changed since 2001. While most school districts contribute more than the minimum towards premiums, many have struggled to increase contributions at a rate that keeps up with inflation and maintains affordability for school employees. As a result, employees on average paid 46% of their total health premiums and approximately 60% of their medical and pharmacy costs in 2019.