Premiums Raised, Benefits Cut for TRS-ActiveCare; Similar Changes Loom for TRS-Care for Retirees

The Teacher Retirement System board of trustees today adopted large premium increases and significant benefit reductions for the TRS-ActiveCare health program, which now covers more than 300,000 active public school employees.

Citing increased medical and drug costs, the exhaustion of a small reserve amount, and the cost of small benefit increases required under new federal regulations, the health-care actuary for TRS estimated that TRS-ActiveCare would need a funding increase of 18.9 percent to hold benefits constant for the coming fiscal year. Based on the TRS actuary’s recommendation, the board chose today to respond with a 9.5-percent premium increase and a significant reduction in benefits, effective September 1.

ActiveCare premium increases: Premiums for all plans and coverage options will increase 9.5 percent. The cost of employee-only coverage under the high-deductible ActiveCare 1-HD plan will increase $25 per month ($300 per year) for a total premium of $287 per month ($3,444 per year). Employee and family coverage under ActiveCare 3–the highest-benefit plan–will go up $127 per month ($1,524 per year) for a total premium of $1,461 per month ($17,532 per year).

Premiums in the mid-benefit ActiveCare 2 plan (in which nearly three-quarters of all participating school employees are enrolled) will increase $38 per month ($456 per year) for a total premium of $434 per month ($5,208 per year) for employee-only coverage. Employee and family coverage under ActiveCare 2 will increase $94 per month ($1,128 per year) for a total
premium of $1,085 per month ($13,020 per year).

Premium cost sharing from the state was set at $75 per employee per month in 2001 and has not increased since then. School districts are required to provide toward premium costs at least $150 per employee per month (or whatever greater amount the district provided in the 2000-2001 school year). Assuming no rise in premium assistance from the local school district, employees will bear the full cost of the increase in the coming fiscal year.

ActiveCare benefit changes: For ActiveCare 2, the individual medical deductible rises to $750 from $500 and the family deductible to $2,250 from $1,500. Co-pays for emergency-room visits, inpatient stays, and outpatient surgery all will increase to $150 from the current $100. Generic prescription co-pays will increase to $15 from $10 for retail and to $45 from $20 for a mail-order 90-day supply.

ActiveCare 3, for the first time, will have medical deductibles–$300 for individuals and $900 for families. Co-pays for emergency room, and inpatient stays will increase to $150 from the current $100, and outpatient surgery will require a $150 co-pay. Generic prescription co-pays will increase to $15 from $10 for retail and to $45 from $20 for a mail-order 90-day supply.
Due to new federal regulations, all ActiveCare plans will cover 100 percent of the cost for common preventive services with no co-pay, and benefits are enhanced in the following areas: skilled nursing care, home health care, chiropractic services, and hospice care. All plans also will institute a new $5,000 co-pay for bariatric surgery. This increasingly popular procedure currently has no co-pay under the ActiveCare benefit design. For the high-deductible ActiveCare 1 and ActiveCare 1-HD plans, those are the only benefit changes.

Impact on districts not participating in ActiveCare: Several of the state’s larger districts do not participate in ActiveCare. However, it is safe to assume that the cost increases in ActiveCare indicate a trend that is likely to affect all districts. Four major health-care financial consultants this month have predicted national health-care cost increases ranging from 8.2 percent to 12.7 percent in 2011.

Retiree health care: The TRS board will wait to see if the legislature goes through with a proposed cut in the state TRS-Care contribution before making changes in premiums or plan design. However, based on the board’s discussion today, retirees may be looking at increases as soon as September 1 of at least 13.4 percent even if the legislature keeps TRS-Care funding at the current level (equaling 1 percent of covered payroll). If the legislature cuts the state contribution rate in half (to 0.5 percent) as proposed, increases would be at least 19.3 percent. As with the ActiveCare changes adopted today, these increases could be covered by a combination of premium increases and benefit reductions.