Flashback: Cathy Burner's speech to STRS Board October 3, 2002

From Cathy Burner

Speech to STRS Board October 3, 2002:

STRS Health Care Presentation

Thank you for providing a forum for input on how to manage the STRS Health Care Fund so that it will continue to provide health care benefits for retirees through the present trials and into the future.

My name is Cathy Burner. I hold the office of Legislative Agent for the Ohio Retired Teachers Association. My testimony today, October 3, 2002, will contain researched information. It will also contain concerns expressed by retirees and by active teachers.

Executive Director, Herb Dyer, said in his April, 2002, report that we”…will simply have to share the pain as fairly as possible.” We would like to add the word “equally” to that statement. Using the history of health care, everyone who had 25 or more years of service share equally with coasts and coverages. It did not matter if the service period was 25, 30, 40, 45, or more years of service. A proposal is before the STRS Board to change the fair and equal burden of health care costs by allowing the annuitants with higher monthly benefits to pay less for their health care by placing a higher burden on older retirees with smaller benefits who are less able to afford the heavy increases.

As an example of what SB 190 has done, retired teachers were omitted from the 2.2% formula for calculating retirement benefits. We are specifically talking about members that retired before 1998 their coverage is based on a 2.1% formula. ORTA asks that all members with 30 years of service or more be calculated on the 2.2% health care formula. It is further requested that a 30-year ceiling be established that no members can be reimbursed beyond 30 years at the 2.2% coverage. In other words, the STRS board proposal says that if you make more, you pay less and conversely, if you make less, you pay more.

In graphic terms, it is putting some recipients on a luxury liner while relegating others to a dingy. We have been and should continue to be in the same boat. Let us continue to share the pain fairly and equally. To do otherwise would be discriminatory and unfair for an older retiree with small monthly checks whose budgets are now reduce them to making purchases at discount stores. It would be a real travesty of justice to allow this proposal to happen.

In addition, according to STRS statistics, 80% of the Health Care Fund is consumed by 20% of the recipients not yet on Medicare. Conversely, only 20% is consumed by the 80% who are on Medicare. This is further proof that older retirees with 30 years service should not be subsidizing recent retirees by the older retirees paying a higher percentage of their health care premiums.

On another issue coverage for spouses, ORTA has encountered feelings of disbelief to outrage at the suggestion of eliminating the spousal health care coverage by the year 2007. ORTA questions the legality of a retroactive change in an established past practice of offering a subsidized health care benefit which members and their spouses have planned their retirement around. STRS retirement literature leading up to the retirement years has repeatedly mentioned access to this coverage for spouses. Older retirees have few or no options on the proposal to eliminate this coverage. Couples have relied upon this coverage for years and their ages generally preclude them from other plans and reemployment. A compromise should be reached with possible reduction in subsidies but not total elimination. It is further recognized that SB 190, which has passed, introduced language for the defined and combined retirement investment plans. This literature clearly pointed out that access to the Health Care was dependent on the active teacher’s choice in retirement benefit selection.

The proposal to eliminate Medicare, Part B reimbursement, is targeting the older population of our retirees who are already forced to live on lower incomes. We recognize that this is a cost –saving measure and suggest that this reimbursement be reduced from 90% but not eliminated. Total elimination would create another big hole in the budgets of our older retirees.

To help defray some of the expenses, ORTA is requesting an employer and employee increase in contributions. Maximizing the employee contribution to 10% from the current 9.3% would not require a statute change and could be accomplished by the Board’s action. Maintaining an attractive retirement system and health care fund will benefit the active teachers and keep teaching as a highly regarded profession in the state of Ohio.

Another item pertaining to employers is to have the school employers of re-employed retirees pay their health care costs. There was considerable discussion about the re-hires (14,000 +) at the last roundtable. These retirees are mostly in the pre-Medicare group, which is the group that has the highest cost (80%) to the Health Care Fund. We solicit, encourage, and would lend our support to whatever action is necessary to achieve this proposal.

Since this is a forum for cost cutting of expenses, we would be remiss to not mention the Police and Fireman’s pension fund has reduced their prescriptions from a 90 to 60 days. They have shown that this is cost effective due to the number of retirees passing away before a 90 day prescription is used. With 100,000+ retirees receiving benefits, STRS has the potential to save $1 Million (or more) per year considering the average retiree has five prescriptions filled and with the likelihood that the more elderly probably fill more than five prescriptions.

In the June 2002 STRS Legislative Update the subject of charter schools was mentioned. To quote, “…we continue to monitor HB 364 as well as other legislation pertaining to community schools to ensure there are no provisions adversely affecting STRS. To date, there is nothing of concern.” ORTA, in the strongest of terms, disagrees with this premise. Enclosed you will find a spreadsheet with information from The Ohio Department of Education pertaining to Community Schools. You will find the percentage of total contribution to the STRS Ohio retirement.

Please note the vast disparity in contributions by the community schools to the State Retirement System also note the total state support and the difference in contributions to the retirement fund. For an example, we will use the information from the Ohio Virtual Academy, which was funded at almost $4 million dollars, and they contributed less than Mollie Kessler School, which only receives under $116,000. Mollie Kessler will pay over one-quarter of its funding to the Teacher Retirement, while K12 Virtual contributes less than 1% of its $4 million. The Ohio Virtual Academy is paying $25,000 to STRS on a budget of nearly $4 million. A traditional public school would pay $400,000 on this same budget to STRS.

Our tax dollars are being pumped into these charter schools and STRS is getting a pittance into the system. In the case of The Ohio Virtual Academy 70% to 89% of the tax dollars are pocketed as profit and those pockets are in McLean, Virginia. In addition the academic records of the community schools are dismal (36 of 41 schools) are on academic emergency or failing only 6% (212 of 3646 schools) are on academic emergency or failing.

ORTA suggests that the group at this table secure legislation to limit the Virtual schools charge per-pupil to make it more in line with their cost of educating a student via a computer. An example may be $1200 per pupil. However, if we allow this virtual school concept to rapidly expand we will have the following in Ohio… Lower Teacher salaries, loss of students from good schools that are not on the emergency list and in the long run the failure of Ohio to attract businesses and jobs because of poorly educated citizens and finally low contributions to the STRS will be the demise of the pension system.

Also enclosed is the SumaCare Health Care Plan from Summit County, which proved to be very cost effective for participants. . Members from the Akron area are requesting a review of this program for another option with possible cost-savings for the health care fund.

As we look at the changes in health care, we consider them temporary ad hoc measures for the particular purpose of stabilizing the Health Care Fund. As we re-visit these areas on an annual basis (or less), we await, in anticipation, for an improvement in investments and a replacement of reduced benefits.