Damon-CORE meeting March 13, 2006

Half a dozen CORE members met with half a dozen STRS staff members on March 13 (Damon-CORE meeting) to discuss questions submitted by CORE members. In attendance: STRS – Damon Asbury, Steve Mitchell, Bob Slater, Laura Ecklar, Sandra Knoesel and Terri Bierdeman; CORE – Chuck Angeletti, Dave Parshall, Nancy Boomhower, Lloyd Knudsen, Earl Bixel and Kathie Bracy. Below are the questions submitted, with Damon’s printed responses:

1. How many parking spaces are there at STRS and how many are not being used? There are a total of 666 parking spaces in the STRS parking garage. Levels B-E each have between 137 and 145 spaces. On any given day the occupancy on those levels range between 75-95%. Level A has 108 spaces. It is used for both associate and visitor parking. The occupancy level varies depending on the number of visitors.

2. Is STRS actively considering serving as its own PBM and/or joining with other Ohio pension plans to develop such an Ohio PBM? Over the past two years there have been discussions with the other Ohio retirement systems about forming our own PBM. The group believed in the end that we did not have sufficient economics of scale with our collective memberships to build its own self-supporting PBM. STRS continues to monitor the marketplace for improved ways to deliver pharmacy benefits while controlling drug costs.

3. What steps and schedule are planned to review our PBM coverage? This contract expires in 12 months. The current contract with Caremark runs through December 31, 2007. STRS will begin looking at the marketplace in the coming months to see whether Caremark remains the best option for our membership.

4. Is the annual subsidy for higher education still being given to employees? Is it up to $7000 a year? The educational and certification assistance program is available to associates. Associates may apply for assistance in amounts up to $5250 per year to enroll in coursework that will enable them to perform better in their current job or to prepare for another position at STRS. Prior approval must be granted prior to enrolling in coursework or applying for certification programs.

The average tuition reimbursement last year was $3489.

Students enrolled in 5 consecutive classes with a B average or better may apply for up to $7000 annually, but must pay taxes on the amount above the IRS established level of $5250.

5. Why are we paying $600+ per person for insurance when on the open market it can be bought for less at the present time? In the open individual market, insurance companies are underwriting applicants for coverage. Currently, for people in the 55 to 59 age bracket, 25% of applicants in the open market are rejected for coverage and they may be re-rated as frequently as every six months. If the individual has any claims experience, it is also not unusual for the individual to experience a significant rate increase for the second year. STRS does not reject anyone for coverage so we have a significant number of people with medical conditions which increase overall costs and therefore premiums. Secondly, STRS has a higher benefit compared to many products in the marketplace which also results in higher premiums.

6. Is more being considered to help bring those of us who retired over 20 years ago and are living on the $20,000 dollar level or lower? The 2.2% just did not get the job done in terms of buying power. With the current funding period at 55.5 years, it is not feasible at this time to do an ad hoc increase for retirees. The Retirement Board determined last month that no pension benefit enhancements will be considered until the funding period is less than 30 years and the funding level is more than 85%.

7. Are we testing to see if actives will support 5% themselves? It would start at an average of $80 a month up to $160 but with increases due to raises and steps helping offset that. Retirees are doing more than their share with costs already disproportionately. The Member Education and Engagement campaign is entering the second phase of activity. Efforts are underway to educate key members of the legislature and to engage school board members, superintendents and treasurers in understanding the need for a dedicated revenue stream for health care and to see the importance of higher contribution levels for both employees and employers. We are also expanding our contacts with the members of the HCA for STRS. As the legislative initiative develops, options for the appropriate distribution of the contribution increase will be finalized.

8. Would implementing any items lower unfunded liability such as: sliding scales for all HC costs (premiums, copays, out-of-pockets, Rx’s) from highest at 20 years and lowest or career teachers of 30 or more years? Premiums for benefit recipients are already based on a sliding scale using years of service. While it is possible to implement a sliding scale for copays and other out-of-pocket expenses based on years of service, several hurdles would be difficult or impossible to overcome. The biggest challenge is that almost 70% of benefit recipients have 30 years or more of service, so the 30% with less than 30 years would have to pay considerably higher out-of-pocket expenses to have any impact on funding the liability. The sliding scale of benefits would also be very complex for Aetna and MMO to administer, since in reality, STRS would be creating a different plan design for each year of service. Finally, if people with lower years of service were asked to have higher out-of-pocket expenses on top of higher premiums, it would likely cause more adverse selection and drive up everyone’s premiums even faster.

9. Have you considered basing HC premiums based on percents of pension vs. Straight dollar figures to make HC costs more equitable? STRS has explored this idea within the last couple of years. One of the challenges with this idea is that people with higher pensions actually put more money into the Health Care Stabilization Fund through their employer contributions, and for this reason might expect to pay lower premiums, not higher premiums. Another concern is that even if someone’s pension may be low, STRS does not know what other sources of income they may have, so there is a concern with the fairness of basing financial need solely on the STRS Ohio pension amount. Finally, there is a concern that this approach may worsen adverse selection by driving away some of the healthier risk and further driving up premiums for everyone.

10. When will you have an idea about the HC premium increases for 2007? Discussions began at the March Board meeting regarding criteria the STRS staff will use in shaping the 2000 health care program. These discussions will continue at the May and June Board meetings. The preliminary rates based on 2004 claims were shared with the Board in March. Next, staff will begin the process of developing 2007 rates and plan design changes for 2007. Preliminary rates based on 2005 claims will be available in June. The Board is expected to act on the 2007 premiums at its August meeting.

11. What is the status of your efforts to have Board meetings web cast? We have previously explored the feasibility of web casting board meetings, but have not pursued it due to projected costs and expected quality of the web casts. We do audiotape meetings and CD copies of the meetings are available upon request for a nominal charge for postage and discs.

12. Conni went to Portland, OR and Chicago for conferences. Chapman and Flannagan are going to Florida for conferences. Has anyone checked to see if this information is available in Ohio rather than traveling long distances for the information? Is this really necessary? The specific conferences attended by Ms. Ramser, Ms. Flannagan and Mr. Chapman are offered by the International Foundation for Employee Benefits and are specifically designed as part of a well-developed and comprehensive training series for plan administrators and trustees. Depending upon the program selected, the course content includes plan governance, benefits administration, health care, and investments.

The programs are not offered in Ohio. Board members uniformly rate these as being among the best training opportunities available. In addition to the quality of the programs, the opportunity to interact with the presenters, staff and trustees from other systems is not easily replicated here.

The Board has participated in local training as well.