The HC quagmire: Damon writes to the Columbus Dispatch

May 30, 2006

Letters to the Editor

The Columbus Dispatch

34 S. Third St.

Columbus, OH 43215

To Whom It May Concern:

I am writing in response to an article titled "Systems struggling too provide for retirees" that appeared in your paper on May 30. Since 1974, the State Teachers Retirement System of Ohio has been providing optional health care coverage to Ohio's retired teachers and their family members and has about 111,000 individuals enrolled at this time. While health care coverage was once one of the least expensive programs public and private employers and pension plans could provide to their workers and retirees, we all know that escalating costs and increased utilization have made providing affordable health care insurance a national issue. Today, STRS Ohio spends $1.2 million per day on retiree health care.

STRS Ohio currently supports its health care program through a fund that is separate from its pension fund. This health care fund includes retiree premiums, a portion of employer contributions and special allocations to help ensure the long-term solvency of this fund. While the unprecedented market downturn that occurred from 2000-2003 had an adverse effect on this fund, as well as the pension fund, investment returns have been excellent the last three years. STRS Ohio's investment returns for the 2004 fiscal year, which ended on June 30, 2004, were 17.7%, and returns for the 2005 fiscal year were 12.25%. This year to date, our returns are about 14%. But, as noted above, double-digit increases in health care costs have eaten away at the monies in the health care fund and it is now predicted to last only until 2021 -- in spite of the fact that retirees are paying about 46% of the health care costs through their premiums and out-of-pocket expenditures.

Consequently, STRS Ohio and the Health Care Advocates for STRS (HCA) have jointly developed an initiative to phase in an increase in teacher and employer contributions over a five-year period to strengthen the health care fund. We are now working on draft legislation while we continue to talk to our membership, who currently voice majority support for this proposal, and to employers. We are well aware of the funding challenges school districts in this state face. Unfortunately, our members' employers will not escape the financial impact of retiree health care should this initiative fail. We are already seeing many educators teaching beyond the traditional 30 to 35 years because they can't afford health care coverage in retirement. This translates into higher medical costs and higher wages -- increased costs that are being absorbed by their employers. The liability for health care for retired teachers, faculty and administrators will continue to exist whether or not STRS Ohio provides coverage.

Our Retirement Board and the HCA have taken a proactive approach to address this issue and look forward to continued and constructive dialogue with our members, employers and members of the Ohio Legislature in the months ahead.

Sincerely,

Damon F. Asbury

Executive Director

[State Teachers Retirement System]