Molly Janczyk re: Possible future restrictions on beneficiaries rejecting STRS HC for cheaper coverage elsewhere, but later wishing to enroll

From Molly Janczyk, September 25, 2006

Subject: STRS HC:Possible future restrictions: Minutes:8/18/06:Member Benefits Report

I receive minutes monthly from STRS on Board Meetings. They include details from all meetings and holdings of STRS are detailed.

SOME RESTRICTIONS ARE BEING CONSIDERED SUCH AS A RETIREE AND A SPOUSE WHO CHOOSE NOT TO GO WITH STRS HC, WILL NOT BE ABLE TO ENROLL IN STRS IF THEY LOSE THE HC THEY CHOSE.

Jim McCready, senior consultant with Watso Whatt, on rate setting methodology and self insured premiums for 2007 HC.

Case mix methodology reflects needs of more health concerns with Plus Plans and healthier participants using Basic Plan. Therefore rates in both plans adequately reflected.

Meyers: Trends calculated w/o netting the effect of Medicare Part D subsidy payments:

McCready: Correct

Leone: Concerned re: no subsidy for dependents.

Knoesel: Reminded Board that educators with less than 15 yrs do not even have access to HC.

Leone: Concerned about loss of healthy retirees with less than 15 yrs.

Knoesel: Actually the per member per month cost of this grp. is twice as much as 30 yr retirees.

Steven Liao, Ass't Director of HC Vendor Relations, reviewed fully insured rates for 2007.

Billirakis: Satisfaction of fully insured plans.

Liao: The 3 plans (Kaiser, AultCare, Paramount) have slightly higher enrollee satisfaction levels than Med Mut. No changes for any of the 3 except since Paramount uses Caremark, the RX copays changes for 2007 will affect Paramount retirees.

Mr. Nickell, Direc. of HC Services, reaffirmed if a retiree chose STRS HC and a spouse does not enroll, they can do so at later time.

****HOWEVER: STRS RETIREE AND SPOUSE WHO CHOSE TO GO ELSEWHERE FOR HC COVERAGE AND LOST IT WOULD NOT BE ALLOWED TO ENROLL IN STRS OHIO HC PLAN UNDER RESTRICTIONS NOW BEING EXPLORED!

Tucker Ellis and West LLP: On state level there are NO Ohio laws other than court ordered guardianship and Board Rules that must be considered in connection with restricting enrollment opportunities. Tucker Ellis and West LLP recommended focusing attention of clear revisions to Board Rules if the board pursues limiting enrollment.

((My opinion only: If a spouse is considering enrolling in the future, now may be the time IN CASE the Board decides to change this as well. Only my opinion based on STRS paranoia and what constitutes a red flag to me. At least call, and get promises in writing. m.j.))

Staff recommended delaying any change until 2009 so adequate analysis may be conducted AND ADVANCE NOTICE GIVEN TO MEMBERSHIP. ((This is how it started in 3/2002 when I picked up on a blurb in STRS Newsletter that spousal premiums may change due to cost increases. This is when I began calling and emailing. If you currently do not have STRS HC, consider what you and your spouse want to have for the rest of your life, NOW! m.j.)).

Leone: If Board passes this motion and something happens in next 12 months, can the Board change its mind?

Nickell: Yes.

Billirakis: There is no motion before Board to take formal action.

Leone: Why is outside legal counsel needed to conduct research rather than Attorney General?

Neville: STRS Counsel: Attorney General decided outside counsel was needed because of specialized nature of HC topic and major implications of this research. STRS does not have such specialized expertise in house.

Laio: LTC: Aetna Long Term Care is currently fully insured so Aetna holds risk. Coverage is underwritten and participation voluntary. Cost is based on selected levels of coverage with no premium subsidy from STRS. There are
2 types of LTC. A disability model and a service model. Aetna is a disability model and provides cash benefits. Aetna's rates are competitive and haven't changed in 7 yrs. AARP offers a service based model based on actual cost incurred.

Aetna requested a survey to find out why LTC is not being selected. It is considering changing to service plan model.

Aetna LTC terms are extended through 2010 to allow states to modify respective Medicaid plans based on new enacted federal legislation.

((I have Aetna LTC and pay $71 a month which can apply to Assisted Living, Home Health Care or Nursing Homes. I could pay less but attempt to keep up with current costs of these facilities. You can ONLY purchase LTC IF you have NO preexisting conditions like my husband does with Rheumatoid Arthritis and consequent Diabetes due to steroids he needs for his level of Rheumatoid. Steroids make sugar levels increase and over decades Diabetes developed. If you are considering LTC, do not hesitate as as soon as you receive a diagnosis, you will no longer be able to purchase it. m.j.))

LTC Partnership Program was enacted in 2/06 allowing states to create legislation enabling enrollees of approved LTC plans to protect additional assets from Medicaid 'spend down' requirements. This adds value to LTC programs once it is implemented on state level. Enrollees can then become eligible for Medicaid while retaining personal assets equal to LTC insurance benefit payments. Reciprocity between states will have to be determined.

Nickell: Board requested enrollment restrictions and legal research at federal and state level found: HIPAA: Public Health Service Act (PHSA) applies to STRS Ohio. STRS exempt to portability requirements because it has 'less than 2 participants who are current members.' Medicare and Medicaid agree. STRS does not have to offer annual open enrollment and can significantly limit special enrollment provisions.

Knoesel: Summary of Requests:

**Staff report on AGE RATING and reemployed retiree HC.

Malinowski: Director of HC Finance:

Staff examined feasibility of determining premiums on enrollee's age which results in higher premiums as enrollee ages. Federal Age Discrimination in Employment Act (ADEA) and Ohio Civil Rights Act, STRS IS PERMITTED TO REQUIRE OLDER PARTICIPANTS WHO PAY FULL COST (NO SUBSIDY) TO PAY HIGHER premiums for HC. Charging age related premiums to these UNSUBSIDIZED enrollees is legal if higher premiums are justified by cost data and are only increased to extent necessary to account for differences in cost of benefits resulting from age:
*age rating must be based on age brackets of no more than 5 yrs.
*increases must be: -determined objectively -actuarially justified -no greater in amount than increased costs attributable to age -applied uniformly to all similarly situated persons in age bracket

For subsidized enrollees, standards are higher.

*Premiums may not go above enrollees paying a greater share
*Subsidy paid by STRS must be same for all similarly both before and after Medicare eligibility

These requirements would make it difficult for STRS to satisfy the equal cost test with respect to subsidized enrollees.

The Board and Staff agreed further research into age rating be discontinued UNTIL the outcome of federal legislation is determined for subsidized enrollees and until 2009 for unsubsidized enrollees when development of plan design changes are due.

Leone: Rehires: what happens when they terminate employment and want into STRS HC? Russell: No changes recommended to current HC enrollment. Objects to his daughter , a newly hired educator , contributing 1% to rehires HC. Questioned if STRS should continue to allow school districts to be rehire retired teachers rather than new teachers.

Ramser agreed on basic premise of how rehires affect new teachers but the Board can only affect HC. Rehires bring 1% to HCSF while retirees who do not work bring nothing.

Puckett: staff is estimating proposed change re: rehires will be a savings to STRS and cost employers.

Meyers: agreed with Leone that school districts have shifted costs to STRS.

Investments:

Leone: Need a doomsday plan ready to be implemented immediately.

Meyers: Doesn't agree with Buser who previously discussed a contingency plan as well. STRS has a diversified portfolio and the design balances our risk.

Lazares: If something were to happen that effects retirement fund, it would cause damage.

Mitchell: The Board completed a major Asset/Liability Study 8 months ago and implemented a new asset allocation mix that did not significantly increase risk of portfolio. Long term strategy is demonstrated by STRS's latest 10 yr. annual compounded 8.3% per year despite difficult period of 2001-2003. Markets can be very volatile for short periods, STRS attempts to mitigate this with 4 yr smoothing and tactical asset allocation outlined in Asset Investment Plan.

Meyers: STRS doesn't need all its money now as payouts are made over time. A diversified portfolio is a contingency plan.

Leone: All items need to be considered to protect pensions: even upsetting ones such as raising age and service retirements, lowering COLAS.

Billirakis: What are realistic events we are planning for? A catastrophic event could be political agendas and spectrums.

Chapman: Contingency plans are also developed to address operational issues.

Leone: plans to bring list of items to Exec Direc and Exec Direc encouraged all to bring lists to be shared.

Sr. Staff agreed to generate ideas over next several months.

Board suggested might be wise to dedicate portion of every month's meeting to this topic given urgency ascribed to it by several Board Members.
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I understand this only superficially and please direct all questions and concerns to Damon and the STRS Board.