Plain Dealer: Ohio teachers' health-benefits fund drying up

Cleveland Plain Dealer, December 10, 2006

Ellen Jan Kleinerman

Plain Dealer Reporter

The fund that pays for retired teachers' health benefits could run dry in 15 years.

To prevent that from happening, representatives from the State Teachers Retirement System of Ohio want working teachers and school boards to contribute more money to the Health Care Stabilization Fund.

But state lawmakers must approve any changes to the retirement system.

That's why the retirement system is pushing for a bill to be introduced by the end of this year or early next year that would increase contributions by 5 percent - half from working teachers and half from their employers. The health care fund covers teachers, instructors and professors working in public primary and secondary schools as well as state colleges and universities.

The proposed increase would be phased in over five years with a one-half-percent boost each year from both teachers and their employers, said Damon Asbury, executive director of the retirement system.

The proposal has support from the Ohio Education Association, Ohio Federation of Teachers, Inter-University Council of Ohio and other groups representing teachers.

The Ohio School Boards Association is opposing the plan because of the added expense.

"Health care is hammering everyone," said association spokesman Rick Lewis. "But schools simply cannot afford this increase. Programs in many school districts are bare bones, and an extra payment would take away money for books, computers and other necessary educational tools."

Currently, 10 percent of teachers' income is deducted from their paychecks for their retirement, while employers pay 14 percent of their teacher payroll. The retirement system uses 1 percent of the employer contribution for retirees' health care with the rest going to pensions. Teachers in the public sector pay into the state retirement system instead of Social Security.

Lewis pointed out that the system is obligated by law to cover only disability, survivor and pension benefits - but not health care.

While not required, the system is permitted to subsidize health care coverage, said Laura Ecklar of the retirement system, and that began for members in 1974. Spouses and dependents were brought into the plan about four years later.

Skyrocketing costs in the 1980s forced the system to form the Health Care Stabilization Fund, which uses three sources of income - premiums paid by participants, a portion of employer contributions and revenue from money invested.

Increases in health and prescription costs and the sagging stock market have taken a toll on the fund, which now totals $3.46 billion. The retirement system estimates the fund will go dry by 2021 without the proposed increase.

Lewis said the system needs to tighten its belt. But Asbury said the group has done so over the past three years by cutting back on travel, agency vehicles, staff and other operating costs.

William Leibensperger, Ohio Education Association director, said that ideally, new money should flow into the health fund by next year and at the very latest 2009. "If not, then it's over, and that would be the beginning of the death spiral."

Asbury said this issue is crucial to teachers in their 50s who often retire after 30 years on the job and need health coverage before Medicare kicks in. He said he has presented the plan around the state to teachers, who appear receptive.

Some teachers, Leibensperger said, are working longer just to keep health-care benefits from their schools.

According to the system, 111,000 retired teachers get health benefits and 280,000 working teachers contribute to the plan.

To reach this Plain Dealer reporter: ekleiner@plaind.com, 216-999-4631