From RH Jones: Final Version of STRS Responses to OSBA/OASBO

From RH Jones, December 5, 2007
Subject: Final Version of STRS Responses to OSBA/OASBO

To all:

The message below is quoted from the ORTA web-site. PLEASE read it & write your legislator. This is very important. We MUST get this HB 315 moving!

RHJones, a proud Life Member of ORTA, CORE, OEA/OFT, AEA, NEOEA, NEA/AFT, VFW & American Legion

From Bob Jones, December 5, 2007
Subject: Final Version of STRS Responses to OSBA/OASBO

"ORTA established 1947 Final Version of STRS Responses to OSBA/OASBO "Toolkit" Comments With the introduction of House Bill 315, discussion about the funding proposal for the STRS Ohio Health Care Program has increased. It is important that any discussion be based on fact. As has been the practice in the past, STRS Ohio and the Health Care Advocates for STRS (HCA) want to ensure that accurate facts are shared with members, employers and legislators. With that in mind, we would like to address some statements that have recently surfaced to ensure everyone has the correct information.

It has been suggested that STRS Ohio must take responsibility for the challenges facing health care funding, rather than asking employers to share in that responsibility.

Individuals who have been involved with the STRS Ohio Health Care Program for the past several years know that, were it not for changes made by the State Teachers Retirement Board in 2003, the Health Care Stabilization Fund would be depleted by now and the health care program would be ending in 2008. The Retirement Board made some tough decisions that angered many retirees — but they were decisions that needed to be made if the life of the program was going to be extended. These changes included: reducing premium subsidies; completely eliminating the subsidies for spouses and dependents of educators; and raising the eligibility requirement for health care to 15 years of service.

Over the years, the Retirement Board has taken other steps to control increases in health care cost trends, such as implementation of a disease management program for individuals with certain chronic diseases; incentives to promote the use of generic drugs; and moving to coinsurance from copayments. As a result, participants in the health care program are paying for 48% of the program’s costs each year through their premiums, copayments, deductibles and other out-of-pocket expenses.

Currently, state law only allows employer contributions to help with health care program expenses. With House Bill 315, for the first time active educators will be contributing to their own future coverage. With the full implementation of the bill, retiree health care coverage will be primarily funded by educators through the premiums paid by retirees and the additional 2.5% taken out of each educator’s paycheck.

STRS Ohio should look at requiring members to work longer or later in life to extend the life of the health care program.

At this time, the average age of an STRS Ohio service retiree is 58. If we changed the minimum retirement age to 60 for example, it only adds a few years to the solvency of the health care program. Such a change fails to address the need to fund the liabilities associated with retiree health care.

Additionally, about one-third of the individuals enrolled in the health care program are under age 65. If we eliminated health care coverage for these 38,000 retirees and their family members, we estimate that between 20%–25% of them would not be able to find coverage due to preexisting conditions. These individuals— somewhere between 7,600 and 9,500 people, including disabled teachers — would probably immediately join the ranks of Ohio’s uninsured or, if low enough in income, qualify for Medicaid.

Projections show that a couple age 65 today living to an average life expectancy could need as much as $295,000 to cover premiums for supplemental Medicare coverage and out-of-pocket medical costs. Few, if any, of today’s educators can save enough to pay for the cost of health care in retirement on their own. That’s why they have shown majority support for House Bill 315 — even though it means more money will be taken out of their paycheck. They would rather pay a manageable amount of money while they are working than be saddled with the full cost of health care in retirement.

School districts are already struggling with the high cost of health care for current employees — and the current school funding situation makes this additional contribution increase unaffordable.

The high cost of health care is an issue that is impacting all employers and all Americans. Ignoring the problem of retiree health care will not make it go away and can have a serious impact on school budgets. Without access to stable and affordable retiree health care, many more educators will likely teach longer because they can’t afford health care coverage in retirement. This translates into higher medical costs and higher wages — increased costs that will have to be absorbed by their employers. Should the health care program end, efforts at the bargaining table to increase educator salaries significantly will undoubtedly intensify because educators will know they will be responsible for 100% of their health care costs in retirement. Other alternatives include bargaining with employers to provide health care coverage to retirees and disabled educators.

If this legislation fails, the STRS Ohio Health Care Program will end — but the health care needs of retired educators and disabled teachers will not go away. Pushing the liabilities around doesn’t solve the problem. That’s why STRS Ohio and the HCA have stepped up to the challenge and developed a responsible, equitable funding plan that shares the responsibility for health care coverage among retirees, active teachers and employers.

School districts have always had to deal with finite resources; it has always been up to the people seated at the bargaining table to determine how these resources are distributed. The costs of House Bill 315 are known, can be budgeted for and are gradually phased-in. House Bill 315 is a proposal that recognizes the cost of health care and provides a method to pre-fund retiree health care on a long-term basis.

Employer contributions to STRS Ohio have not been increased in more than 20 years — they have been at 14% since 1984. House Bill 315 calls for up to a 2.5% increase in employer contributions, spread out over a five-year period. In meetings that have been held to date with K–12 employers, there has been recognition on all sides that retiree health care is a critical issue that needs to be addressed. Some employers, such as the Inter-University Council of Ohio, have voiced support for House Bill 315, recognizing that a “viable, fully funded and solvent program is critical for attracting quality faculty to Ohio’s public universities …. If the program were to expire, our institutions would be negatively impacted, in cost and quality of talent.”

Now is the time for school districts that are opposed to this contribution increase to come to the table to engage the issue. The opponents of House Bill 315 have not offered a viable alternative. And time is running out. While current projections show the health care fund being solvent until somewhere between 2021 and 2024, the principal in the fund will start being tapped somewhere between 2009 and 2011. Once that happens, the retirees’ portion of costs will quickly become unaffordable. At this point in time, a 5% contribution increase is workable and manageable as a long-term source of funding for the health care program. Employers, employees and retirees all have a stake in this problem and should be part of the solution. STRS Ohio and the HCA look forward to opportunities to discuss this proposal with school board members. We are all dedicated to having the best educators in our classrooms to serve Ohio’s students. Starting with that premise, we believe we can work together to address this critical issue."

RHJones, Life member of ORTA