John Curry and Ann Hanning re: Healthcare costs

From John Curry, September 29, 2009
Subject: Re: Ann...would you please pass this on to your Western Area Vice President, Karen Butt

Ann,

Thank you for your reply. I am happy to see that you do state, in your letter below, that "health care costs are high" for STRS retirees. Thank you for recognizing that. For your ORTA Western Area Vice President to say that they are "affordable" really stretches the truth. Currently, OPERS (had I spent 30 years paying into their retirement system instead of STRS) rates for my spouse and myself would be less than $100 per month total rather than what STRS wants ($967 per month) or ...more than nine times the OPERS rate. OPERS "grandfathered" their spouses' spousal subsidy, STRS didn't...they cut off the spousal subsidy overnight. How was OPERS able to do that and continue doing that when STRS wasn't?

Currently, under OPERS, the employer pays out 7% of the employer's contribution into the "healthcare pot" whereas STRS employers only pay 1% into the healthcare pot (see the ORSC table below). Yes, I realize that all five pension plans are supposed to provide corrective action should they not meet the 30 year unfunded liability by submitting their plans for corrective action to the Ohio Retirement Study Council. OPERS planned ahead while STRS didn't. In past "good investment return years" (while the unfunded 30 year mandate was also on the books) STRS dropped their employer healthcare contribution rate and took some of that money to pay for the 35 year/88% pension payout while none of the other pension systems were that generous.. no other Ohio public retirement system pays higher than 77% for 35 years. This was accomplished by these systems so as to allow for healthy hc insurance subsidies for both retiree and spouse...while STRS kept on with the 35 year/88% payout mentality. It was by that same foresight that the other plans were are still able to offer much more "affordable" (translated = subsidized) spousal rates. It was that foresight that separates the other plans from STRS.

To those current retirees that you related , "When I mention the high cost of STRS spousal cost of STRS spousal HC, some single benefit recipients (single, divorced & widowed) remind me that they do not want their rates & costs increased to provide less expensive HC for me & other non-career teachers," I can only say, 'did you tell them how OPERS managed to avoid this situation by not dropping their employer contribution rates nor imposing the 35 year/88% rule when the times were good?' It didn't have to be done that way....STRS still did it....the other systems didn't.

I borrowed part of a table from the ORSC website which shows that while STRS is busy paying out 88% (and,by comparison, OPERS only 77% for 35 years) the monies that OPERS doesn't pay out for their 35 year people allows OPERS to remain closer to their 30 year unfunded mandate that is imposed by the ORSC while still funding, and offering, affordable retiree and spousal health insurance rates:

http://www.orsc.org/uploadpdf/2008_ORSC_Annual_Report_127th_GA.pdf (page 14)

Ohio Retirement System Percentage of Employer Contribution Allocated to Health Care in 2009

PERS 7.00%*
STRS 1.00%
SERS 4.16%**
OP&F 6.75%
HPRS 5.50%

*This amount will be reviewed by the board and may be revised during the first quarter of
2009.
**Does not include employer health care surcharge of up to 1.5% of total active member payroll.

Why is the current 1% STRS employer health contribution rate a measly 1% and the others so much higher? This allows STRS to fund the 35 year/88% payout that OPERS and the other three systems didn't offer and still don't offer. The 35year/88% payout is nice but STRS couldn't afford it and still (more than ever) can't afford it while offering affordable hc insurance rates for BOTH retiree and spouse. This lack of consideration and foresight by STRS for BOTH retiree and spouse is becoming more evident (and expensive) every day.

I do appreciate your efforts in explaining that current STRS healthcare rates aren't affordable. Finally, like you, I retired and went back to work. I work 12 hours shifts so that I can afford to have healthcare insurance, comparable to the STRS 80/20 plan, for a monthly premium that is far more affordable than the STRS plan for myself and I can also subsidize my wife's premiums while she is also working. We are lucky...many STRS retirees (not yet eligible for Medicare) either can't find a job (especially now - with the financial climate) or are too ill to work.

Ann, this letter may not sit too well with some of those 35 year retirees but..... they should understand that there is no decent retirement without affordable healthcare. This applies to both 30 and the 35 year retirees as the 30 year people and the 35 year people both retired with what STRS considers "full benefits." The healthcare premium rates for the 30 year and the 35 year retiree are the same.

Now.... maybe Karen can take some time out during her busy football season and tell me why she thinks my (and other tens of thousands of retirees with and without spouses) healthcare rates are still "affordable." You, Ann, have replied and have said they are "outrageous"...I thank you for stating this. I will be awaiting Karen's response.

John

From Ann Hanning, September 29, 2009
Subject: RE: Ann...would you please pass this on to your Western Area Vice President, Karen Butt

John,

I’ve forwarded your message to Karen Butt. Karen is a big football fan & often busy during the season.

I agree with you that health care costs are outrageous & unsustainable. This is true not only for the STRS plan, but for those plans offered by others. $1,155 per month is unaffordable for many people. This is especially true when co-pays & deductibles are added to the costs. I’ve been sharing the 2010 premium chart in some of my presentations.

A school district in the Columbus area says the cost of family coverage (for as few as the employee & spouse - 2 people) is $1253 per month. The district pays a portion of the cost for the active employee.

Until 2 weeks ago, I was a “young spouse”. I celebrated my 65th birthday earlier this month, by going to Kroger for my “free” flu shot (paid by Medicare).

In 2003, I returned to work part-time so that I could pay for my STRS health care. At that time, we were also providing HC for a 20 year old son who was living at home & going to college. In 2005, I began working full-time. In 2006, we reduced our premiums by changing our HC with STRS to the Aetna basic plan. In 2008, we dropped the dental plan offered by STRS.

In the past 5 years, I have twice asked an independent insurance agent to seek less expensive HC for me. I was told that the STRS plan was my best choice in terms of cost & coverage. I was told that other HC providers had concerns about my high blood pressure & my height to weight ratio (I guess I’m too short to get less expensive HC !)

Recently my doctor wanted to change one of my two daily blood pressure medications which each cost $4 per month. He said I know you won’t take a higher cost medication so check at the pharmacy & if the prescription is not on the formulary, let me know & I’ll find another lower cost drug

When I mention the high cost of STRS spousal HC, some single benefit recipients (single, divorced & widowed) remind me that they do not want their rates & costs increased to provide less expensive HC for me & other non-career teachers.

As we continue to review the long term fiduciary & financial contingency planning by STRS, I’ve heard from some ORTA members. Some members have written to say preserve my health care, even if it means reducing my COLA. Some say that older retirees need a higher COLA, as their pension benefit is probably lower than that of younger retirees. Others say that those under the age of 65 years need a higher COLA to offset HC costs

When the pension systems presented their solvency plans to the ORSC (Ohio Retirement Study Council), Aristotle Hutras, the ORSC Director, stated that the

Pension systems were in trouble partly because they provided & subsidized retiree health care programs which are NOT required by state statute.

HPA (Healthcare & Pension Advocates), formerly, HCA (Health Care Advocates) continues to be concerned about the solvency of the STRS Health Care Stabilization Fund (HCSF). In a recent study requested by HPA, Bolton Partners suggest that efforts be focused on keeping the highest possible COLA for STRS benefit recipients, even at the expense of reducing health care! They noted that all benefit recipients receive a COLA; only those participating in the STRS HC plan receive the premium subsidy & benefit.

HB 315

HB 315 died on 12/31/08. Unless they are passed by the House & Senate, all bills introduced in a General Assembly die at the end of that GA period. When HCA met in January, we began talking to Rep. Oelslager about re-introducing the bill for this GA period (2009-2010). When we learned of concerns about the solvency of the STRS pension fund, HCA became HPA & changed its immediate focus. As noted above, HPA remains concerned about the solvency of the HCSF.

In conclusion, I agree that health care costs are high. We all need to continue efforts at all levels to address the health care issues & costs.

Stay healthy,
Ann