Your State Health Benefits at Risk, Get Informed, Get Involved
TPEA is communicating to make sure all state employees and retirees are aware of significant threats to our ERS health benefits. Please get informed on this issue and get involved by communicating with key legislators and ERS staff, as is detailed below.
As the result of a projected $142 million deficit, ERS has developed a list of proposed options which would to impose significant increases in a variety of out-of-pocket health care costs, and that will have the effect of shifting $150 to $200 million of costs to ERS plan participants during the next fiscal year, which begins September 1, 2010.
None of the options that ERS has developed would require efficiencies by health care providers as a way to help close this deficit. This is problematic since ERS has stated publicly that excessive increases in provider costs, particularly by hospitals, are the primary cause of the deficit, not increased utilization by plan participants.
TPEA believes any acceptable plan to close the ERS deficit must include significant contributions through health care provider efficiencies. TPEA has also been working to get legislative leaders to consider contributing additional funds to help close this deficit and limit the severity of the benefit reductions. Legislative leaders have made it clear that they will not simply “bail out” the ERS plan. But TPEA is hopeful they will support a balanced approach to dealing with the ERS deficit that includes provider efficiencies and additional support from the state.
Finally, in addition to the current projected deficit, ERS testified at a recent Senate State Affairs hearing that even with the proposed increases in participant costs, ERS may need an additional $400 to $700 million during the next legislative session to maintain benefits. Given that the state will face a budget shortfall in 2011 that is generally agreed to be at least $11 billion and potentially $15 billion or more, ERS is likely to face demands for further cuts rather than receiving new funds. Additional benefit cuts during the next legislative session on top of the increased costs currently under consideration by ERS would significantly reduce the value and affordability of our health benefits, probably permanently. TPEA considers the current and potential threats to our health care benefits to be a crisis. Furthermore, TPEA strongly believes that it is important to establish the underlying principle that the responsibility for solving this crisis must be shared by providers, the legislature and plan participants.
TPEA communicated as early as November 2009 about the significant financial deficit that the Employees Retirement System projected for our health benefit plan. ERS had estimated, and newer data have confirmed, that the ERS Group Benefit Plan (GBP) is facing a deficit of $142 million by the end of the current biennium, primarily because of higher than anticipated health care costs. The legislature also played a role since it provided less funding than ERS requested in its LAR and then required ERS to spend down its reserve fund, which could have been used to buffer the unexpected increase in health care costs. Follow this link to see the ERS document explaining the deficit.
In order to close this $142 million deficit, ERS has been studying an array of increases in co-payments and deductibles for medical services and prescription drugs, changes to co-insurance and other plan design changes. ERS also created a survey that 48,000 state employees and retirees took part in. TPEA has received an extremely high level of complaints about the ERS survey. ERS should release survey results soon, and TPEA will post these results on our web site (www.tpea.org).
What Benefit Changes Are Likely
ERS does not have legal authority to change state contributions towards health care, since these decisions are set in the Appropriations Bill. ERS is limited to seeking efficiencies from health care providers or increasing copayments, deductibles, coinsurance and other out-of-pocket cost sharing features under the ERS health plan. ERS has testified that it anticipates increasing participant costs by 6 to 8 percent in the aggregate, with 6 percent translating to $150 million and 8 percent equaling $200 million, or $25 million for each 1 percent change.
ERS presented estimates of what particular design changes generate in terms of “savings” in a recent presentation to the Senate State Affairs Committee. Follow this link to see what type of combinations of changes would be necessary to achieve 6 to 8 percent savings.
Any combination of increases that generates 6 to 8 percent savings would likely require:
- reasonably significant increases in copayments for primary care and specialist office visits,
- a probable first-time imposition of a medical services deductible for HealthSelect,
- changes in the stop loss amount for coinsurance purposes,
- increases in copayments in inpatient, outpatient and emergency room services,
- and probable increases in prescription drug copayments.
After analyzing possible changes in plan costs, TPEA believes that many state employees and retirees simply cannot afford all the shifted health care costs that are likely to change to close the ERS deficit. Deductibles and other changes that will cause large one time costs will also deter some participants from accessing needed services, which could lead to more expensive complications.
Equity Issues with Other State-Funded Health Plans
TPEA testified before the Senate State Affairs Committee on March 31 on our concerns about whether state employees and retirees could afford the extent of shifted costs being discussed. TPEA also raised a number of concerns about the equity of the cuts we are experiencing, since other state-funded health plans at TRS, UT and Texas A&M have been sufficiently funded and are not expected to face benefit reductions. Click here to see archived video of TPEA’s testimony. Of course TPEA is not in any way suggesting that other plans should be cut, but rather that legislative leaders need to help mitigate cuts to ERS now and during the upcoming legislative session.
Prospects for 2011 Legislative Session Are Bleak
As we’ve mentioned before, the State of Texas will likely face a huge budget shortfall as the Legislature convenes next January. Most estimates conclude the shortfall will be at least $11 billion, and possibly $15 billion or more. To its benefit, Texas will have at least $8 billion in its “Rainy Day Fund” and possibly more than $10 billion. However, it is unlikely the Legislature will use more than half the Rainy Day Fund to help balance the budget.
ERS testified that it will need between $400 and $700 million NEW dollars to maintain health benefits for the next two year state budget (after the significant cost increases already under consideration). Given that the 82nd Legislature will most likely be looking to cut current expenditure levels, some analysts have suggested the legislature will try to cut the state’s contribution levels for active and retired state employees. The state currently pays the full health insurance contribution for full time employees and qualifying retirees, and half the contribution for spouses and other dependents. TPEA worked very hard in 2003 to maintain this state contribution policy, we will work just as hard to preserve this benefit in 2011.
Get Involved, Communicate with Key Legislative Leaders
TPEA is encouraging all state employees and retirees to communicate with key legislative leaders to ask that any plan to close the ERS deficit takes a balanced approach that includes provider efficiencies and additional funding from the state. This will help limit the cost of any plan design changes to employees, retirees or their families.
First, please send an email to Senator Robert Duncan (R-Lubbock), to thank him for working with TPEA to try to limit the impact of any changes at ERS and to assure providers contribute to help close the deficit. Senator Duncan’s email address is: robert.duncan@senate.state.tx.us
In addition please call, email or write to the following legislative leaders. Ask for their help to lessen the impact on state employees and retirees in closing the $142 million ERS budget deficit. In particular, request that the legislature find additional funds to help ERS close its deficit and that health care providers also be required to provide savings. The balanced approach that TPEA is supporting is the best and most fair way to resolve this problem.
Lt. Governor David Dewhurst
(512) 463-0001
http://www.ltgov.state.tx.us/contact.php for email link
Senator Steve Ogden (R-Bryan)
(512) 463-0105
steve.ogden@senate.state.tx.us
The mailing address for Lt. Governor Dewhurst and Senator Ogden is:
The Texas Senate
PO Box 12068
Austin, TX 78711-2068
And,
House Speaker Joe Straus (R-San Antonio)
(512) 463-1000
joe.straus@speaker.state.tx.us
Representative Jim Pitts (R-Waxahachie)
(512) 463-0516
jim.pitts@house.state.tx.us
The mailing address for Speaker Straus and Chairman Pitts is:
Texas House of Representatives
PO Box 2910
Austin, TX 78769-2910
Another way for state employees and retirees to have your voices heard is to attend one or more of the eight ERS-sponsored feedback sessions being held around the state. These forums are being put on by ERS to solicit input from state employees, retirees and other interested parties about their thoughts and preferences on possible and proposed health benefit changes ERS is considering. ERS will also be releasing the results from its survey as part of this process.
Check the schedule to see the dates, times and locations of these events. They will be on May 6 in McAllen, May 11 in Huntsville, May 12 in Dallas, May 13 in Austin, May 14 in Houston, May 18 in San Antonio, May 20 in El Paso, and May 21 in Lubbock.
Although these meetings may not be convenient to attend, it is important that ERS hears about concerns state employees and retirees have about both the survey and proposed cuts in health benefits. TPEA has received a large volume of complaints relating to the ERS survey, many felt it forced respondents to choose from limited choices in a way that did not reflect their true preferences. TPEA has also pointed out that there was no discussion of options that would force providers to share in any cost reductions. Please be respectful in any communications with ERS staff, they have a difficult job in this process. Please also feel free to put your concerns in writing and submit signatures of other employees who may share your concerns but are unable to attend.
Watch TPEA’s website www.tpea.org for special event announcements and to read about TPEA’s future schedule.