Texas Likely to Face Unprecedented Budget Deficit
All available evidence suggests that Texas legislators will face a budget deficit of as much as $21 billion when the 82nd Legislature convenes on January 11, 2011. This estimate does not include the availability of at least $8.2 billion in the State’s “Rainy Day Fund.” Until recently, public estimates of the deficit had been at $18 billion, but newspaper articles now suggest the deficit could surpass $20 billion.
Comptroller Combs will provide the official estimate of the deficit when she releases the Biennial Revenue Estimate in January. Whatever the exact number, a deficit of this scale will require significant budget reductions and will pose a severe threat to state jobs and to our health benefits. For example, state agencies were required to submit 10 percent spending reduction plans as part of their Legislative Appropriations Request (LAR) to the LBB and, in the aggregate, these submissions include a reduction of about 9,800 state jobs. At this point this is more of a budget exercise, but the threat to state employees when the legislature convenes is real.
ERS LAR Reveals Threat to Health Care Benefits
The Employee Retirement System submitted its Legislative Appropriations Request (LAR) to the LBB at the end of August. The LAR is the starting point in the budget process for the FY 2012-2013 biennium, but the LAR submissions by ERS indicate that the state’s budget deficit could seriously threaten the ERS health care program for active and retired employees and their families.
ERS is required to submit its LAR based on instructions jointly issued by the LBB and the Governor’s office. The base request amount is calculated using current biennial expenditures for the ERS Group Benefit Plan, including the reserve funds that ERS was required to spend down, and reducing that total by the 5 percent general revenue reduction that legislative leaders asked most agencies to perform, which yields the base request amount of $2.5 billion for the FY 2012-2013 biennium. Primarily because of the approximately 9 percent cost inflation trend that our health plan is projected to experience, ERS has estimated the base budget request of $2.5 billion will be $576 million in All Funds ($356 General Revenue) less than what is required to maintain current benefits.
While these numbers are scary by themselves, TPEA asked ERS to show what type of plan design changes would be necessary if the agency only received the base amount of $2.5 billion, and not any of their exceptional item requests for an additional $576 million.
The examples cited below are intended to illustrate the types of plan design changes that could be used if the legislature does not provide additional funding above the base request amount. Neither of these approaches have been proposed or put forward by legislators or ERS.
If ERS only adjusted the state’s insurance contribution levels down, but in equal proportion to the current contribution scheme (100% for the individual employee/retiree and 50% for dependent coverage) this would translate to an 80/40 percent state contribution structure for employee/retiree and dependents, respectively. Using current (FY 2011) insurance contribution rates, individual plan participants would have to contribute nearly $1000 more annually, while full family participants would see an annual increase of just less than $2000.s
Alternatively, if ERS used only the imposition of a deductible as way to deal with this level of funding, it would require that each plan participant have a $3,400 annual deductible (currently the deductible for medical services is $0, and this assumes the state picks up 100 percent of costs after the deductible is met). This means every participant would have to pay up to $3,400 out of pocket each year before insurance coverage would begin. In many respects this would turn the state plan into a catastrophic coverage insurance plan. While healthy participants might not pay anything, plan members with multiple dependents could see increased family costs exceeding $10,000 annually.
Again, these examples are intended to be illustrative of the types of changes that could occur if ERS was appropriated only the base level of funding in LAR. TPEA correctly anticipated the state’s fiscal problems in our 2011 Legislative Agenda and we will be working hard to preserve an affordable health insurance program for state employees, retirees and their families.
Attention: Short Term Increase in Annual Coinsurance Out-of-Pocket Maximum
Despite objections raised by TPEA, the ERS Board of Trustees approved a number of changes to the HealthSelect program that increased many out-of-pocket health care costs beginning on September 1. You can follow this link to see the HealthSelect plan changes.
Plan participants should be aware that the increase in the annual coinsurance out-of-pocket limit from $1000 to $2000 which took effect on September 1, 2010 applies to a calendar year and will start over on January 1, 2011. Please don’t postpone needed medical services, but if you have flexibility in the timing of a major procedure or expense you may avoid costs by waiting until next year.
For other tips on ways to save money on health care costs, follow this link to TPEA’s July Update.
New Smoking Cessation Programs Available to State Employees
Do you wish you could quit smoking? Light up the Quitline instead.
The Department of State Health Services (DSHS) announced recently that state employees, retirees and their dependents are eligible for a tobacco cessation program offering free nicotine replacement therapy and free telephonic counseling.
Additionally, the Health and Human Services Commission (HHSC) has adopted a 14-month pilot program to provide a comprehensive smoking cessation benefit – including smoking cessation prescription medications – to state employees working within the HHSC enterprise.
All of these opportunities can be accessed by calling the Quitline (1-877-YES-QUIT).
While the expanded Quitline and nicotine replacement therapy are benefits available to all state employees, HHSC’s pilot program is available only to state employees working within the HHSC enterprise; this includes employees of the Department of Assistive and Rehabilitative Services (DARS), Department of Family and Protective Services (DFPS), Department of State Health Services (DSHS) and Department of Aging and Disability Services (DADS).
As of September 1, 2010, HHSC enterprise employees who are enrolled in Quitline counseling services are able to buy, at current ERS co-pay tiers, prescription medications for smoking cessation. Like all state employees, they will also have access to free nicotine replacement therapy and free telephonic counseling.
TPEA believes there is a strong likelihood that the 2011 Legislature will look at imposing health insurance premium differentials for smokers and possibly other tobacco users. The best estimates are that 20 to 25 percent of state employees smoke. Additionally, studies have determined that a smoker who quits will personally save at least $2,100 per year.
To access these programs, please call the Quitline (1-877-YES-QUIT). When calling, HHSC enterprise employees should identify themselves as such and reference their interest in a smoking cessation prescription medication. Information on specific prescription medications can be found at http://www.yesquit.org/pharmacotherapy.html. If prescribed by your doctor a coupon to reduce the cost of your prescription may be found at www.chantix.com. For additional information on quitting tobacco use, state employees can access the DSHS website www.yesquit.org.
Get Better Informed, Provide Your Home Email Address
TPEA has been working to inform state employees about relevant issues and concerns through our legislative update email program since 2003. TPEA takes pride in being the most reliable source of accurate and timely information on legislative developments and other concerns for active and retired state employees.
However, because this information is sent to your state email address, TPEA is necessarily constrained in the types of information and recommendations that we can provide. TPEA is therefore encouraging all interested state employees to provide their home email addresses, or other non-state email address, so that TPEA can offer you the full range of information we have available. TPEA will not sell or otherwise permit access to these addresses to any other party.
Follow this link to submit your home email address to TPEA.
Watch TPEA’s website www.tpea.org for special event announcements and to read about TPEA’s future schedule.