STRS News

 

April, 2014 STRS Board Report

Board Reviews Proposed Changes to STRS Ohio Health Care Program for 2015 and 2016

During the April meeting of the State Teachers Retirement Board, STRS Ohio staff presented the Retirement Board a two-year health care plan for years 2015 and 2016. The recommendations continue building upon the multi-year strategic plan that began with the board’s December 2011 approval of a strategic health care program framework.

 

A key component of that framework is to extend the projected solvency of the Health Care Fund to 65 or more years by 2025. Staff recommended the changes outlined below with the board’s strategic framework in mind. The board will be asked to vote on these items at its May meeting.

 

Proposed Changes to STRS Ohio’s Health Care Program for 2015

Reducing the subsidy multiplier by 0.1% to 2.2% per year of service — continues the phased-in reduction that the board began in 2012. A retiree with 30 or more years of service would receive a subsidy in 2015 of 66% of the total cost of the plan. The 2014 subsidy for a retiree with 30 years of service is 69%.

 

Aetna Medicare Plan changes

In-network coverage changes include: reducing deductible to $300 from $500; reducing primary care physician office visit copay to $15 from $20; increasing specialist physician office visit copay to $25 from $20.

 

Out-of-network coverage changes include: increasing out-of-pocket limit to $2,000 from $1,500; increasing specialist physician office visit copay to $50 from $40; and increasing coinsurance percentage to 6% from 4%.

 

Medical Mutual Plus and Basic Plan changes

Include two in-network primary care visits at $20 each in the Basic Plan.

 

Increase deductible and coinsurance out-of-pocket limits as follows:

 

 

In-Network

Out-of-Network

Plan

Deductible

Out-of-Pocket

Deductible

Out-of-Pocket

Basic Plan

$2,250

$3,700

$4,500

$7,400

Plus Plan

$2,000

$3,400

$4,000

$6,800

 

Express Scripts Plan changes

Increase the covered brand-name deductible to $200 from $150.

 

Implement a specialty drug tier with a 10% coinsurance and maximum per prescription fill limit of $500.

 

Increase the maximum annual expense per enrollee to $4,700 from $4,550.

 

Other proposed changes include:

Continue Medicare Part B premium reimbursement at 2014 levels for plan years 2015 and 2016.

 

Eliminate Medicare Part B reimbursement to benefit recipients who are not enrolled in an STRS Ohio Medicare plan.

 

Eliminate the practice of offering subsidy and providing Medicare Part B premium reimbursement for new survivors on or after Jan. 1, 2015. These survivors were not receiving a subsidy or Medicare Part B reimbursement before the benefit recipient’s death.

 

Continue the current Delta Dental and Vision Service Plan programs for the next two-year period 2015–2016.

 

Proposed Changes to STRS Ohio’s Health Care Program for 2016

Reducing the subsidy multiplier by 0.1% to 2.1% per year of service — completes the phased-in reduction that the board began in 2012. A retiree with 30 or more years of service would receive a subsidy in 2016 of 63% of the total cost of the plan.

 

Aetna Medicare Plan changes

In-network coverage changes include: reducing deductible to $150 from $300; increasing Skilled Nursing/Home Health Care coinsurance to 2% from 0%.

 

Out-of-network coverage changes include: increasing out-of-pocket limit to $2,500 from $2,000; increasing specialist physician office visit copay to $55 from $50; increasing Skilled Nursing/Home Health Care coinsurance to 4% from 0%; and increasing coinsurance percentage to 8% from 6%.

 

Medical Mutual Plan changes

Discontinue the Plus Plan.

 

Increase the Basic Plan deductibles to $2,500 in-network/$5,000 out-of-network.

 

Increase the Basic Plan coinsurance out-of-pocket limits to $4,000 in-network/$8,000 out-of-network.

 

Express Scripts Plan changes

Increase the prescription drug coverage annual maximum expense limit to match expected 2016 Medicare changes.

 

AultCare, HealthSpan and Paramount plan changes

Discontinue the regional plans.

 

These are the key components of the proposed changes recommended by STRS Ohio staff. Following board action, which is expected in May, a comprehensive review of all of the changes will be included in STRS Ohio newsletters in July and October.

 

Board Votes to Discontinue Irrevocable Waiver Program for Health Care

The board voted to discontinue the irrevocable waiver program. This program allowed STRS Ohio benefit recipients to enroll in another Ohio retirement system’s health plan as a spouse by agreeing to irrevocably waive coverage at STRS Ohio. Because of changes in the Ohio retirement systems' programs that significantly reduce or eliminate spousal subsidies, the board voted to allow these individuals to enroll in an STRS Ohio plan during the 2014 and 2015 open enrollment periods and, thereafter, treat them the same as any other benefit recipient beginning on Jan. 1, 2016.

 

Retirement Board Continues Work on Funding Policy

During the past several months, the Retirement Board has worked with its actuarial consultant and STRS Ohio staff on a funding policy for the system. Segal Consulting began with a funding policy discussion last fall, and the board continued to explore the topic at subsequent meetings including the April board meeting. A funding policy is a document that establishes the funding philosophy of the board to help ensure the systematic funding of future benefit payments for members and benefit recipients of STRS Ohio.

 

A funding policy could benefit future boards by establishing the framework and specific objectives to monitor STRS Ohio’s funded status and by preserving the financial improvements realized by the passage of pension reform legislation in 2012. The Retirement Board is expected to continue its work on a funding policy in the months ahead.

 

Ohio House Passes ARP Mitigating Rate Moratorium; Board Action on Hold

At the April meeting of the State Teachers Retirement Board, the board put on hold a discussion on the mitigating rate for STRS Ohio’s Defined Contribution (DC) Plan and alternative retirement plans (ARP) offered to higher education faculty through private vendors. The mitigating rate, established by law, is a portion of the employer contribution that is used by the retirement system to offset the negative impact of participation in these defined contribution plans. The board’s actuarial consultant recommended a 1% increase (to 5.5% from 4.5%) in the mitigating rate. However, before the board took action on this recommendation, the Ohio House of Representatives added an amendment to Amended Substitute House Bill 483 to place a moratorium on the mitigating rate applied to ARPs at 4.5%. The moratorium would be in effect until July 1, 2015. The Ohio Senate has yet to pass the bill.

 

The amendment also requires further study on the mitigating rate to be completed by the end of the year. STRS Ohio executive director Michael Nehf testified before the House Finance and Appropriations Committee to express his concerns with the amendment, namely: (1) the Retirement Board, as fiduciaries, have a recent recommendation of the consulting actuary to increase the mitigating rate to 5.5%, and; (2) the study being called for should be conducted by an actuarial firm and the systems to which the mitigating rate applies should be consulted (STRS Ohio, OPERS and SERS). The Ohio Senate has not yet established a timeline for acting on Am. Sub. H.B. 483.

 

Proposed Operating Budget for Fiscal Year 2015 Calls for Slight Increase

The Finance Department proposed system budgets for the 2015 fiscal year (July 1, 2014–June 30, 2015) during the April board meeting. The proposed system operating budget totals $91,482,200, an increase of 1.1% over the current year’s budget. The proposed budget includes a 0.7% increase for salaries and wages, and a 20% increase in custodial banking fees. The proposed budget reflects 578 full-time equivalent associates, down from 585 currently. The proposed capital budget for fiscal year 2015 totals $1,597,500, a decrease of about 5.2% from the current year’s budget.

 

Retirements Approved

The Retirement Board approved 221 active members and 117 inactive members for service retirement benefits.

 

Other STRS Ohio News

 

CEM Reports Improvements in Service for Fiscal Year 2013 with Costs Holding Steady

STRS Ohio received the CEM Pension Administration Benchmarking report for fiscal year 2013, which reflected improvement in the retirement system’s service level score. STRS Ohio’s service score was the second highest among its peer group of 14 systems and also ranked second overall of the 55 plans that participate in the study. STRS Ohio’s Call Center, written pension estimate and disaster recovery activities ranked first among all participating systems, and one-on-one counseling ranked second. STRS Ohio is on track to improve this service score again next year as bank and tax changes were added to online service. The report also measures each plan’s administrative cost per member and annuitant. STRS Ohio’s cost per member remained steady — higher than the peer average, but below the average cost of all participating systems. Since 2006, STRS Ohio has reduced costs measured in the report by about 18%.

 

 

 

April 26, 2014 9:57 AM