Topic:
RETIREMENT AND PENSION SYSTEMS; TEACHER CERTIFICATION; HEALTH INSURANCE;
Location:
TEACHERS - RETIREMENT;
Scope:
Connecticut laws/regulations;

OLR Research Report


January 13, 2000

 

2000-R-0013

RETIRED TEACHERS' HEALTH BENEFITS

 

By: Judith S. Lohman, Chief Analyst

You asked (1) whether prescription drug coverage for retired teachers is available anywhere in Connecticut, (2) why there is a difference between the state subsidy for retired teachers who remain with local board plans compared to those who are covered by the state plan, (3) whether the law requires the state to pay any shortfall in the cost of teacher retirement benefits, and (4) whether there has been any discussion of splitting the difference between the $110 state subsidy to local school boards for retired teacher coverage and the $75 subsidy for the state plan.

SUMMARY

Prescription drug coverage for retired teachers is available throughout the state, but it is no longer free. Starting January 1, 2000 Aetna US Healthcare began charging $68.90 per month for its HMO with drug coverage. The Aetna HMO plan is the one that is no longer available in Tolland County. The Teachers' Retirement Board's (TRB) other provider, Stirling & Stirling, has plans available throughout the state but it charges $80 per month for a prescription drug rider.

The difference in the amount the state pays for TRB's retired teachers' health plan ($75) and its subsidy for local board plans for such teachers ($110) stems from 1998 changes in how retired teachers' health insurance is funded. A 1998 law set a $110-per-month floor under the amount the state would contribute to local plans because that was the amount the state was paying for its state plan at the time. After 1998, the premium cost for the basic TRB plans dropped to $75 per month, per individual.

The law requires the state to pay any shortfall in the $110-per-month subsidy to local boards of education for retired teachers if there is not enough money in the Retired Teachers' Health Insurance Account (funded by active teachers) to pay the account's full share of the subsidy ($82.50 per individual per month).

According to Bill Sudol of the TRB, the board is asking to introduce legislation both to increase the $75 state payment towards the cost of the state plans and to add an inflation factor to the minimum $110 subsidy to local plans. Both proposals require increasing the appropriation for retired teachers' health insurance in the next fiscal year.

PRESCRIPTION DRUG COVERAGE

Prescription drug coverage for retired teachers is available throughout Connecticut, according to Sudol, but it is no longer free. Starting January 1, 2000, Aetna US Healthcare began charging more for HMO coverage for retired teachers, including prescription drug coverage. The Aetna plan used to be free.

As of January 1, 2000, TRB offers five health plans from two providers. The providers are Aetna US Healthcare and Stirling & Stirling. Not all plans are offered in all areas. The plans and their costs appear in Table 1.

Table 1: Retired Teacher Health Plans Offered by TRB

PLAN NAME

MONTHLY PER-PERSON COST AS OF 1/1/00

Stirling & Stirling

Traditional Medicare Supplement with prescription

● With dental

● With dental, vision, and hearing

$80.40

$110.45

$125.45

Stirling & Stirling

Zero Premium Medicare Supplement (no prescription)

● With dental

● With dental, vision, and hearing

$0

$30

$45

Aetna US Healthcare HMO

Medicare 10 HMO with dental

$68.90

Aetna US Healthcare POS

● Medicare 10 POS Golden Choice (no dental)

● With dental

$92.80

(CT rate) $106.90

Stirling & Stirling

● Stand-alone dental, vision, hearing rider

$0

DIFFERENCE IN HEALTH PREMIUM SUBSIDY

1998 Statutory and Cost Changes

The difference between the $110-per-month subsidy for health insurance for retired teachers who remain in local board plans and the $75 the state pays for the basic plans offered by TRB arises from (1) changes in funding for retired teachers' health insurance and (2) changes in the kinds of plans TRB offers. The changes stem from a 1998 law.

PA 98-155 allowed the TRB to offer optional, higher-cost health insurance plans to retirees and to require those who chose an optional plan to pay any difference in the premium over that of the basic plan. It also revised the way costs for retired teachers' health insurance is divided between the state General Fund and contributions from active teachers.

Choice of Plans

By law, retired or disabled teachers and their spouses are eligible for health insurance coverage provided by TRB, if they are eligible for Medicare Part A hospital insurance. Those who are not eligible for Medicare Part A may participate in the same health insurance plan their last employing board of education maintains for its active teachers. TRB formerly offered one plan for which retirees paid nothing. PA 98-155 allowed TRB to offer basic and optional health insurance plans. TRB has to cover 100% of the cost of the basic plans (currently $75 per individual per month) but retirees must pay any additional premium if they choose an optional plan.

Cost Sharing

The cost of the state's share of retired teachers' health insurance premiums is split between the TRB's General Fund appropriation and the Retired Teachers' Health Insurance Premium Account, which is funded by contributions of 1% of salary per year from active teachers that total more than $500,000 per year.

State Plan. Before 1998, the TRB paid a flat 25% of its plan's health insurance premium for regular retirees and 45% for disabled retirees from its General Fund appropriation. PA 98-155 established a minimum contribution from the board's General Fund appropriation of 25% of the basic TRB plan premium or the amount it contributed in FY 1997-98, whichever is greater. This means the General Fund contribution cannot fall below its FY 1997-98 level of $27.50 per month per retiree even if plan costs go down. If the premium increases, the board must pay 25% of the higher amount from the General Fund. Thus, premium savings are used to reduce the burden on the active teachers' contributions.

Local Board Plans. The TRB sends a subsidy to local boards to cover some or all of the cost of the premiums for retirees participating in local board plans. The subsidy is the same dollar amount as the cost for the TRB plan in 1997-98 ($110 per individual, per month). If the premium for the local board's plan is more than the state subsidy, the local board has the option of paying the difference itself out of local funds or requiring the retiree to pay the difference. PA 98-155 requires TRB to pay part of the subsidy for local board premiums for retirees from its General Fund appropriation. The subsidy was formerly funded entirely by the active teachers' contributions via the Retired Teachers' Health Insurance Premium Account. Under the act, the board must contribute the same 25%, with a $27.50 per month minimum, from the General Fund to the local subsidy as it contributes to the cost of the TRB plan.

STATE LIABILITY FOR FUNDING SHORTFALL

As already mentioned, the Retired Teachers' Health Insurance Account and the state General Fund share the cost of paying the $110 per individual, per month health insurance subsidy to local boards of education. The General Fund pays $27.50 of that sum and the Retired Teachers' Health Insurance Account pays $82.50. If there is not enough money in the account to pay its full share, the law requires the General Assembly to appropriate enough money to make up the shortfall (CGS Sec. 10-183t(d)).

PROPOSALS TO CHANGE THE SUBSIDY LEVELS

Since the passage of PA 98-155, retired teachers' out-of pocket health insurance costs have increased for two reasons: (1) Aetna US Healthcare has started to charge more for some plans and has stopped offering its basic HMO plan in all areas of the state and (2) the basic TRB plans do not include prescription drug coverage. If a retiree wants that coverage, he must pay about $80 a month.

Sudol says that the TRB is exploring legislation to subsidize the cost of the prescription drug rider on the TRB plans, thus increasing the $75-per-month subsidy for the state plan. The board is also asking to add an inflation factor to the local board subsidy so it can increase beyond the flat $110 per month. Both proposals are contingent on the General Assembly appropriating more money for retired teachers' health insurance in the coming year.

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