Why is trs insurance so expensive?
Hey, Texplainer: Are all school districts covered by the state’s health care plan for teachers? Do any other options for health care exist?
In 2002, Texas created a health care plan designed to help small districts provide affordable health coverage for their employees. Since then, most school districts — big and small — have signed up. According to the latest enrollment numbers, nearly 90 percent of Texas school districts participate in the program, known as TRS-ActiveCare.
But in recent years, frustration has grown with the state’s support of the program, and a few larger districts have lobbied to leave. State law currently doesn’t allow that, however, and bills designed to give the districts permission to depart have failed in the Texas Legislature.
One key complaint: The state hasn’t kept up with the rising costs of health care. Since 2002, the state’s $75 per employee per month contribution for teacher health care has remained flat. Meanwhile, employees’ shares of premiums have more than doubled.
Larger school districts had the negotiating power to get a good deal with a private insurer, so they weren’t required to join TRS-ActiveCare in 2002. Some large districts, like Dallas ISD, decided ActiveCare rates were better than what they could get locally. Other large districts, including Austin ISD and Houston ISD, still provide health insurance locally.
Districts are banned from backing out once they’ve joined the plan to avoid a problem known as adverse selection, said Ann Fickel, associate executive director at the Texas Classroom Teachers Association.
“If they have the freedom to jump and in out, only the sickest, most expensive districts are going to join the TRS plan when it’s to their benefit,” Fickel said. “And that’s not to the benefit of the plan.”
That has frustrated some districts. El Paso ISD opted into the state’s health insurance program in 2011. Melissa Martinez, the district’s executive director of community engagement, said the administration formed two committees to look into joining TRS-ActiveCare, and both recommended against it. But some board members argued that school districts shouldn’t be in the insurance business and that TRS-ActiveCare would “remove that piece from our plate,” Martinez said.
Since 2015, some El Paso school district employees and lawmakers have been asking the state to let them leave the program, Martinez said. Allowing districts to opt out of TRS-ActiveCare has been the subject of several bills, none of which have succeeded.
In 2017, Texas state Rep. Lina Ortega, D-El Paso, sponsored a bill to let districts with more than 1,000 employees withdraw from TRS-ActiveCare. State Rep. J.M. Lozano, R-Kingsville, meanwhile, introduced legislation to let districts opt out regardless of their size. A fiscal analysis of that proposal found that it would likely increase school district employees’ premiums.
El Paso ISD wants to leave TRS-ActiveCare because the cost of care has gone up and school districts and employees have to cover the difference, Martinez said. She added that health insurance rates are lower in El Paso, and the district has identified cheaper plans. The district currently pays $34 million per year for TRS-ActiveCare.
“It really hinders us because if you’re in the traditional marketplace, if your plan goes up you start to shop around and see what your options are," Martinez said. "We don’t have that option right now," she said. "If it goes up, we can’t do anything about it.”
But TRS Chief Health Care Officer Katrina Daniel said in an email that health care costs for teachers would go up if legislation passed allowing districts to opt out.
“If legislation was passed to allow districts to opt out, districts with lower health care costs would likely opt out to seek low-cost options,” Daniel said. “Over time and as more lower-cost districts leave the plan, the plan would become increasingly unaffordable and therefore unsustainable.”
Not everyone is unhappy with the plan. For some districts, especially smaller ones, TRS-ActiveCare has improved accessibility to care, said Amy Beneski, deputy executive director of governmental relations at the Texas Association of School Administrators.
“There were many districts that couldn’t even get health care,” Beneski said. “Or if they could get health care for their employees, it was so exorbitant. One of the benefits of ActiveCare has been having a large pool of people and hoping that would spread some of the costs out among districts across the state.”
Beneski said some problems districts have with the state’s coverage, like the rising cost of care, are also happening in the private market.
“TRS-ActiveCare isn’t any different than any other insurance issues that are out there in that suffered from inflation,” she said.
Cristela Rocha teaches sixth grade reading and writing at Del Valle ISD and has been covered by TRS-ActiveCare since 2013, when the district switched. She has some problems with TRS-ActiveCare — she pays more for health care under the plan and finds that providers have less knowledge about her plan, which has led to some expensive procedures not covered by her insurance.
What do Districts of Innovation have to do with health insurance?
So far, 145 school districts have used their DOI status and a loophole in the law to compete with TRS-ActiveCare, and it’s increasing costs for everyone in the plan. Depending on whether/how the legislature reacts, and whether more districts take advantage of the loophole, employees may end up paying considerably higher premiums for ActiveCare next year.
When the Legislature approved Districts of Innovation in 2015, TCTA warned against allowing districts to exempt themselves from most provisions of the Education Code. We knew even then that the results were far less likely to be “innovative” and much more likely to be “convenient.” Time has proved us right – more than 95% of the 916 districts who sought the DOI designation did so not to provide an exciting new educational program, but (at least in part) to get out of the state uniform start date.
In the last few years, districts began to consider leaving ActiveCare in the belief that they could offer a cheaper local plan. Current law doesn’t allow districts to leave the plan. It also doesn’t allow districts in ActiveCare to offer a competing plan. And while Districts of Innovation can’t exempt themselves from the main ActiveCare laws, a few districts figured out they could use the DOI process to exempt themselves from the law prohibiting competing local plans.
Why would a district want to offer another plan?
Let’s go back a few years. ActiveCare was created in 2001, largely at the urging of small school districts that found it very difficult to offer affordable, stable health insurance plans to their employees. When a group is small, even one major claim (such as a cancer diagnosis or premature baby) can send premium rates soaring. A larger group can absorb those costs better, because there are more healthy people who aren’t using their insurance to offset the few who have higher claims.
Many of the state’s larger districts were happy with their local plans, so they weren’t required to join ActiveCare, but the smaller districts had no choice. As health care costs have risen over the years, some districts sought ways to provide less expensive options, which has led to the current use of the DOI loophole. These districts are offering both ActiveCare and a local plan.
Why isn’t that OK?
Adverse selection is shorthand for “people make choices based on their own self-interests, and that’s not always good for a health insurance plan.”
When employees are able to choose from more than one health insurance plan, they are going to choose based on their individual needs at the time. If they are generally healthy, they are more likely to choose the least expensive plan, which typically offers the lowest level of benefits. Those who have chronic health conditions or are anticipating major medical procedures will be willing to pay more for better benefits, knowing that it will save them money in the long run.
Health insurance plans need healthy people to balance out the ones who have high claims. If most of the healthy people are in one plan and the high-need people in another, the plan with the high costs will continue to get more expensive, to the point that it will become unaffordable.
If you were around when there was an “ActiveCare 3” you may remember that it originally offered benefits similar to the state employees’ plan. As premium rates rose over time (without corresponding increases in state contributions), healthier employees migrated to the cheaper plans. With the high-need people concentrated in ActiveCare 3, costs rose exponentially to the point where TRS had to eliminate that plan due to unaffordability and low participation.
When a DOI offers a competing plan, it is generally doing so because an insurance broker has provided a lower cost option to ActiveCare. District employees are then given the choice between a more expensive plan with better benefits and a cheaper plan with (typically) lower benefits. The result: adverse selection.
There is a chance that legislation could be passed to address the issue. TRS has informed legislators about the possibility of rising ActiveCare costs and has suggested that closing the loophole by disallowing competing plans would resolve that problem. However, many legislators also represent districts that are either already using the exemption or hope to in the future and may not want to vote for a bill to eliminate that option. It is difficult to oppose options that give some employees a break on insurance costs, even if it is to the detriment of other employees.
Of course, the real solution (short of a complete nationwide health care overhaul) is for the state to contribute significantly more money toward school employee health insurance. ActiveCare has been limping along for years in the absence of higher state funding. TRS has been forced to reduce plan benefits to ensure employees have affordable options, as medical costs grow at a faster rate than salaries. When employees can afford their health insurance premiums, districts don’t have to look for exemptions from the law to try to provide a competitive benefit package.
We’re keeping an eye on this issue. At this time, there is no legislation that would either shut down or expand the ability of districts to offer competing plans, but an amendment could be added to other bills moving through the process. The TRS Board of Trustees is waiting until July to set ActiveCare rates for the next school year, in part to see whether any relevant new laws are passed. We urge concerned teachers to contact legislators to let them know your thoughts and to tell them that the key to keeping the plan affordable for all school employees is a higher state contribution for health insurance.
The TRS Board of Directors met this month to approve proposed changes to TRS-ActiveCare rates for 2021–22 effective September 1, 2021.
Rates increased by around 8 percent for TRS-ActiveCare Primary, TRS-ActiveCare HD, and TRS-ActiveCare-2 rates, while TRS-ActiveCare Primary+ plan rates received an increase of 5.5 percent.
The board reviewed information showing that Texas self-insured plan rates have increased 24 percent since 2013, while TRS plan rates have only increased 8 percent in that amount of time.
It was noted that the increases to 2021–22 rates were due to the pandemic as well as districts choosing to offer competing health plans, creating fewer participants in the TRS-ActiveCare program, which drives up the costs. TRS estimated that the rate increases would have been 2.5 percent less this year without the impact of competing coverage.
The plan benefits remain unchanged, with the exception of the HD plan where specifics were updated to stay in compliance with federal guidelines for high deductible healthcare plans.
Click the links below for more information:
2021–22 TRS-ActiveCare Rates
2021–22 TRS-ActiveCare Plan Highlights
What’s New and What’s Changing for 2021–22 TRS-ActiveCare
Senate Bill (SB) 1444 of the 87th Session of the Texas Legislature, signed by the governor and effective September 1, 2021, provides districts with an option to opt out of TRS-ActiveCare. Districts currently participating in ActiveCare have the option to exit, and districts currently not in ActiveCare wishing to join will be able to opt in. Notice of a change in ActiveCare participation must be made by the newly established annual opt out deadline of December 31. To provide for stability of the TRS plan, the choice to opt in or out will be effective for five years. Districts currently in ActiveCare will not need to do anything if they wish to stay in the program.
Districts of Innovation that offered competing coverage may continue to offer the plan for the upcoming plan year but will be subject to the opt in or out provision in future years.
Additional information on provisions of SB 1444 will be addressed in future HRX posts.
Patti Redding is an associate consultant at TASB HR Services. Send Patti an email at patti.redding@tasb.org.
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