April Board News

Board Approves Health Care Program Changes for 2017; Long-Term Health Care Funding Discussions to Continue

At its April meeting, the State Teachers Retirement Board approved changes for the 2017 health care program that are designed to help reduce STRS Ohio’s long-term plan costs and extend the solvency of the health care fund. Due to increasing claims costs and the lack of a dedicated source of funding, STRS Ohio is facing significant health care funding challenges. The approved changes do not provide a long-term funding solution for the health care fund. The changes are projected to extend the solvency of the health care fund by two to three years beyond the projected 15-year solvency period reported last month in Segal Consulting’s annual actuarial valuation.

The board is exploring long-term funding solutions for the health care program that would allow STRS Ohio to continue a health care program that is of value to members. Throughout the discussion of possible options, STRS Ohio will use its website, newsletters and eUPDATE email news service to keep members informed.

Following reviews that took place during its February and March meetings, the Retirement Board approved the changes outlined below to the STRS Ohio Health Care Program for 2017:

Plan design changes for 2017:

  • The Alere disease management program for non-Medicare enrollees will be discontinued.
  • Emergency room copays will increase to $75 from $65 for Medicare plan enrollees.
  • Medical Mutual non-Medicare enrollees residing outside of Ohio will move to a Basic Plan administered by Aetna.
  • Urgent care copays will increase to $40 from $35 for all plans.
  • Health care plans offered by HealthSpan will be discontinued.
  • Coverage for proton pump inhibitors (PPIs) will be discontinued for non-Medicare enrollees.
  • Preferred network for retail pharmacies will be adopted and copays at non-preferred network pharmacies will increase by $10.
  • Diabetic prescriptions copay will increase to the full copay from a one-half copay.
  • Specialty drugs coinsurance percentage will increase to 13% from 10%, and the per prescription maximum will increase to $550 from $500.

Eligibility changes for 2017:

  • Medicare Part B premium reimbursements for survivors and beneficiaries who were age 65 by 2008 will be discontinued.
  • Coverage for sponsored dependents of unmarried retired teachers will no longer be offered. This does not include incapacitated adult children.
  • Premiums for dependent children will be changed to a per child premium.

Subsidy changes for 2017:

  • The subsidy multiplier for non-Medicare benefit recipients will be reduced to 1.8% per year of service from 2.1%.
  • The Medicare Part B premium reimbursement will be phased out over a three-year period, beginning in 2017.

Proposed Reduction to Mitigating Rate Included in Omnibus Pension Legislation

STRS Ohio staff has been working with Rep. Kirk Schuring (R-Canton) on a bill that would make technical corrections to Chapter 3307 of the Revised Code which governs STRS Ohio. The bill also addresses chapters of Revised Code governing the other Ohio retirement systems. Most of the corrections address items related to the passage of pension reform in 2012. Rep. Schuring introduced the bill (House Bill 520) on April 13.

In addition to the corrections requested by STRS Ohio and the other retirement systems, the bill included language to change the way the mitigating rate for the Alternative Retirement Plan (ARP) is calculated. The mitigating rate is a portion of the employer contribution that is necessary to offset the negative impact on the retirement system of participation in an ARP.

Under the bill, the Ohio Retirement Study Council would no longer calculate the rate. Instead, STRS Ohio would be required to contract with an actuary to determine the ARP mitigating rate based on a statutory formula. The mitigating rate would be one-fourth of the rate calculated under this formula, with a cap of 4% — which is below STRS Ohio’s current mitigating rate of 4.5%. STRS Ohio opposes the mitigating rate proposal in its current form and intends to work with the bill’s sponsors to address concerns regarding the language. The bill has not yet been referred to a committee for hearings.

Proposed Operating Budget for Fiscal Year 2017 Calls for 1% Increase Over Current Year; Fiscal 2016 Budget Amendment Requested

The Finance Department proposed system budgets for the 2017 fiscal year (July 1, 2016–June 30, 2017) during the April meeting. The proposed operating budget totals $96.9 million, an increase of 1% over the amended fiscal 2016 budget. The proposed budget reflects 556 full-time equivalent associates, down from 572 in the current year. The proposed capital budget for fiscal 2017 totals $3.2 million, an increase of 3.5% from the current year’s budget.

STRS Ohio’s amended budget request for the current fiscal year calls for an additional $900,000. Savings identified by various departments were offset by higher than projected costs for performance-based incentive payments, unused vacation and sick leave — due to retirement payouts, custodial banking fees and building maintenance and equipment.

Retirements Approved

The Retirement Board approved 64 active members and 81 inactive members for service retirement benefits.

Other STRS Ohio News

Online Services Gain Popularity

In March, STRS Ohio members and benefit recipients completed 35% of bank changes, 73% of tax changes and 59% of member beneficiary designation changes using online options through their Online Personal Accounts. The ability to change death benefit and reemployed retiree beneficiary changes online was recently implemented as well.