Health Care Program News

Health Care Valuation Report Shows Fund Improvement Despite No New Funding

Cheiron shared the results of its actuarial valuation of STRS Ohio’s health care plan during the October Retirement Board meeting. The report shows good claims experience, lower than expected enrollment and continued federal government payments had positive impacts on the fund. Costs for the health care program are paid from the Health Care Fund, which is currently funded through premiums charged to enrollees, government reimbursements and investment earnings on these funds. No employer contributions are used to help fund health care since these contributions are needed for the pension fund.

The Health Care Fund balance on June 30, 2020, was $3.90 billion, an increase from $3.87 billion last year. Benefit payouts for the fiscal year totaled about $491 million, an average of more than $1.3 million per day. The funded ratio of the plan is 182.1%, slightly above last year’s funded ratio of 174.7%.

Under current conditions, if the fund earns 7.45% in all future years and all other plan experience matches assumptions, the fund is projected to remain solvent for all current members. While this is positive news for the Health Care Fund, it is important to note that without a dedicated revenue stream for health care, the fund is more vulnerable to investment market volatility. Also, the various components that affect funding for the health care program — plan enrollment and utilization, government subsidies and rebates, investment returns — are not predictable and cannot be relied on in future years. These factors can result in greater volatility of a fund of this size with benefit payments of nearly half a billion dollars per year.

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