The Teacher Retirement System of Texas (TRS) administers two health benefit programs: one for current public school employees and their dependents, the Texas School Employees Uniform Group Health Coverage Program (TRS-ActiveCare); and one for retirees and their dependents, the Texas Public School Retired Employees Group Benefits Program (TRS-Care). This overview addresses TRS-Care only.
TRS-Care is a self-funded program, established in 1985 through Chapter 1575 of the Texas Insurance Code.28 As of Aug. 31, 2016, the TRS-Care program covered about 261,500 retirees, dependents and surviving spouses. Aetna administers the health plan while Express Scripts administers the pharmacy benefit.29
TRS-Care faces a large and growing shortfall. In the absence of supplemental appropriations or changes to the plan’s design, retiree premiums could triple starting on Sept. 1, 2017.30
TRS-Care funding is linked to active public school and charter school employee payrolls and not to actual health care costs. Rising costs, an increasing retiree population and a contribution system that hasn’t changed in more than a decade have led to an ongoing funding shortfall. In 2015 alone, the Legislature contributed $768.1 million in supplementary appropriations to cover this funding gap.
A November 2016 report by the Joint Interim Committee to Study TRS Health Benefit Plans projects the TRS-Care shortfall at $1.3 to $1.5 billion for the 2018-2019 biennium, and $4 to $6 billion for the following biennium.31
TRS-Care receives state general revenue contributions equal to 1 percent of the salaries of all active public education employees. In addition to these contributions, TRS-Care is funded by retiree premiums as well as contributions from active public education employees and local school districts. The active public education employee contribution rate is 0.65 percent of payroll, while school districts contribute 0.55 percent of payroll.
At its creation in 1985, TRS-Care was expected to remain solvent for just 10 years, with the understanding that additional funding or benefit changes would be necessary to maintain the plan. Its funding formula hasn’t changed since 2005, however, and hasn’t kept pace with plan costs, requiring periodic supplemental appropriations.32
In 2003, for instance, the Legislature appropriated $516 million from the Texas Economic Stabilization Fund to cover a TRS-Care shortfall. More recently, the Legislature made supplemental appropriations to TRS-Care in fiscal 2013, 2014 and 2015 (Exhibit 3).
|Contribution Source||Description||Fiscal 2015 Revenue|
|State Appropriation||1.0 percent of salaries of all active public education employees||$304,917,343|
|State Supplemental Appropriation||One-time appropriation to maintain TRS-Care viability||$768,100,754|
|School Districts||0.55 percent of payroll||$179,157,485|
|Active Employees||0.65 percent of payroll||$198,196,273|
|Other||Federal subsidies; investment income; employer surcharge||$201,816,846|
Source: Joint Interim Committee to Study TRS Health Benefit Plans
Major causes of TRS-Care shortfalls include:
The 2015 Legislature created a Joint Interim Committee to Study TRS Health Benefit Plans to examine the sustainability of TRS-Care and affordability of TRS-ActiveCare and present its findings before the beginning of the 2017 legislative session.
The committee’s November 2016 report offered a series of proposals for TRS-Care, based on the assumptions that current state, school district and active employee contributions would not increase and participant costs would rise. These include: