The Employees Retirement System of Texas (which administers the Group Benefits Program for higher education faculty and administrators) has submitted its plan identifying savings and expenditure reductions of five percent from general revenue appropriations for the current biennium. The action is in response to an official request by the governor and presiding officers of the House and Senate. Although state retirement plans are currently exempt, the request applies to the employee and retiree health insurance program, which receives state revenue for the monthly health insurance contributions for employees and retirees.
In an official statement, ERS projects that "the five percent reduction will occur naturally because of state government hiring delays or freezes. When there are fewer filled positions, there is a corresponding reduction in the need for insurance contributions."
You can download the official ERS Response to the 5% budget reduction here.
Importantly, however, the program is also facing a funding gap of an estimated $148 million, since current health care spending is higher than available funding and reserves. The agency says it is "working with state officials, plan members, and stakeholder groups to determine how best to cover the funding gap through benefit design changes."
For more about the current funding gap, see the "For Your Benefit" Winter 2010 newsletter, available here.
ERS had forecast an increase in costs of about eight percent for 2010-11, but only received funding for 6.5 percent. Recent trends indicate that health care costs are rising at about nine percent. Therefore, the health plan, at current benefit levels, faces a funding gap of approximately $181 million in Fiscal Year 2010. A contingency fund will be used to cover this. In Fiscal Year 2011, however, the plan is projected to be $250 million short, and with only $102 million left in this fund, the plan will have to save additional money, according to an ERS statement.
The agency reports that practical options must include increasing copayments, deductibles, coinsurance, and contribution levels for members and dependents.
The "For Your Benefit" document above includes a link to an online survey, allowing members to to assess the various options and priorities available at this point.
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