“A Pending Disaster”
We are all
aware of the looming $8.6 billion dollar deficit
facing our biennial budget for 2010-2011. We also
are aware that the state has a statutory
responsibility under Connecticut General Statutes,
Chapter 167a, to provide retirement, disability,
survivorship, and health insurance benefits for
Connecticut public school teachers and their
beneficiaries. The benefits of the program are
funded by employee contributions, state
appropriation, and investment income.
State
employee contributions and state investment income
are there. (These two aspects will be discussed
later in this article.) It’s the state
appropriations portion which is the “pending
disaster” to the Connecticut Teachers Insurance Fund
referred to in the title of this article. If the
state withholds contributions for one or two years
it will have a disastrous impact on our funds
viability. You say, “How can this happen if the
general fund requires state appropriations to the
CTRB Insurance Fund?” In effect, if the Legislature
passes the budget and “cuts” are in the budget for
our Insurance Fund they can list the areas being
amended at the end of the budget. This will, in
effect, reduce the funding legally to our Insurance
Fund.
At the
meeting on August 19, 2009, Dr. Joe Field
(consultant to the CTRB on health insurance) offered
the following model for our understanding. The key
elements that contribute to the viability of the
CTRB Insurance Fund:
At the
end of June 2008 the model that was produced by Dr.
Field showed the CTRB Insurance Fund would be
extremely healthy through 2018 at $274 million
dollars.
As of August 19, 2009, all the key elements of the
model have been compromised, because of the stated
deficit and its implications on state and local
school districts.
-
Active teacher contributions are down due to an
estimated 1200-1500 less teachers in 2009-2010.
Salaries are flat and have not increased by the
estimated 4%.
-
State
contributions, if eliminated for one year, will
have an impact on our Insurance Fund in the
amount of $26 million dollars… if eliminated for
two years the impact on our Insurance Fund will
be $52 million dollars. In effect, this is 1/3
of the Insurance Fund’s solvency.
The loss
of active teacher contributions places the new model
for our Insurance Fund viability at $150-175 million
dollars through 2017. This is a considerable
downward trend and it will have a major impact on
the fund. Dr. Field clearly stated if the state
contribution is belated for one year, it will have a
major impact on the fund but it could survive until
2015. If the state contributions are eliminated for
two years, losing $52 million dollars, the Insurance
Fund could be bankrupt in 2 ˝ years! There are many
facets to this model that are extremely complex,
above and beyond the major factors that were
presented to us, and now to you in this article.
Some of these factors are: cash flow, cost of
medical necessities, increases, usage, etc. All have
an impact on the Insurance Fund viability.
Many interested parties, from different agencies and
teacher groups, were present at this work session as
well. The latest information from the Capitol seems
to suggest a one year loss of state funding to the
CTRB Insurance Fund. The ARTC will keep our members
updated on any new development in this vital area
through our website and member mailings.
This meeting then turned to another major problem
facing our Insurance Fund. The Pharmacy Benefits
Manager (PBM), Medco, due to a “Held Harmless
Clause,” that is required by the state of
Connecticut in all contracts, was advised by its
legal department, not to sign a three year contract.
Negotiations have gone on for many months to no
avail and this is a $95 million dollar contract! The
three year contract with Medco would have saved the
fund approximately $5.7 million dollars. As we go to
press, Dr. Field is pursuing other PBM companies to
take over our drug program. This change will occur
in late February or March, 2010. It is very
important for all our members to stay up to date on
this topic. Each member using the drug plan will be
informed by the CTRB on how to get ready for this
change. Please watch for CTRB mailings and website
directions.
Authors Note: Why is the state taking funding off
the backs of Retired Teachers when state employees
have NOT been involved in an insurance give back at
all?! Their subsidy from the state is 7 times that
of teachers!
As always, any new information on these topics will
be forwarded to ARTC members by mail or via our
website.
