Tuesday, June 18, 2013

Why are approximately 600 TRS retirees paying more for health insurance than anyone else?



Jeri Shanahan, a retired teacher, has researched the issue for several years; she has talked to dozens of legislators and various officials over this duration, but the injustice remains unresolved.

The Issue:
Retirees, 65 and older and not eligible for Social Security and Medicare, will pay the highest premium for Teachers’ Choice Health Plan in 2014: $719.96 (Illinois Department of Central Management Services (Link for Benefit Recipient Rates, CMS). They are also paying more than twice as much as retirees not eligible for Social Security and Medicare but living out-of-state.

Imagine the effects of Senate Bill 1 on retirees 65 and older who live in Illinois and without Social Security and Medicare. Of course, many powerful and wealthy people do not care about anything except their influence and fortune. But what does union leadership believe about this discrimination of age, residency and (possibly) gender? Do they believe these retirees have “equal rights, which equal laws must protect?” (Thomas Jefferson). Moreover, imagine the severe effects of Senate Bill 2404 on retirees 65 and older who live in Illinois and without Social Security and Medicare. Making a choice between a compounded Cost-of-Living Adjustment and health care may be making a choice between abject poverty and death.

So why isn’t there a consistent and fair rate-setting methodology for premiums? Does anyone know how these rates are determined? Why doesn’t the governor-appointed Teacher Retirement Insurance Program Committee convene at least four times a year according to state statute? After all, the committee’s main function is “to consider and make recommendations on issues affecting the program of health benefits for retired teachers” (Link for Teacher Retirement Insurance Program Committee).  Is Central Management Services at fault?

Schedule of Findings
According to the Illinois Department of Healthcare and Family Services:

TEACHER HEALTH INSURANCE SECURITY FUND
For the year ended June 30, 2012

12-1. FINDING (Lack of written rate-setting methodology)
The Illinois Department of Healthcare and Family Services did not have a documented written rate-setting methodology to calculate the insurance rates that are used to determine the premium rates charged to participants for the Teachers’ Retirement Insurance Program (TRIP).

We noted that only one individual was involved in calculating the insurance rates and there was no written rate-setting methodology of how this individual calculates the TRIP insurance rates. This individual left the agency near the end of the fiscal year and the Department did not have any other employees aware of how the previous individual calculated the rates. Additionally, there was no formal process for a documented review of the insurance rate calculation.

Further, auditors noted that the Department provided the Teachers’ Retirement System of the State of Illinois by April 15th with historical and projected data on enrollment, utilization, and costs of TRIP information which is used to determine the amount of health care premiums charged to participants in TRIP; however, there was no rate-setting methodology provided explaining where the information was obtained from and how the information was used to determine the premium rates.

The State Employees Group Insurance Act of 1971 (5 ILCS 375/6.5(e)) requires the Director of the Department of Central Management Services to determine the insurance rates and premiums for Teachers’ Retirement System benefit recipients and dependent beneficiaries, and present to the Teachers’ Retirement System of the State of Illinois, by April 15th of each calendar year, the rate-setting methodology (including but not limited to utilization levels and costs) used to determine the amount of the health care premiums.

Executive Order 2005-3, Executive Order to Reorganize Agencies by the Transfer of Certain Healthcare Procurement and Administrative Functions Primarily of the Department of Central Management Services to the Department of Healthcare and Family Services issued by the Governor on April 1, 2005 transferred the respective powers, duties, rights and responsibilities related to State Healthcare Purchasing from various departments, including CMS, to the Department of Healthcare and Family Services. The Executive Order states the statutory powers, duties, rights and responsibilities of the various agencies, including CMS, derive from various statutes including 5 ILCS 375 et seq. The functions associated with State Healthcare Purchasing intended to be transferred included rate development.

Executive Order 2012-1, Executive Order to Reorganize Agencies by the Transfer of Certain Functions of the Department of Healthcare and Family Services to the Department of Central Management Services, the Department of Corrections, the Department of Juvenile Justice, the Department of Human Services, and the Department of Veterans’ Affairs issued by the Governor on March 1, 2012 transferred the respective powers, duties, rights and responsibilities related to State Healthcare Purchasing from the Department of Healthcare and Family Services back to various departments, including CMS. The departments had until September 30, 2012 to complete the transfer of functions.

Good internal controls would require that no one individual should control a key aspect of a transaction or event. The Statewide Accounting Management Systems Manual (Procedure 2.50.10) requires duties and responsibilities be assigned systematically to a number of individuals to ensure that effective checks and balances are in place and routinely practiced.

A formal written rate-setting methodology would provide clear procedures and specific documentation requirements for ensuring that insurance rates are being calculated consistently and the correct premium rates are being charged for TRIP.

Department management stated that the rate-setting calculations are performed via formulas retained in electronic spreadsheets and staff resources were not available to convert the electronic methodology into written procedures. Executive Order 2012-01 transferred the Office of Healthcare Purchasing from HFS back to CMS effective July 1, 2012.

Without a formal written rate-setting methodology, the Department cannot ensure that the insurance rates are being calculated consistently and correct premium rates being charged for TRIP are in accordance with State statutory requirements. In addition, over reliance on one individual for the calculation of TRIP insurance rates without a proper written rate-setting methodology subjects the State to potential disruption in the event that there are changes to that individual’s employment status. (Finding Code No. 12-1, 11-2, 10-1)

Recommendation:
We recommend the Department develop a formal written rate-setting methodology as required by the State Employees Group Insurance Act and submit it to the Teachers’ Retirement System.

Department Response:
Executive Order 2012-01 transferred the Office of Healthcare Purchasing from HFS back to CMS effective July 1, 2012. The functions associated with State Healthcare Purchasing and the development of a formal written rate-setting methodology is now the responsibility of CMS.

A. FINDING (Financial statement preparation)

In the prior year, the Illinois Department of Healthcare and Family Services (Department) did not complete the Teacher Health Insurance Security Fund’s financial statements in a timely manner. The Department did not provide a complete set of financial statements until January 17, 2012, six and a half months after the fiscal year end. In the current year, the Department improved the process of financial reporting and completed the Teacher Health Insurance Security Fund’s financial statements in a timely manner. (Finding Code No. 11-1)

IS THERE A REASON WHY THE TEACHER RETIREMENT INSURANCE PROGRAM COMMITTEE HAS NOT MET FOR YEARS?

Despite a statute that requires the Committee to convene at least 4 times each year, I was told as long as the rate does not increase more than five percent each year, this committee does not have to convene. I was also informed that the former committee chairperson (Colm Brewer) had resigned, no one had been appointed to take his place, the committee had not met for a few years, and Central Management Services had not requested any meetings.

TEACHER RETIREMENT INSURANCE PROGRAM COMMITTEE
Authority: [Link for] 5 ILCS 375/6.5 (g-5) Year of Creation: 2004 (PA 93-679)

Number of Members: 10 Number appointed by Governor: 10
Vacancies: 0 Governor Vacancies: 0…

Purpose: To consider and make recommendations on issues affecting the program of health benefits for retired teachers. The Committee shall convene at least 4 times each year.

Compensation: Not noted in statute
Expenditures: FY 2007 FY 2008 FY 2009
Member Salaries/Stipends
Member Per Diem/Reimbursement
Other Per Diem/Reimbursement

All Other Expenditures
Total No expenditures, no meetings FY 2007 – FY 2009
For board meetings

Required Work Products:
The statute requires the Committee to convene at least 4 times each year.

Other Requirements:
Meetings for FY 2007 – FY 2009:
No meetings. According to the Governor’s Office of Executive Appointments has no expenditures and has not met to conduct business.

Board/Commission Vacancies:
No vacancies as of June 2010

Link for State of Illinois Office of the Auditor General, Management Audit, September, 2011, Vol. II, Detail on Boards and Commissions (see page 314)


More Sources & Links:

Financial Audit for the Year Ended June 30, 2012

Summary Report Digest from the Office of the Auditor General

Teachers’ Choice Health Plan

3 comments:

  1. At the last IRTA meeting I attended, representatives from CMS were there. When asked who the teacher representatives were for TCHP/TRIP, we were told that it was exclusively made up of AFSCME people. When asked why that was, CMS reps said that was the way it always was done.

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  2. According to Jeri Shanahan, recent FOIA requests from the Comptrollers’ Office show that

    12,308 retirees pay $80.23 per month for health insurance
    8,109 pay $203
    13,157 pay $208.87
    1,497 pay $276.58
    2,358 pay $478.71
    2,574 pay $358.15
    40,606 pay $0.00

    When many more pay under $50.00 per month for TRS TRIP health insurance, one can see the amounts charged are much less than the amounts shown on the CMS website. That chart appears to be incomplete. Of course, many of these amounts include dependents and spouses charges.

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  3. You will qualify for Medicare under your spouse if he and probably she has 40 units. Find job income of around $1,400 (check with SS as this number changes each year) each quarter. Be sure to declare your cash income from baby sitting, sealing envelopes, self employment, etc. Maximum of $1,400 each quarter for a total of 4 credits a year. You only need 40 credits or 10 years of work. That includes being a life guard etc. when you were 16. You may not be too far away from qualifying. Again, check with SS as they no longer mail out information on how many credits you have. The least you can get from SS for a pension is around $90 that will go a long way to paying the $104.90 for Medicare. Medicare is a BIG gun. Be sure to get it. I've never been refused service because I'm on Medicare. Supplemental insurance becomes a lot cheaper than buying a regular plan.

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