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Cynthia L. Moore
Washington Counsel, National Council on Teacher Retirement
January 29, 2001
(Updated May 19, 2001)

Introduction

            During the past two years, Congress has been looking at retiree health care.  It discussed a variety of Medicare reforms, including adding prescription drugs to the program.  Because of this level of interest, NCTR decided to gather information from its members about their involvement, if any, in health care for retired teachers and their general concerns about the issue (even if they have no involvement).  The information was obtained through a telephone survey of the executive directors of the 50 statewide retirement systems that serve teachers.  After the data was compiled into a chart, it was sent by facsimile to the responders for their comments and corrections.  The information is current as of January 2001, the month during which the information was collected.  We are grateful that all 50 systems agreed to participate.  The data will facilitate a discussion of whether NCTR should become involved in the issue of health care for retired teachers and, if so, to what degree.  (Since this document was first prepared, the NCTR Legislative Committee authorized its Washington Counsel to monitor the issue and suggest areas in which the organization can become involved. Washington Counsel is doing so and has prepared reports, which appear on this web site.)

Questions Asked

Ø      What involvement, if any, does your retirement system have in providing health care for retired teachers (and non-certified staff if your system also covers them)?

Ø      If your retirement system is involved (to whatever extent), briefly describe funding of health care for retired teachers.

Ø      Regardless of the extent of your retirement system's involvement, please list any general concerns you have about the issue.

Background

            Health care for retired teachers is more problematic than health care for retired state employees.  In the latter case, many states make coverage available for their retired employees.  As their former employer, the state is in a logical position to provide a plan.

The situation with retired teachers is more complicated.  Their employers are generally school districts, not the state.  Their retirement systems, however, are usually (except for the teachers in city pension systems) administered by states.  It is not always clear, therefore, who does, or should offer health care to retired teachers.  Not surprisingly, retired teachers across the country have different degrees of coverage which results is widely varying costs and availability.  In Michigan and New Jersey, for example, retired teachers do not generally pay a premium for health care coverage.  Other states provide a subsidy, such as Oregon and Pennsylvania.  Still other states provide no assistance, though may provide a program, for which retired teachers themselves bear the full cost of coverage. 

Scope

Ø      The data gathering effort concentrated on the involvement of retirement systems in health care programs for retired teachers.  It did not survey what entity, if different from the retirement system, administers the program.  In some cases, the responder volunteered the name of the entity, which the survey does include.  In those cases where no name was provided, no further research to obtain the name was conducted. 

Ø      “Teacher” covers only those for kindergarten through grade 12 although the information given may also include health care for retired higher education personnel. 

Ø      The information in the summary represents a first look at the issue.  It is not intended to be exhaustive.

Summary

The summary is here. The detailed information is available by clicking here.

What is the extent of NCTR members’ activity in health care for retired teachers?  (Abbreviation key for names of states appears on last page.)

What are examples of involvement by retirement systems that do not administer a program, but have some degree of activity in providing health care for retired teachers?

CA (System pays a subsidy.  )

DE (System involved to extent that it deducts premiums from retirees' checks and enrolls individuals.  System involved in pre-funding retiree health care to extent that if pension employer rate is lower than 2%, difference goes into health care fund.)

FL (System pays a subsidy.  )

IL (System enrolls individuals, deducts premiums from retirees' checks, and collects contribution from active employee.  It does not negotiate the contract.)

NC (System enrolls retirees and deducts premiums for dependents.)

NH (System pays a subsidy.  )

NM (System withholds premiums from retirees' checks and sends them to Health Care Authority.  It also sends lists of enrollees to Authority.)

OK (System pays a subsidy.  )

RI (System enrolls retirees, answers questions, and deducts premium from retirement checks.  Department of Administration negotiates contract and vendors provide remainder of services.)

VA (System pays a subsidy. )

WA (Department deducts premium from benefit check upon retiree's request.  It mails educational materials prepared by Health Care Authority along with other publications to individuals wishing information about retirement).

WI (System offers a local government health insurance pool that fewer than 10 school districts have joined.  It also administers an accumulated sick leave conversion credit program for state and university employees.  School districts often provide some years of coverage for teachers with teachers' paying 10% or so of premium and eligibility conditioned on insurer's willingness to cover retirees.)

If the retirement system administers a plan, who funds it?

State                                                                                                                       NJ

Retirement System                                                                                   AK (Tier 1 and Tier 2 for 65+)

Retirees                                                                                                                  IN, MS, UT

Employers                                                                                                             MI

Retirement System and Retirees                                                                  AK (Tier 2, only pre-65),

                                                                                                                                OR, VT

Retirees and Employers                                                                                             AZ

Active Members/Retirees/State                                                                    CT

Active Members/Retirees/Employers                                                          AL, KY*

Employers/Retirees/State                                                                                  PA

Employers/Retirees/Gains in Retirement System Trust Fund                       CO, OH

Employers/State/Retirees/Active Members/Gains in Retirement

System Trust Fund                                                                                       TX

* Note, retirees of the Kentucky Teachers’ Retirement System pay a premium only if they choose a coverage option that costs more than the basic support rate.

Which systems stated they offer a premium subsidy?

AR ($75/month)

CA (Beginning in 2000, a portion of retirement system surplus is used to pay Medicare Part A premium for retired teachers who did not establish eligibility for such coverage.  California teachers are not covered by Social Security.  Affected individuals are those hired before April 1, 1986 and who did not establish eligibility for Medicare Part A through coverage by a spouse or other Medicare-covered employment.)

FL (System offers health insurance subsidy to all retirees, including teachers, who can show evidence of health insurance coverage, whether through Medicare, another government program, or a private carrier.  Subsidy paid directly to retiree.)

KY (Retired members with twenty or more years service will receive $234.00 monthly in plan year 2001 for the under age 65 group and $210 monthly for the Medicare supplement/drug program.  $210.00 per month represents the total projected cost of the Medicare supplement/drug program for plan year 2001.)

NH (System pays a standard subsidy rate for retired teachers' health care directly to school districts.  Subsidy amount is usually less than premium.)

OK ($100/month)

OR ($60/month)

PA (up to $55/month)

VA (System pays a health credit to retired teachers based on years of service.  Anyone with 15 years or more of service receives $2.50 per year which is paid each month, e.g., retired teacher with 30 years of service receives a $75 credit per month.

Concerns Identified by Retirement Systems 

High Cost of Retiree Care Health Generally and/or Prescription Drugs (37)

Availability of Health Care (especially in rural areas) (6)

Selected other issues raised:

Prescription drug advertisements on television increase demand and therefore costs (2)

Need to investigate ways for individuals to save for health care in retirement while still working.  Some tax-deferred vehicle that allows employee to save voluntarily should be considered.  (2)

Abbreviation Key

AL      Alabama

AK      Alaska

AZ       Arizona

AR       Arkansas

CA        California

CO     Colorado

CT       Connecticut

DE       Delaware

FL        Florida

GA       Georgia

HA       Hawaii

ID        Idaho

IL         Illinois

IN        Indiana

IA        Iowa

KS       Kansas

KY     Kentucky

LA       Louisiana

ME      Maine

MD    Maryland

MA      Massachusetts

MI      Michigan

MN     Minnesota

MS     Mississippi

MO     Missouri

MT     Montana

NE    Nebraska

NV    Nevada

NH    New Hampshire

NJ     New Jersey

NM   New Mexico

NY   New York

NC  North Carolina

ND  North Dakota

OH  Ohio

OK   Oklahoma

OR Oregon

PA  Pennsylvania

RI    Rhode Island

SC  South Carolina

SD   South Dakota

TN    Tennessee

TX   Texas

UT   Utah

VT   Vermont

VA   Virginia

WA  Washington

WV West Virginia

WI   Wisconsin