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May 4, 2000     (512) 463-0300

Senate Finance Subcommittee on ERS & TRS Employee Benefits Issues Discussed Health and Retirement Benefits

AUSTIN - The Senate Finance Interim Subcommittee on ERS & TRS Employee Benefit Issues examined how the state should fund health care for its employees, today, Thursday, May 4, 2000, at the Texas State Capitol.

Senate Finance Committee Chair Senator Bill Ratliff has asked the subcommittee to review employee benefit issues facing the Employees Retirement System (ERS) and Teacher Retirement System (TRS).

Invited testimony began with Jerry Haddican of the Texas Legislative Council. He briefed the members about the legal background on retirement benefits provided through ERS. Stephanie Coates of the Legislative Budget Board spoke about appropriations to ERS for retirement benefits. Sheila Beckett, Executive Director of the Employees Retirement System then explained the defined benefit plans, deferred compensation plans, the TEXFLEX savings program, and other benefits provided through ERS.

The testimony was continued by Ronald K. Snell, Division Director of the National Conference of State Legislatures, who spoke about contributions and benefit plans in other states. He was followed by Matthew P. Lathrop, the Director of the Commerce and Economic Development Task Force, of the American Legislative Exchange Council. He spoke on defined contribution plans. Ginger Smith with the State Pension Review Board also talked about the defined contribution and benefit plans. Charles Dunlap, Executive Director of the Teacher Retirement System, provided the last testimony from invited guests. He explained the catastrophic health insurance coverage option for teachers.

Members of the Legislative Council informed the members that state employees can retire when they reach 60 years of age, if they have at least 5 years of service with the state. Last year, the Legislature assigned more than $596 million for ERS retirement benefits for the 2000-2001 biennium, an increase of $63 million since the last budget. State employees contribute 6% of their monthly salary to the retirement program, which the state then matches.

Sheila Beckett briefed the subcommittee about some of the changes about to be made in health insurance for state employees. Beginning September 1, 2000 employees receiving health care from four different HMOs (Health Maintenance Organization) will have to look somewhere else. Humana, Aetna, Prudential and First Care will no longer provide health services to the state. Just over half of all state employees are and remain covered by Health Select, administered by Blue Cross/Blue Shield.

Another issue the state and its employees face is the increasing price of health care. Employees will pay 16% more in 2001 than this year. A state employee will pay $177 a month if his family is covered by Health Select Plus HMO, or $202 if their plan is with Health Select. Senator Ogden said the increase would mean from $360 to $400 a year per family, and close to $500 if the co-payment for medicines were included.

With the purpose of attracting more employees to Health Select Plus, which is cheaper for everyone involved, Ogden proposed to share the state's savings with the employees. The state pays $89 less for Health Select Plus than for Health Select, while the employee only saves $29. Ogden said a more equal share would be an incentive for the employee to choose the cheaper plan. Although more restricted and not available throughout the state, witnesses told the subcommittee that Health Select Plus is gaining acceptance rapidly.

Following the invited testimony, the subcommittee heard from six members of the public. Lillie Gilligan, a retired state employee, claimed her insurance company refuses to pay for the only drug that alleviates her pain. The company, she says, would only pay for other drugs she has already tried with no results. The witness said she had to purchase the medication with her own money. She also stressed that the state should encourage healthy lifestyles among the employees.

The subcommittee consists of five members appointed by Finance Committee Chair Bill Ratliff. Senators Steve Ogden of Bryan, serves as chair, Gonzalo Barrientos of Austin, Mario Gallegos, Jr. of Galena Park, John Carona of Dallas, and Jon Lindsay of Houston are the other members of the subcommittee. The charges include, but are not limited to, funding contingencies, projected funding needs of TRS-Care, HMO competition and the cost of providing health plans, and the issues surrounding provision of Optional Retirement System or other alternatives for state employees. After public testimony, the subcommittee recessed subject to the call of the chair. The Senate Finance Subcommittee on ERS & TRS Employee Benefits will meet again to continue discussion of its charges.

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