TRS-ActiveCare is uniquely funded, with most plans we offer being self-funded. We'll go over what that means, how TRS sets "total" premiums for employers, and how the cost of health care overall impacts the plan.
You'll see the term "premium" many times. As a refresher, a premium is the monthly amount someone pays for health insurance.
Self-Funding 101
When a health plan is self-funded, that means the plan pays claims as they come in from the pool of money that is on hand.
Each week, Blue Cross and Blue Shield of Texas (BCBSTX) and Express Scripts send medical and prescription drug claims to TRS. TRS then pays those claims out of the TRS-ActiveCare fund.
The TRS-ActiveCare Fund
Now that you know how claims are paid with self-funding, let's look at how TRS-ActiveCare gets its pool of money. Remember: the TRS-ActiveCare fund is separate from your pension fund and from TRS-Care, the retiree health plan.
Minimum funding for TRS-ActiveCare is based on a 2001 Texas state law – not on the cost of health care. The law set minimum amounts the state government (not TRS) and your employer must put toward the monthly cost of your health insurance.
Monthly minimum contributions:
Employers can contribute more than the minimum, and many do. However, that decision is up to each employer. The rest of the funding comes from employees' monthly contributions. A simple way to think of it is that the fund is paid by three sources:
- You (through your monthly contribution)
- Your employer
- State of Texas
The fund then pays for medical and prescription claims for everyone in TRS-ActiveCare.
How Total Premiums Are Set
The monthly premium you pay is not the total premium. The total premium is the price TRS sets for your employer and reflects how much is spent on your health plan.
Your employer decides how much they'll contribute toward the total and how much you'll pay each month.
Total premiums are based on data. We look at how much claims have cost the TRS-ActiveCare fund over the last fiscal year and adjust for price changes we expect for the current year, such as inflation. Then we can set a total premium.
We also want to make sure we have enough to cover unexpected costs (like from a pandemic). This is included in the premium set for your employer.
Think of it like a household budget. There are expenses you can always count on, but it's good to set aside extra in the event of something unexpected.
Market Pricing & Total Premiums
To understand how general health care pricing impacts total premiums, let's continue with the household budget comparison.
Items in that category "such as groceries, cleaning supplies, etc". are all subject to inflation. When the cost of food rises, so does your grocery bill. This applies to health care pricing, too.
When a hospital increases what they charge for services like an MRI or knee surgery, that tends to increase the amount they charge both you and TRS-ActiveCare.
These increases impact what TRS-ActiveCare pays out each year, which impacts the total premiums. We work to minimize cost growth and have an advantage due to our size. In the last ten years, we've seen only one-third of the increase in costs compared to other large employers!
However, we still must factor cost growth in the market and budget accordingly.
For context, according to data from the U.S. Bureau of Labor Statistics, prices for medical care in 2022 are 113.7% higher than in 2001.
That's how your TRS-ActiveCare fund works! To stay up to date with TRS-ActiveCare and your plan benefits, sign up for The Pulse for TRS-ActiveCare: https://www.trs.texas.gov/Pages/subscribe.aspx