PrintRetirees face a looming healthcare crisis
The explanation for why retirees are paying more for healthcare these days makes sense to Ray Variakojias.
"Healthcare costs are going up, and the retirement system has lost money," he says matter-of-factly. The logic of the situation, however, still doesn't ease the retired English teacher's anxiety. "The reality is that as retirees our pensions are etched in stone, but our healthcare benefits are penciled in."
In Ohio, where Variakojias is a member of the retiree chapter of the Cleveland Teachers Union, the State Teachers Retirement System (STRS) is searching for ways to finance retiree health coverage, but it has taken drastic measures to do so.
The system's Healthcare Stabilization Fund, decimated by increasing costs and the economic downturn, is facing a $200 million shortfall. The result has brought moderate changes to the program that took effect in January of this year. Next year's cuts could be even more extreme. In addition to higher co-pays and deductibles, new retirees will be required to pay 100 percent of their own and dependents' premiums until age 60, and the retirees will face the gradual elimination of coverage for their spouses and dependents.
"There will be less coverage for retirees, and it will be more expensive," says Herschel Grim, a health and retirement consultant for the Ohio Federation of Teachers (OFT). "We're trying to wash out the deficit and maintain healthcare benefits without driving retirees into bankruptcy."
In an effort to fight the proposed changes, the OFT--with the help of benefits experts at the AFT national office, the Ohio Education Association (OEA), and Ohio State University--created the Health Care Advocates for STRS, a coalition that includes the OEA, the American Association of University Professors and other interested organizations.
When the OFT looked into the retirement system board's policy changes, it found that the level of change proposed was unnecessary, says Tom Mooney, president of the OFT and an AFT vice president. "The changes are an overreaction to short-term phenomena," he says, referring to the rising cost of healthcare coverage and the drop in stock market returns.
In March, the group met with the STRS and offered several alternatives to the proposals its staff has advanced.
"The current idea is to modify the plan to reduce the drain on the program until the economic picture changes," says Grim.
The group's long-term goal is to come up with a permanent funding program that would guarantee healthcare benefits for retirees.
"Active members have said that they are willing to pay more toward future healthcare benefits if those benefits are guaranteed to be there when they retire," says Grim.
