Cops, firefighters, teachers and other public employees in Ohio have long rested easy knowing a steady pension check and affordable health care would be there for them at the end of their careers.
But big changes — and considerably higher costs —are coming for many of the 442,000 Ohioans who look to the pension system for all or a portion of their health care coverage.
Each of those systems is scrambling for ways to stretch dwindling health care dollars, and several are looking at some fairly dramatic adjustments: whacking cost of living allowances, hiking premiums, cutting subsidies and more.
Without changes, three of the systems expect they’ll run out of health care money within a decade.
The reasons for the crisis? Higher drug prices, spiraling medical costs, people living longer and a volatile stock market.
Another concern for retirees: None of the pension systems are required by law to provide health care. That’s important to note as the systems strive to keep the funds viable over the long term. The focus will always be on keeping the pension checks flowing — providing health care is secondary.
Retired Beavercreek teacher Linda Beaver is preparing for the worst.
“We anticipate that in the next couple of years something drastic will happen with health care and we’ll be in the same situation as some of the other state systems — out in the marketplace, hunting for coverage,” she said.
School Employees Retirement System
SERS, the pension fund that covers school bus drivers, cafeteria workers and janitors, is looking at a plan to cut the cost-of-living allowance given to retirees to shore up the pension fund and eventually free up money to cover health care costs.
If nothing happens, SERS — which has offered retiree health care packages since 1962 — is projected to run out of health care money within seven years.
SERS wants to change the COLA starting Jan. 1, 2018, but it needs lawmaker approval. “We’re trying to find a sponsor for the bill right now. As soon as we do, we can get the bill introduced,” SERS spokesman Tim Barbour said.
Currently, SERS retirees receive a flat 3 percent COLA starting on the first anniversary of retirement. The system wants to eliminate it in 2018, 2019 and 2020 and then tie it to inflation with a cap of 2.5 percent in subsequent years.
Retirees would be eligible for a COLA on their fourth anniversary.
Ohio Police & Fire Pension Fund
In May, trustees of the Ohio Police & Fire Pension Fund will debate plans to scrap its current health care model in favor of issuing stipends to each retiree, who can then use the money to go buy coverage.
Without making changes, health care money will dry up within nine years, and is projected to last only another six years even with the changes, fund officials say.
“I think that retiree health care is a big deal and it’s a bigger deal for our retirees than others because our members retire earlier,” said Jay McDonald, president of the Ohio Fraternal Order of Police. “There is not a day that goes by that someone doesn’t call me because they just heard about it and they’re wondering how they’ll take care of their families.”
Retired Dayton deputy police chief Virgil McDaniel, head of the Dayton FOP Retirees, said he’s telling members not to overreact since it’s not known yet what the new health care system will cost.
State Teachers Retirement System of Ohio
STRS of Ohio, which just voted to indefinitely to suspend its COLA, is searching for ways to make $3.2 billion in its health care fund last for generations. Right now, the fund is expected to be drained within 18 years.
STRS is currently looking at four options to stretch health care dollars. Benefits director Gary Russell acknowledged the changes will likely mean people pay more for insurance, accept less coverage or maybe both. A decision is expected in August or September of this year with implementation in 2019, he said.
Ohio Public Employees Retirement System
OPERS — the largest pension fund in the state — began offering health care coverage in 1974 and has the rosiest projection among the five pension systems, saying its health care fund will last indefinitely.
But that projection comes a year after OPERS enacted massive changes in health care coverage — and for some, huge price increases.
OPERS retirees who are eligible for Medicare receive counseling on picking health care coverage as well as an average monthly stipend of $334.
“It gives them enough to pay for the best Medicare and prescription package available, with money left over to cover other expenses or to save for future health care costs,” OPERS spokesman Todd Hutchins said.
But younger retirees in OPERS who are not yet eligible for Medicare are paying more under the new system. In 2016, retirees paid $32.54 of the monthly premium. By next year, they’ll be paying $219.33 per month, according to OPERS estimates. And premium coverage for spouses and reimbursement of Medicare Part B costs are also being phased out.
Geoff Hetrick, chief executive of the 65,000-member Public Employee Retirees Inc., said OPERS started planning for the changes a decade ago.
“All appears to be stable for right now,” he said.
Ohio Highway Patrol Retirement System
Director Mark Atkeson took over the Ohio Highway Patrol Retirement System in 2011, and health care premium increases have happened in each year since, he said.
It is the smallest of the state’s five statewide systems.
Atkeson said the $102 million health fund is projected to run out of money within nine years, though recent changes are expected to improve its solvency.
The current proposed changes come after the state legislature in 2012 enacted the most sweeping pension overhaul in decades.
Lawmakers attempted to shore up finances in the oft-troubled public pension systems with changes that increased contributions for many, raised retirement ages and set new cost-of-living adjustments.
The changes also realigned some thinking among those charged with managing the funds: protect pension checks above all else.
Since the reforms, SERS and STRS have been plowing all of the employer contribution money into the pension side of the systems — starving off the health care side.
“There is no new money going into health care. It’s just shrinking because there are only payouts,” said John Cavanaugh, director of the Ohio Retired Teachers Association.
While STRS considers ways to stretch its limited health care money, Cavanaugh notes that Ohio “isn’t operating in a vacuum. The whole country is in flux about what’s going to happen with health care, with the Affordable Care Act and with Medicare,” he said.
Cavanaugh cautions STRS against building all its health care changes around helping retired teachers until they turn 65, given that some Republicans in Congress have vowed to make massive changes in Medicare.
“You can’t even rely on a program that’s been around for 50 years,” he said.
‘I’m not mad’
Russell, who oversees benefits at STRS, said volatile health care and prescription drug costs are squeezing the system.
STRS spends about $2 million a day on health care and pays to fill three million prescriptions a year.
“Prescription drugs is the beast that everyone keeps chasing, Russell said. “Drugs eat up more and more of the health care pie.”
McDonald, of the Ohio FOP, agreed. “This is about the spiraling prescription drug costs and it’s making health care unaffordable for the pension systems — and everybody.
“I’m not mad at the pension system,” McDonald added. “They’re doing the best they can with the dollars they have.”
Even with the financial challenges, Hetrick said Ohio’s public pension systems are in far better shape than most other states, with safeguards built into the system to protect retirees.
“In 85 years, OPERS has never missed a benefit payment and the General Assembly, by statute, cannot go in and raid those dollars,” he said.