Why What’s Happening to Marguerite Nedreberg Should Matter to You
The Ohio Health Care Program, the agency of the Ohio State Teachers Retirement System (STRS) in Columbus, Ohio that provides access to medical coverage to retired faculty in the state’s public two and four-year colleges and universities is in trouble. According to the Report to Members, 2002, an annual summary of STRS benefits, between July 1, 2001 and June 30, 2002 the program received $460 million from public schools, colleges and universities and from premiums paid by retired faculty and spent $438 million on medical coverage.
A first glance, this looks like a gain of $22 million. However, during 2001-2002, the state’s investments in stocks, bonds and other securities lost $267 million, for a net deficit of $245 million. Worse, STRS’s investments have lost $8 billion during the last two years, says Laura Ecklar, Director of Communication Services at STRS. These deficits will drain the Ohio Health Care Program of money by 2008, warns the Report to Members, 2002.
One cannot charge the State Teachers Retirement Board with mismanaging investments. STRS losses come amid an economic malaise in which stocks in the Standard Poor 500 have lost since January 1, 2000 on average 48 percent of their value, writes John W. Rogers, Jr., Chairman, Chief Executive Officer and Chief Investment Officer of Ariel Mutual Funds in “Portfolio Manager Commentary—September 30, 2002.” These declines have exacerbated the plight of Ohio STRS, whose Retirement Board seeks an annual return of 7.75 percent on its investments to fund pensions and subsidize medical coverage. The pursuit of robust returns has led the Board to “be a somewhat aggressive investor,” says the Report to Members, 2002. Such investments tend to be volatile and have fallen precipitously with the stock market.
“You can’t name a retirement system that hasn’t lost money the last two years,” says Frank Ready, Executive Director of the Mississippi Public Employees Retirement System.
Its investments have lost 15 percent of their value the last two years. Ready puts losses between September 30, 2001 and September 30, 2002 at $1.1 billion. Private funds, too, have retreated. The AIM Constellation Fund lost 26 percent of its value between December 21, 2001 and December 31, 2002 according to AIM Funds Year End Statement.
Another culprit is heath-care costs. In 1980, Americans spent $245 billion on health care; in 2000 the amount spiraled to $1.2 trillion, writes Tony Romano, Communications Coordinator for Nationwide Health Plans, in “The Costs of Medical Care.” In Ohio, health-care costs have risen 117 percent during the past decade. Today, STRS spends more than $6,000 a year on each retired professor at age 60. By 2010, the program expects that amount to double. These expenditures come at a time when the number of retired faculty is increasing faster than the number of faculty paying into the program.
All of this worries Marguerite Nedreberg, who has taught computer science part-time for 12 years at Youngstown State University in Youngstown, Ohio. The Ohio Heath Care Program awards her .69 of a year for each year of part-time teaching, giving her 8.28 years of full-time service. She qualifies for medical coverage through the program because she exceeds the 5-year minimum of full-time service, though she would pay a $300 per month premium for coverage, an amount that would absorb her entire STRS pension. However, Nedreberg considers medical coverage through the Ohio Health Care Program too expensive.
The $300 per month premium through the STRS Program includes coverage for prescription drugs, emphasizes Art Thomas, an Ohio Insurance Agent who sells Anthem and Mutual of Omaha group policies. Thus, he stresses, the $300 per month premium is a good buy for a retiree on a regimen of prescription drugs.
However, Youngstown State University computer science adjunct Marguerite Nedreberg may soon be unable to buy coverage at all through the Ohio Health Care Program. The State Teachers Retirement Board must reduce medical benefits and raise premiums to keep the Program from running out of money. The Board may also be forced to raise the minimum full-time service from five to ten years, says STRS Communications Director Laura Ecklar. This move would deny Marguerite Nedreberg coverage despite her 12 years of part-time teaching.
Should the Retirement Board raise the minimum years of full-time service from five to ten, Marguerite Nedreberg would not be alone in losing the option to buy medical coverage through the Ohio Health Care Program. Fifteen-hundred part-time faculty at Ohio’s public colleges and universities have at least five years of full-time service but fewer than ten, estimates Howard Kon-icov, Adjunct Faculty Coordinator and mathematics adjunct at the University of Cincinnati in Cincinnati, Ohio.
STRS Communications Director Laura Ecklar cautions that the Retirement Board will not decide this issue until April 2003, and that a decision would not take effect until January 2004. The Retirement Board has other options, as well, notes Ecklar. In addition to increasing the minimum years of service, it may no longer subsidize medical coverage for retirees with less than 15 years of full-time serving, leaving them to pay the full premium. The Retirement Board may also eliminate subsidies for a retiree’s spouse and dependent children by 2007, increase premiums for everyone, require retirees after 2004 to pay the full premium if they retire before age 60 and only begin subsidizing coverage at age 60.
This erosion of medical coverage irks Lynda Hoffman, who has taught English five years part-time at the University of Toledo in Toledo, Ohio. By law, she must pay into STRS rather than Social Security because she teaches at a public university. She believes this is money lost, for she expects never to qualify for medical coverage through the Ohio Health Care Program. If she does eventually qualify, Hoffman fears the premiums may be too expensive.
Thomas Shipka, Chair of Philosophy and Religious Studies at Youngstown State University, faults the Ohio General Assembly for allowing the Ohio Health Care Program to shift the cost of medical coverage from taxpayers to full and part-time faculty at Ohio’s public universities. In an era of retrenchment, part-time faculty without medical coverage may be unable to persuade anyone that they deserve it, worries Shipka. The fact that none of Ohio’s public universities provides medical coverage for professors’ spouses makes this issue, rather than coverage for part-time faculty, the priority, he explains.
Unfortunately, these woes are not unique to part-time faculty in Ohio, warns STRS Communications Director Laura Ecklar. Doubt-digit increases in medical costs coupled with the retirement of large numbers of professors will force tough choices on retirement systems throughout the U.S., she believes. All 50 states have retirement systems for public employees, including college and university faculty, says Jennifer Smeltzer, Membership Director of the National Conference on Public Employee Retirement Systems in Washington, DC. All part-time faculty at public colleges and universities may soon find themselves teaching longer to qualify for less coverage at higher costs.
