Mario Iacone: INVESTMENT LOSSES & FUNDING PERIOD

From Mario Iacone, November 7, 2009

The huge impact of investment losses on the funding period can best be illustrated USING STRS DATA.

The following was obtained from the STRS update of 8/11/2009.

STRS stated the following,

Even with these changes, the funding period for the pension fund stood at 41.2 years on July 1, 2008………………………………………

However, due to the recession, the market value of our investment assets declined by about $24 billion over the past two fiscal years. As a result, STRS Ohio's unfunded liability almost doubled in just one year and the funding period now stands at "infinity."

If investment losses can impact the funding period so drastically, one would expect that investment strategy would be changed and/or effective risk management implemented to avoid huge future losses.

Furthermore, the funding period that existed TWO FISCAL YEARS AGO was 26.1 years.

The high of STRS asset value was close to 80 Billion and that was achieved at some point in 2007.

That would mean the funding period in the last two years has gone from 26.1 years to infinity, mostly due to investment losses.

Please review the following chart obtained from the STRS website. Note that the amounts shown are Actuarial Value of Assets and N0T Actual Value of STRS assets.

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Further note on the chart what investment losses did to the great funding periods from 1999 to 2001.

However, the past is the past and in all fairness, I am not faulting the STRS Investment Department for the past because as we have all found out during the current financial crisis, high risk was the thing to do.

However, I would like to see the results of the past used to avoid the same mistakes in the future.

Dollar to a donut and why should we Ohio public service retirees be thankful for an Attorney General from New York state?

From John Curry, November 7, 2009

I would be willing to bet a dollar to your donut that the majority of Ohio's public service retirees have no idea of how Medical Mutual, Aetna, and the other insurance companies, who contract with Ohio's retirement systems, set their "out-of-network" rates for the calculations relating to what out of network MD's charge (you know, the old "reasonable and customary" mantra) when you visit an out-of-network doctor. What Ohio's public retirement systems' contracted agents (the hc insurance companies) use to base their (in fact, all health insurance companies) reasonable and customary rates is a data base developed by a division of UnitedHealth called Ingenix. Their "supposed" out-of-network charges for medical procedures by MD's across this country involved "low-balling." Low-balling is a term used to describe a practice of deflating the actual out-of-network Md's charges in an attempt to allow your insurance plan to pay less of the bill for your-out-of network MD visit. Why? Well, if your insurance pays less, guess who gets to pay more? I'll leave you to ponder that one...while you are munching on your donut! While you're munching you might want to read the article below as taken from the Buffalo (NY) News re. Ingenix and the new system (almost in place) to replace the inflated Ingenix data. Enjoy your breakfast and be thankful for that AG from NY! His actions will help your wallet and the wallets of thousands of retirees who haven't the slightest idea what has transpired....and probably never will!

John

That system was created by a company called Ingenix, a subsidiary of United Health Group, itself a large insurer and, thus, a player in a massive conflict of interest. Following the attorney general’s investigation, United Health agreed to stop operating the database as soon as a new one could be created. The company acknowledged no wrongdoing. [You didn't expect them to, did you?]

In its place, Cuomo announced creation of a new Web site that will allow consumers to see what an insurer was likely to pay before they went to an out-of-network doctor. FAIR Health and the upstate universities will set up and operate the Web site and the new database upon which insurers will base their out-of-network reimbursement rates.

http://www.printthis.clickability.com/pt/cpt?action=cpt&title=A+reform+for+health+insurers&expire=&urlID=414233122&fb=Y&url=http%3A%2F%2Fwww.buffalonews.com%2F149%2Fstory%2F852155.html&partnerID=173606

A reform for health insurers

Attorney general’s transparency plan sheds light on out-of-network costs

The Buffalo News, November 6, 2009

Attorney General Andrew M. Cuomo last week unveiled his latest reform of an industry in need of supervision. This time, following his upending of the college loan scam, he has targeted health insurers.

Specifically, he has picked apart the false system by which insurers calculated out-of-system reimbursement rates and has announced the creation of a new nonprofit company. FAIR Health will work with Syracuse University and others, including the University at Buffalo, to operate a new database and consumer Web site that will bring transparency and credibility to a payment system that few could comprehend and no average user could challenge.

Cuomo announced this plan months ago following an investigation that showed health consumers were cheated out of hundreds of millions of dollars by an evaluation system that routinely deflated the so-called reasonable and customary costs charged in any particular region, thus reducing the amount an insurer had to pay.

That system was created by a company called Ingenix, a subsidiary of United Health Group, itself a large insurer and, thus, a player in a massive conflict of interest. Following the attorney general’s investigation, United Health agreed to stop operating the database as soon as a new one could be created. The company acknowledged no wrongdoing.

In its place, Cuomo announced creation of a new Web site that will allow consumers to see what an insurer was likely to pay before they went to an out-of-network doctor. FAIR Health and the upstate universities will set up and operate the Web site and the new database upon which insurers will base their out-of-network reimbursement rates. The system is expected to be functioning within a year.

Cuomo has made a name for himself by training his sights on broken and even corrupt systems that are largely invisible to most people, but which take money out of their pockets. Not long after taking office in 2007, he discovered that many colleges were colluding with lenders, benefiting both those parties at the expense of students. He forced the creation of a new system.

That’s what is occurring here. The attorney general’s work will help lower the costs of out-of-network care. At the same time, it shows why so many people favor a public option in health reform. More competition is needed to wring this kind of gamesmanship out of the system.

2010 STRS Ohio Prescription Drug Program for Aetna, Medical Mutual and Paramount Enrollees

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Express Scripts: Low-cost generic drug list for home delivery (p. 1-2)

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Express Scripts: Low-cost generic drug list for home delivery (p. 3-4)

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Healthcare enrollment options for 2010

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Healthcare Program Highlights for 2010, p. 1-4

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Healthcare Program Highlights for 2010, p. 5-8

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Healthcare Program Highlights for 2010, p. 9-12

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Healthcare Program Highlights for 2010, p. 13-16

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Healthcare Program Highlights for 2010, p. 17-20

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Healthcare Program Highlights for 2010, p. 21-24

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Healthcare Program Highlights for 2010, p. 25-28

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An oldie but a goodie...3 years ago....Bill Leibensperger and the "death spiral" statement

From John Curry, November 5, 2009
Gee, Bill, on this one we may have some agreement! It's now 2009 and we haven't obtained any "new money," have we? We are still at that miserable 1% contribution rate to the healthcare stabilization fund from the employer (while all the other state retirement systems are paying a much higher rate). Are we seeing the beginning of the hc insurance "death spiral?" The "then it's over" time is upon us!

John

William Leibensperger, Ohio Education Association director, said that ideally, new money should flow into the health fund by next year and at the very latest 2009. "If not, then it's over, and that would be the beginning of the death spiral."

Bill Leibensperger - 2006

Ohio teachers' health-benefits fund drying up

Sunday, December 10, 2006

Ellen Jan KleinermanPlain Dealer Reporter

The fund that pays for retired teachers' health benefits could run dry in 15 years.

To prevent that from happening, representatives from the State Teachers Retirement System of Ohio want working teachers and school boards to contribute more money to the Health Care Stabilization Fund.

But state lawmakers must approve any changes to the retirement system.

That's why the retirement system is pushing for a bill to be introduced by the end of this year or early next year that would increase contributions by 5 percent - half from working teachers and half from their employers. The health care fund covers teachers, instructors and professors working in public primary and secondary schools as well as state colleges and universities.

The proposed increase would be phased in over five years with a one-half-percent boost each year from both teachers and their employers, said Damon Asbury, executive director of the retirement system.

The proposal has support from the Ohio Education Association, Ohio Federation of Teachers, Inter-University Council of Ohio and other groups representing teachers.

The Ohio School Boards Association is opposing the plan because of the added expense.

"Health care is hammering everyone," said association spokesman Rick Lewis. "But schools simply cannot afford this increase. Programs in many school districts are bare bones, and an extra payment would take away money for books, computers and other necessary educational tools."

Currently, 10 percent of teachers' income is deducted from their paychecks for their retirement, while employers pay 14 percent of their teacher payroll. The retirement system uses 1 percent of the employer contribution for retirees' health care with the rest going to pensions. Teachers in the public sector pay into the state retirement system instead of Social Security.

Lewis pointed out that the system is obligated by law to cover only disability, survivor and pension benefits - but not health care.

While not required, the system is permitted to subsidize health care coverage, said Laura Ecklar of the retirement system, and that began for members in 1974. Spouses and dependents were brought into the plan about four years later.

Skyrocketing costs in the 1980s forced the system to form the Health Care Stabilization Fund, which uses three sources of income - premiums paid by participants, a portion of employer contributions and revenue from money invested.

Increases in health and prescription costs and the sagging stock market have taken a toll on the fund, which now totals $3.46 billion. The retirement system estimates the fund will go dry by 2021 without the proposed increase.

Lewis said the system needs to tighten its belt. But Asbury said the group has done so over the past three years by cutting back on travel, agency vehicles, staff and other operating costs.

William Leibensperger, Ohio Education Association director, said that ideally, new money should flow into the health fund by next year and at the very latest 2009. "If not, then it's over, and that would be the beginning of the death spiral."

Asbury said this issue is crucial to teachers in their 50s who often retire after 30 years on the job and need health coverage before Medicare kicks in. He said he has presented the plan around the state to teachers, who appear receptive.

Some teachers, Leibensperger said, are working longer just to keep health-care benefits from their schools.

According to the system, 111,000 retired teachers get health benefits and 280,000 working teachers contribute to the plan.

CORE meeting November 19

Details at http://kathiebracy.blogspot.com/2009/11/core-meeting-november-19-2009.html

CORE meeting November 19, 2009

From Mary Ellen Angeletti, November 5, 2009
CORE (Concerned Ohio Retired Educators) will hold its November meeting on Thursday, November 19th at the STRS building at 275 East Broad Street in Columbus. Parking is free in the STRS parking garage behind the building. We encourage you to also attend the STRS meeting which usually begins around 9:00 a.m. on Thursday in the meeting room on the 6th floor but this beginning time varies from month to month. For this reason, we suggest you check with the STRS website (www.strsoh.org) to confirm the time. The STRS meetings have included Friday as well as Thursday so might want to check on this too.

Remember that CORE meeting attendees usually leave the STRS meeting around 11:30 a.m. on Thursday in order to go to the cafeteria room behind the Sublett Room on the second floor of the STRS building where the CORE meeting will begin promptly at 11:45.

If you have suggestions for the November CORE meeting agenda, please send a reply to John Curry at curryjo@watchtv.net so that he can relay this information to CORE President, Dave Parshall.

Committee members working on "talking points" for the ORSC and legislator visits are reminded to bring their ideas to this Nov. 19th meeting to share. The points will be discussed at this upcoming meeting.

STRS FLASHBACK - 6 YEARS AGO - CORE's Sondra Stratton talks about the STRS gripe she filed!

From John Curry, November 4, 2009

“If perhaps no one has bothered to file a complaint, please consider this an official complaint.”

Canton Repository, November 1, 2003

Teacher talks about STRS gripe she filed

By PAUL E. KOSTYU Copley Columbus Bureau chief

COLUMBUS — Sondra K. Stratton turned in the State Teachers Retirement System.

It was a complaint filed by Stratton, a retired teacher living in the Brown County community of Sardinia east of Cincinnati, that launched an investigation of the teachers’ pension fund by the Ohio Ethics Commission. Stratton said she sent a letter to the commission Aug. 5 but tried to keep knowledge of her effort quiet.

Copley Ohio Newspapers first reported the ethics investigation Oct. 10.

David E. Freel, executive director of the commission, said he cannot comment about its investigations and would not say who contacted his office about the teachers’ pension fund.

The commission also is investigating the Ohio Police & Fire Pension Fund, but that inquiry could be made known because Gov. Bob Taft publicly requested it.

Freel said investigations of pension funds “are the highest priority” and are expected to last a couple of months or so.

Though the teachers’ pension fund had confirmed it was the subject of a commission investigation, it did not know who initiated the in-quiry. Laura Ecklar, a teachers’ pension fund spokeswoman, said at the time that the commission asked for records dealing with travel and investments.

The teachers’ pension fund has been under scrutiny since June after media reports raised questions about spending on travel, employee bonuses, artwork and other items. The spending came at a time when the system’s investment portfolio plummeted and health-care costs of members increased. Questions also were raised about the system’s internal policies.

Stratton has drafted a letter to Franklin County Prosecutor Ron O’Brien asking him to investigate the pension system for fraud. She said she will mail the letter next week. She plans a similar letter to the U.S. attorney’s office, though she’s not sure to which office in Ohio she will send it.

O’Brien said this week he is looking into possible spending abuses by the Police & Fire Pension Fund. O’Brien has asked for help from the investigation arm of the Ohio attorney general’s office.

A spokeswoman for O’Brien said he would have to look at Stratton’s request to determine if it merited an investigation.

“I asked them to look at everything,” Stratton said of her request. “We want to see where the money is spent and if there was any criminal wrongdoing.”

Stratton said she has talked with Freel and other members of the commission staff a couple times since she sent her letter. She said she has provided Freel’s office with various documents, including news reports.

“They told me they had heard things,” she said, adding that she was told the commission had been waiting for a formal request so it could launch an investigation.

In her letter to O’Brien, Stratton said, “Many of us are wondering why in the eight months plus we have been working on this situation, collecting paperwork and uncovering a serious mass of misspent funds by the executive director, STRS board members and possibly STRS employees, the Franklin County prosecutor’s office has not begun an investigation.”

She added, “If perhaps no one has bothered to file a complaint, please consider this an official complaint.”

She accused teachers’ pension fund board members of being “hedonistic with the funds that they were supposed to be guarding.” She said there were more abuses at the teachers’ pension fund than at the police and fire fund.

Stratton said several people helped her prepare her investigative requests. The actual letter writing may have fallen to her, she said, because she “basically started” organizing teachers’ pension fund critics last spring for a rally in Columbus.

But she said these letters are her last effort.

RH Jones to STRS re: Our promised benefits & the Bill of Rights

From RH Jones, November 2, 2009
Subject: Our promised benefits & the Bill of Rights

To OH STRS officials, board members and active/retired members:

Concerning our OH STRS retirement benefits promised to us by our Local School District employers, it is tempting just to write off some of us as the fanatical fringe of retired educators just being outrageous; but, if STRS officials/board members do that, they do it at their own peril. We communicate with a large group of interested stakeholders. And this “fringe” is intrepidly and doggedly standing up to tactics of those officials that wish to cut our already inadequate retired educators’ benefits.

Please be aware that many of the OH School Boards may sue STRS if our COLAs, HC, or any other benefits promised by them locally, are cut. I also have e-mailed everyone about the Akron Police/Fire suit, regarding their promised retirement benefits cut by their retirement system after having been promised by their local public employer. It is plain to see precedent has been set.

Also, almost one year ago in a Beacon, Sunday, November 9, 2008, in an excerpt by David Pitt of the Associated Press, some words in effect that President Obama wishes to prohibit the giving of company executive bonuses while cutting worker pensions and limiting circumstances which retiree benefits can be reduced. Obama was talking about the private sector, but for us public professional educators, we are protected from benefit cuts by the U.S. Constitution’s Bill of Rights. You may remember that I addressed the STRS board on the matter and sent out a couple e-mails on it. We are grandfathered. Period.

This is my personal opinion,
Robert Hudson Jones, a retired OH STRS teacher member

At a pension system near you?

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