Health insurance premiums for current and retired state employees who are not on Medicare will increase 5% next year.
In addition, the wellness credit for state employees will be reduced from $75 to $50 a month, starting next year.
And starting next year, the Medicare-member retirees in the state health insurance program will be forced to obtain their pharmacy coverage through the Medicare Part D market rather than through the state plan.
The 15-member State and Public School Life and Health Insurance Board adopted these changes during its meeting Wednesday to eliminate an initial projection of a net loss of $49.8 million for the state plan and instead end up with $28.7 million in net income in 2021.
Courtney White of the Milliman actuarial firm said the health insurance premiums will increase by 5% for current and retired state employees who are less than 65 years old, but not retirees who are 65 and older.
That's projected to raise $3.26 million for the plan in 2021, he said.
The rate increase will affect 27,198 current employees and 210 retirees under 65.
There are 10,803 retirees age 65 and older, said Alex Johnston, a spokeswoman for the state Department of Transformation and Shared Services, after the board's meeting.
The premium version of the insurance plan is the most popular one, with 23,502 employees having that coverage, she said.
With an annual deductible of $500 for an individual or $1,000 for a family, the premium plan offers the richest benefit among the three plan options.
Starting Jan. 1, state employees will pay $118.99 a month for individual coverage under the premium plan, up $5.67 from $113.32 a month, Johnston said. Family coverage will cost $550.01 a month under the premium plan, up $26.19 from $523.82 a month, she said.
White said state government's contribution will increase from $420 per budgeted employee to $450, to raise a projected $12.24 million more next year.
WELLNESS BENEFIT CUT
White said reducing the wellness credit is projected to save the plan $5.9 million next year.
The ARBenefitsWell program provides a monthly discount in premiums for active state and public school employees when certain wellness criteria are met during the year, according to the state Employee Benefits Division's website. This program was created in an effort to reduce ever-increasing claims costs and encourage participants of the ARBenefits Plan to actively engage in their own health and well-being.
"The employees that are getting the wellness credit would see the 5% increase plus a $25 increase in their contribution due to that wellness credit going down from $75 to $50 per month," White told the board. "The employees not receiving the wellness credit would just see the 5% increase because they are not getting any credit for that."
Johnston said 22,385 state employees received the credit this year.
MEDICARE COVERAGE
White said shifting the pharmacy coverage for retirees 65 and older to the Medicare Part D market would save the plan $38.5 million next year and leave a $28.7 million positive fund balance.
"So the Medicare retirees would be purchasing coverage through the market either through an exchange or through the PDP [prescription drug plan] market or the MAPD [MedAdvantage Prescription Drug] market," White said.
The Medicare retirees would still get their medical coverage through the state plan, he said.
Shifting pharmacy coverage for Medicare retirees from the state plan to the Medicare Part D market is going to create "winners and losers," White told the board.
"There is going to be people way out here that will win a lot. Some people are going to lose a lot," he said. "But there is going to be a whole continuum.
"It will probably end up changing some behaviors because PDPs have different formularies, so they have different copays by brand versus generic. They really try to encourage generic utilization. There are lots of options. There are 27 PDPs in the market, and premiums are $20 to $50 a month. There is a bunch of zero-premium options out there. The member doesn't pay anything."
Johnston said 10,803 state employees and 3,063 spouses would be affected by changing pharmacy coverage from the state plan to the Medicare Part D market.
Asked about the potential effect on their copays and premiums, she said, "This would depend on the number of drugs taken and the Part D plan that was chosen by the member.
"The range for comparable basic Rx plans to EBD would be $0-$40 in premium, co-pays $0-$6 generic vs. EBD $15; brand drugs $30-$47 vs. EBD $40." EBD is the state's Employee Benefits Division.
Chris Howlett, director of the state's Employee Benefits Division, told the board that the Medicare retirees in the school employees plan moved to Medicare Part D in 2007.
Board member Herb Scott, who is a retired state employee, said the board last year voted to increase health insurance premiums by 5% for current and retired state employees this year to avoid shifting the pharmaceutical coverage for Medicare retirees to Part D.
"I think we are going to have to explain this," he told his fellow board members.
"I think you have some people that are going to be pretty irate because they accepted the 5% across-the -board [increase] with the caveat and understanding" that that wouldn't change pharmaceutical coverage for Medicare retirees, Scott said.
"Now, we are coming back and changing that in the middle of the stream," he said.
Howlett said the division plans to educate members about this change and try to link several entities with the plan's members.
If the board doesn't approve these changes, the worst-case scenario is "we do not have enough money to pay claims for employees or retirees," White said in a response to a question from a board member.
"If claims are higher than expected, utilization is higher than expected, covid is worse than we think and really blows up next year, we won't have any money," he said.
White said he wants both plans for state employees and public school employees to be fully funded.
Both plans have catastrophic reserve funds set aside, but eating into those reserves puts the plans at future risk if they are not replenished, he said.
"It is best not to use that if you don't have to," he said.
The state employees' plan has a $13.5 million catastrophic reserve fund, and the board has made decisions for next year that do not use catastrophic reserve funds, Johnston said after the board's meeting.
Board member Cindy Gillespie, who is secretary of the state Department of Human Services, said, "I know all of us are working with unforeseen fiscal impacts" amid the covid-19 pandemic.
"The responsible thing to do is to not be rosy and hope, and our obligation in my mind is to look long term and ensure the solvency of this program long term, so there are no easy decisions to be made in the climate that we are in."
SCHOOL EMPLOYEES
The board decided not to raise health insurance premiums next year for current and retired school employees.
But the board opted to reduce the wellness credit from $75 to $50 a month for the school employees' plan in a move projected to save the plan $10.9 million next year.
The school employees' plan is projected to have a net loss of $82.5 million; the board's changes would cut the net loss to $30.62 million in 2021.
Howlett said he is working on various initiatives to make up two-thirds of that projected deficit in the next six to nine months.
The board's changes for next year count on a $20 million increase in the state Department of Education's funding for the school employees' insurance plan. That would increase the department's contribution to $108.1 million, according to White.
The school employees' plan has a $37 million catastrophic reserve fund for 2021, and the board's decisions for next year do not use catastrophic reserve funds, Johnston said after the board's meeting.
The school employees' plan covers 49,289 working members and 14,032 retired members, she said.
Johnston said 39,825 school employee plan members receive the wellness credit this year.
The most popular school employee plan is the classic plan, with 27,948 employees, Johnston said. The individual coverage is $183.46 per month and the family coverage is $833.44 per month under the classic plan, she said.
The State and Public School Life and Health Insurance Board's other members include state Department of Health Deputy Director Renee Mallory, who chairs the board; Amy Fecher, secretary of the state Department of Transformation and Shared Services; Greg Rogers, an assistant commissioner at the state Department of Education; the state Department of Insurance human resources manager Stephanie Lilly-Palmer; state Parks, Heritage and Tourism Department Chief Fiscal Officer Cynthia Dunlap; and Arkansas Board of Pharmacy Executive Director John Kirtley, according to the transformation department's website.
The board's members also include retired dentist Terry Fiddler; retired teacher Cindy Allen; Charleston School District Superintendent Melissa Moore; DeQueen School District teacher Dori Gutierrez; Valley Springs School District Principal Lisa Sherrill; and Lanita White, an assistant professor at the University of Arkansas for Medical Sciences.
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