Despite the Legislature’s attempt this year to shore up the state’s health-insurance plan for public school employees, the plan will face a $61 million shortfall next year unless premiums are raised or benefits are cut, according to preliminary projections presented to a state board Tuesday.
John Colberg, an actuary with the Cheiron financial and actuarial consulting firm, presented the projections to the State and Public School Life and Health Insurance Board as it prepares to decide on benefits and set rates for the plans covering state and public school employees.
The public school plan covers almost 83,000 people, including 47,000 teachers, cafeteria workers, janitors and other school employees and their families.
The state employee plan covers more than 64,000 people, including 28,000 employees and their families.
With no cut in benefits, Colberg told the board, premiums for public school employees would have to increase across all plans next year by about 44 percent.
For state employees, the increase would range from 21 to 27 percent, depending on whether reserves were used to offset the amount.
“This isn’t going to be real fun,” state Surgeon General Joe Thompson, a member of the insurance board, said at the meeting. “We’re either going to have to have major benefit changes or major financing changes or both.”
The board will set rates in August for next year. Employees will be able to switch plans in October, with their choices becoming effective when the coverage year starts Jan. 1.
This year, the maximum monthly premium for the “gold” plan, the most popular plan for public school employees, increased by about 21 percent, from $187.36 to $226.70 for individual coverage and from $848.92 to $1,027.20 for family coverage.
Those premiums are based on a school district contributing $131, the minimum required, toward the total monthly cost.
The premium for state employees in the gold plan did not change from 2012 to 2013. State employees in the plan pay $95.78 for individual coverage or $419.62 for family coverage.
Jason Lee, director of the state Department of Finance and Administration’s Employee Benefits Division, said after the meeting that the projections for next year are based on claims submitted in 2012, a year the public school employees plan paid for an unusually large number of expensive medical procedures.
In 2012, the plan had $30.5 million in medical claims that were over $125,000 each, up from $22.8 million in such claims in 2011, Lee said. Expenses for one premature baby last year totaled $4 million, he said.
He expects the projected expenses for 2014 to shrink from the estimate of $61 million as more recent months, when fewer high-dollar claims were submitted, are factored into the calculations.
“I would expect public school employees to see a combination of benefit change and rate increase, but to what degree it is just too early to tell,” Lee said.
Lee announced at the meeting that he will resign as director, effective June 28, to take a job at a private health insurance company, which he declined to name. The board will interview applicants for the director position and make recommendations to Finance and Administration Director Richard Weiss, who will make the final selection.
Any change in benefits for public school employees would also affect state employees because a state law requires the benefits to be the same for both groups, Lee said. Premiums for state employees could stay the same if benefits are reduced, he said.
Starting in 2014, the federal Patient Protection and Affordable Care Act will require most Americans to have health insurance or pay a penalty of $95 or 1 percent of their income, whichever is greater.
Lee said the mandate could increase enrollment in the public school employees’ plan, but it’s unclear what effect that will have on the plan’s finances because the health expenses of those who have yet to enroll isn’t known. The overall effect is likely to be small he said.
Bob Alexander, an attorney for the Arkansas Insurance Department who is on the board, said some public school employees might find it less expensive to enroll their spouses or children in private plans that will be offered through a federal exchange under the Affordable Care Act starting Oct. 1. Details of the approved private plans are expected to be announced in September.
The difference in premiums in the state and public school employee plans stems from how the plans are funded. The state provides about $390 per month for each state employee, compared with about $89 per month for each public school employee.
School districts are also required to contribute at least $131 toward their employees’ premiums. This year, the state Legislature increased the minimum contribution by the districts to $150 starting in January, a measure that was meant to reduce the share of premiums paid by the employees.
The Legislature also allocated $8 million in one-time funding this year to shore up the public school plan after it depleted its reserve for catastrophic claims.
Richard Abernathy, director of the Arkansas Association of Educational Administrators, said school officials warned legislators last fall about an approaching “train wreck” for the insurance plan.
He said he didn’t expect the increase in the school districts’ minimum contribution level to have much effect on premiums because many districts were already paying more than the $131 minimum.
“There’s an equity problem,” Abernathy said, referring to the difference between what the state pays toward insurance for state employees versus public school employees. “The whole thing’s going to have to be looked at.”
Northwest Arkansas, Pages 11 on 05/22/2013