The health plans for teachers and state employees will use reserves built up in previous years to keep the rates and benefits the same in 2018 as they are this year, a state board decided Tuesday.
In a divided voice vote, the State and Public School Life and Health Insurance Board decided to follow the unanimous recommendation made last week by its benefits subcommittee.
One dissenter, board member Andrew Kumpuris, said he favored a slight rate increase to protect the plans against higher costs that could result from state and federal proposals to scale back Medicaid and other government assistance.
With fewer people covered, health care providers will "push back" against insurers' efforts to keep reimbursement rates down, he said.
"I just think that we're looking at it from our prism and not from the prism of the entire health care delivery system," Kumpuris, a Little Rock cardiologist, said.
The state-administered employee health plans cover about 148,000 people, including 45,000 school employees and 26,000 state employees as well as retirees and the spouses and dependents of employees and retirees.
The money to pay claims comes from premiums collected from employees and annual allocations of state funding. School districts also contribute a minimum of about $156 per month for each covered employee.
Thanks to costs in recent years that were below projections, the plans have enough money in reserves to keep rates the same next year, John Colberg, an actuary with the consulting firm Cheiron of McLean, Va., told the board.
As of May 31, the school employees' plans had $169.3 million in reserves, including $71.3 million that had not been allocated, while the state employees' plans had $115.1 million in reserves, including $35.5 million that had not been allocated, he said.
Colberg said the rates likely won't need to be increased until 2020 for the school employees' plans and until at least 2019 for state employees' plans.
But he said a small increase in the rates for state employees' plans next year would reduce the likelihood that a large increase for those plans will be needed in 2019.
Based on projected annual increases of 5 percent a year in medical costs and 11 percent in drug expenses, the rates for state employees that year would need to increase 14 percent, Colberg said.
A 3 percent rate increase next year would lower the increase needed in 2019 to 9 percent, he said.
Board member Shelby McCook, who is also a member of the benefits subcommittee, noted that the plans' medical and drug expenses this year are coming in below projections.
He said he expects the state's contract with San Diego-based MedImpact, which took over as the plans' pharmacy benefits manager last year, to help keep drug costs down in the future.
And he noted that the pay for some state employees will increase by just 1 percent under a pay plan that was adopted by the Legislature this year and begins July 1.
"If we increase their premiums without more justification than we have, we stand a chance of being in that position we've been in several times before, where they say the Legislature increased it and the insurance folks took it away from us," McCook said.
Kumpuris said the plans have benefited from lower costs resulting from the expansion of insurance coverage under the 2010 Patient Protection and Affordable Care Act.
With more revenue from insured patients, health care providers have been willing to accept lower reimbursement rates, he said.
But he said proposed changes to Medicaid could cause the number of people without insurance to climb back up.
For instance, the state plans to request approval from federal officials to move about 60,000 Arkansans off the expanded Medicaid program by lowering the income threshold for eligibility from 138 percent of the federal poverty level to 100 percent of the poverty level.
The American Health Care Act, passed by the House of Representatives last month, would phase out the Affordable Care Act's enhanced funding for Medicaid expansion altogether and reduce the subsidies available to many people who don't qualify for Medicaid.
McCook responded that, even if that happens, he expects the plans to have enough reserves to keep rates the same in 2018. After that, the board can make adjustments as needed, he said.
"If the federal government wrecks the health care system, and we have to go up on rates, then that's the reason we had to do it," he said.
Board member Joe Thompson said the board also could change rates in the middle of 2018 if necessary.
"If the American Health Care Act passes, we need to start thinking about doing something pretty quickly," he said.
The rates for the plans also did not increase in 2016, but lower-than-expected spending helped the plans build reserves, Colberg has said.
According to reports by Cheiron, the school employees' plans last year spent $284.4 million on medical, drug and other expenses -- about $29 million less than the amount the firm projected when the rates for the year were set in 2015.
The state employees' plans spent $279.2 million, about $18 million less than projected.
This year, the rates increased by 2 percent for school employee plans and 3 percent for most state employee plans.
The possibility of a large rate increase for the teachers' insurance in 2013 prompted then-Gov. Mike Beebe to call a special session of the Legislature in which lawmakers allocated $43 million in surplus tax revenue to shore up the school plans.
Lawmakers also increased the amount of state funds that go to the school plans each year from $50 million to more than $80 million.
Laws passed during a special session in 2014 limited coverage of weight-loss surgeries and excluded from coverage part-time employees and employees' spouses who can get coverage from their own employers.
The board also overhauled the coverage offered by the plans, adding deductibles to the most expensive option, now known as the premium plan, and creating a new, high-deductible option called the basic plan.
Representatives of the Arkansas State Employees Association and Arkansas Education Association, the state's largest teacher and support-staff union, said last week that they supported the benefits subcommittee's recommendation to keep the rates and benefits the same next year.
Metro on 06/21/2017