A board on Tuesday rescinded its Aug. 5 decision to discontinue pharmacy benefit coverage next year for about 13,800 Medicare-member retirees in the state employees' health insurance plan and force them go through the Medicare Part D market.
Instead, the State and Public Life and Health Insurance Board opted to give those retirees the option of either continuing pharmacy benefit coverage through the state plan or purchasing that coverage through the Medicare Part D market.
If the Medicare-member retirees want to continue their pharmacy benefit coverage through the state plan next year, their health insurance premiums will increase by 5%, the 15-member board decided in a voice vote with no audible dissenters.
If the retirees decide to go through Medicare Part D, their state insurance premiums will be reduced by $25 a month, the board decided.
The Aug. 5 decision drew sharp criticism from some of these retirees as well as some state lawmakers.
The outcry led state officials to review suggestions from retirees and lawmakers to determine whether there were alternatives to discontinuing the pharmacy benefit coverage for Medicare-member retirees.
A working group of several retired state employees last week suggested giving the Medicare-member retirees the option of either continuing with their state coverage or going through Medicare, said Amy Fecher, secretary of the state Department of Transformation and Shared Services.
The working group included Shelby McCook, Bill Adams, Lex Dobbins, Mary McGee, Janis Harrison and board member Herb Scott, department of transformation spokeswoman Alex Johnston said after the board's meeting.
Chris Howlett, director of the state Employees Benefits Division, told the board, "We requested the group to give us feedback and to be heard and from that standpoint I don't see that it is going to necessarily hurt anything versus just bringing back the whole group back on."
Some board members said they want to make clear that their decision Tuesday doesn't necessarily mean the board won't consider the option of discontinuing state pharmacy benefit coverage for Medicare-member retirees for 2022.
They said the board must consider all cost-savings options.
On Aug. 5, the board also voted to increase the health insurance premiums for about 27,000 current and non-Medicare retired members by 5% next year; reduce the wellness credit from $75 to $50 per month next year; and increase state funding for the plan from $420 to $450 per eligible state employee per month next year.
The board reaffirmed these votes Tuesday.
The board's actions Aug. 5 eliminated a projected $49 million net loss for the state plan in 2021. The changes were projected to instead produce $28.7 million in net income.
Discontinuing state pharmacy coverage for Medicare-member retirees was projected to save the plan about $38.5 million, according to the Milliman actuarial firm.
With the pharmacy benefit changes approved Tuesday, Milliman projected a $3.65 million loss in net income for 2021.
The 5% increase in premiums for the Medicare-member retirees is projected to raise $1.6 million next year, and various program initiatives are projected to save the plan about $3.4 million next year, Milliman estimated.
Howlett said Medicare-member retirees who switch to Medicare pharmacy coverage won't be allowed to come back to the state plan until open enrollment in the fall of 2021 for coverage in 2022.
Open enrollment begins Thursday and ends Oct. 31, Johnston said after the board's meeting. Open enrollment in the Medicare Part D market begins Oct. 15 and ends Dec. 7, she said.
This year, the state's contribution to the health insurance plan is $172.2 million, while working employees' contribution is $99.5 million, according to Johnston.
Medicare retirees' and non-Medicare retirees each contribute $31 million.
After Tuesday's meeting, John Bridges, executive director of the Arkansas State Employees Association, said the association's retired members indicated they are happy with the support they received during Monday's meeting of the House and Senate Insurance and Commerce committees and with the board's decision to delay removing them next year from the pharmacy benefit plan.
"In the span of a year, retired state employees have had to fight to keep their retirement benefit whole and now their health insurance benefit was almost reduced, so many say they feel like they are being singled out," he said in a written statement.
Bridges said the association will form its own focus group made up of retirees from across the state to find alternative solutions to help improve the financial stability of the plan. The group will present the proposals to the Employee Benefits Division and the insurance committee that is trying to keep the plan stable beyond 2022.
"We look forward to working with all parties involved with this issue," he said.
Sen. Kim Hammer, R-Benton, who attended Tuesday's meeting, said in an interview that he thinks "the board did the right thing in listening to the wishes of the retirees."
"It gives us a year to work collectively as a legislative branch with the board to take a look at options of savings, including the medical spend or are we maximizing our savings out of the medical spend and are there other things we can do there that we need to put as much attention on the medical side as we are on the pharmaceutical side?" he said.
Sen. Missy Irvin, R-Mountain View, said Tuesday, "The decision to kick state employee retirees off of their pharmacy benefit in the middle of a pandemic where the majority of deaths are with people over the age of 60 was an inconsiderate and poor decision.
"Cutting them off from a component of their health care that could save their lives from covid-19 and that potentially increases their costs, again, in the middle of an economic struggle due to covid, was just a very poor decision," she said in a written statement after the board's meeting.
The Legislature needs to be fully engaged through the existing committee process on these issues that face state employees and retirees, Irvin said.
"Decisions need to be made transparently with full debate and dialogue, and over the next year so together we can make the best decisions for our state employees and retirees," she said.
Sen. Jason Rapert, R-Conway, said he is pleased with the board's decision
"We will now commence the process of working with the [Employee Benefits Division] board and other stakeholders to find a solution," he said in a written statement.
"From my perspective, the legislature was kept in the dark about troubles in the health plan for way too long and this is unacceptable going forward," Rapert said.
"I also believe that it is terribly wrong for the state of Arkansas to abandon retirees who in many cases served the public for their entire career," he said. "I believe that promises made to employees should be kept -- especially to retirees over the age of 65 who have limited choice."
Gov. Asa Hutchinson said Tuesday afternoon that he appreciates the board listening and finding an acceptable solution that provides options and flexibility for the state's retirees.
"I have heard from many retirees and I know this adjustment will be welcome news," the Republican governor said in a written statement. "I also know the board will continue examining alternative cost-saving measures to deal with the rising cost of health care coverage to ensure the solvency of our insurance plans."