State Prison Funding Increases

BY STATE SENATOR LARRY TEAGUE –

July 4, 2014

LITTLE ROCK – The legislature wrapped up a three-day special session after approving bills to increase the capacity of state prisons, to hold down anticipated costs for public school health insurance and to impose a moratorium on fast-paced computerized lottery games.

The Arkansas inmate population is about 17,000 and is growing steadily. State prison units and many county jails are filled to capacity.  The legislature voted to increase the annual budget of the state Correction Department by more than $6 million, which will allow it to operate an additional 600 prison beds.

Also passed during the special session was a moratorium that prohibits the Lottery Commission from installing keno and other fast-pace computer games in bars and restaurants.  The moratorium expires March 13, 2015.  A permanent prohibition on keno is likely to be reconsidered during the 2015 regular session.

The legislature approved several changes affecting the health insurance system for public school employees, which offers coverage to about 47,000 people.  Legislation changes the membership of the state board that administers the system, adding positions that represent school employees.

Other provisions change eligibility criteria, and will affect spouses of school employees who are currently enrolled in the school health plan.  If they are eligible for health coverage elsewhere, such as where they work, they will not be eligible for coverage under the school plan in 2015. The new law limits coverage for treatment of morbid obesity.

Also, part-time employees will no longer be eligible, beginning in 2015.  The legislation defines a part-time employee as one who works fewer than 30 hours a week, and will affect an estimated 4,000 school employees.

Teachers and public school employees will notice other changes that are not included in legislation approved during the special session.  Those changes have been or will be imposed by the State and Public School Life and Health Insurance Board, and include increases in co-pays, rates and deductibles.  For example, the cost of the bronze plan is expected to increase from $11 a month to $60 a month.  Another expected change would require the gold plan to begin charging a $1,000 a year deductible.  There is no deductible this year.

The system is already using a method called “referenced based pricing” to hold down costs for pharmaceuticals. Under the method, the insurance plan reimburses not for the cost of a specific brand name drug, but instead for amount of a drug that represents a category.  Often it is the cheapest drug in the category.  Reference based pricing tends to encourage patients and physicians to use cheaper prescriptions rather than new, expensive ones.

Consultants to the school health insurance system estimate that a renewed focus on reference based pricing will save it about $4.6 million a year.

The system can claim another $2 million if it aggressively audits its rebate program. When health plans negotiate with pharmaceutical companies for large volumes of prescriptions, the manufacturers often offer rebates as incentives. Consultants believe the school health insurance system could gain $2 million if it more vigorously seeks rebates that it has been promised by drug companies.

The legislation approved during the special session and the actions by the health insurance board will prevent average rate increases of 35 percent for school employees. Rate increases will depend on which plan the employee chooses.

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