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Task Force Making Changes to Public School Employees Health Insurance System


LITTLE ROCK – A legislative task force is working on structural changes to the public school employees’ health insurance system, in an effort to keep it financially sound and to prevent dramatic increases in premiums for teachers and school staff.

The changes under consideration include higher deductibles and increased employee contributions. Removing part-time employees from the plan could save as much as $17.7 million, according to consultants working for the task force and for the state agency that administers health insurance for public schools.

School administrators are paying close attention and can be expected to oppose any recommendations that have a negative financial impact on school districts. Groups representing teachers and school staff told the task force that in the past four years the rising costs of health insurance have exceeded salary raises.

Legislators on the task force are acutely aware that pumping more state money into the health insurance system would mean that spending on other state services would have to be cut.

The system will boost revenue by an estimated $9.1 million by imposing a $1,000 deductible for the popular Gold Plan. The system would get an additional $8.4 million a year by raising the fee for the Bronze Plan from $11 to $60 a month.

Resuming an aggressive approach to a “reference-based pricing model” for pharmaceuticals would save the system as much as $4.6 million a year.  Under this model, the system’s reimbursements are not based on the cost of a specific prescription drug, but rather on generalized costs for all the drugs in its category, as long as they have the same therapeutic effects. Often, the reimbursement amount is set on the cheapest drug in the category, which produces savings for the system.

The pharmacy program should thoroughly audit its rebate plans to determine whether it has received all the rebates due from drug companies. The consultant said it was realistic to assume that $2 million in rebates was owed to the system.

The task force discussed a change in how cafeteria plans are administered, transferring the duty from local school districts to the state.  Cafeteria plans generate about $8.2 million a year in excess FICA taxes, which local school districts now retain.  If the state retained that money, it could put it back into the health insurance system.  However, local school administrators can be expected to oppose a change that causes their districts to lose $8.2 million in revenue.

An astounding statistic was reported at the task force meeting: only 24 percent of state employees and public school employees had an annual physical with a licensed physician last year. Among this group were more than 40,000 people with chronic medical conditions such as high blood pressure, asthma, diabetes and bronchitis whose claims cost $136 million. Many of those claims resulted from a trip to the emergency room.

More members must take annual wellness exams, either because of enticements like discounts or to avoid financial penalties. If as many as 80 percent of members took better care of their health, the savings to the insurance system would be huge and the benefits would increase savings over the long term.

In a special session last fall the General Assembly added $43 million to the public school health insurance system to avoid drastic rate increases. Senior legislators on the task force reminded observers that it was necessary to add $35 million into the system in the 2005 regular session.

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