Jump seen for teachers’ health plans
Adviser: 7% rise possible
Health insurance premiums for public school employees would increase an average of 7 percent next year under a scenario, based on preliminary estimates, presented by an actuary to a state board subcommittee on Friday.
A state senator who is chairman of a legislative task force on teacher health insurance and an educator who serves on the State and Public School Life and Health Insurance Board said they are hoping premiums stay flat next year.
John Colberg, an actuary with the Cheiron financial and actuarial consulting firm, told members of the board’s benefits subcommittee that the 45,000 school employees covered by the health plans would face a potential rate increase of 14 percent, assuming the plan benefits stay the same and that per-person medical costs increase 6 percent next year compared with this year.
But Colberg said after the meeting that his figures didn’t include $5.6 million in payroll-tax savings that school districts are expected to transfer to the health plans this year under legislation passed during a special session last year.
Using that money to hold down rates next year would reduce the potential rate increase to about 7 percent.
“This is the challenge of the [public school employees] funding scenario,” Colberg told committee members. While funding for the plans stays relatively flat, medical costs increase, resulting in the need for higher premiums.
State employees would face a smaller increase, in part because the state employees’ plans have more reserves. Assuming the insurance board allocates $12.5 million in reserves to the state employees’ plans next year, the plans’ rates would need to increase an average of 4 percent, Colberg said.
His figures assumed the board would allocate $7 million in reserves toward the school employees’ plans.
Colberg said the firm used the projected 6 percent per-person increase in medical costs in last year’s projections and used the same estimate Friday to begin the discussion about next year’s rates. The firm revises its projection for the percentage increase in medical costs each year, he said.
The full board is expected to set rates for next year in June or July of this year.
Sen. Jim Hendren, R-Sulphur Springs and chairman of a legislative task force monitoring the plans for teachers and state employees, said he would prefer to see rates stay the same or decrease next year and will be “skeptical” of any proposed increases.
He noted that the plans’ reserves have been increasing as medical expenses have fallen below projections.
“I’m certain that there’s a tendency to be conservative, but they’re going to have to make a compelling case” for the need for a 7 percent increase, Hendren said.
Subcommittee member Jeff Altemus, deputy superintendent of the Marion School District, said Colberg’s presentation “scares me.”
“I was hoping we could have flat rates next year, based on how successful the program has been,” Altemus said.
Under changes that took effect Jan. 1, some school employees are paying more for coverage this year, while others are paying lower rates in exchange for reduced benefits.
The potential for a large rate increase two years ago prompted the state Legislature to create the task force and allocate $43 million in surplus state tax revenue to shore up the plans during a special session in 2013.
The Legislature also has reallocated annual funding from other educational programs to the health plans.
Following recommendations of the task force, legislators passed laws during a special session last year that limited coverage of weightloss surgeries and excluded from coverage part-time employees as well as employees’ spouses who can get coverage from their own employers.
Total state funding for the plans is expected to be $83 million next year, down from $86 million this year, according to Colberg’s figures.
The figures don’t account for an expected increase next year in the amount school districts are required to contribute to the plan. This year, the districts are required to contribute at least $153 per enrolled employee.
Act 517 of 2013 requires the minimum contribution to increase each year by the same percentage that the Legislature increases per-student funding for teacher salaries and benefits.
The potential need for a rate increase comes despite expenses that fell below projections last year.
Monthly medical expenses averaged $285 per employee last year, about $35 less than projected, Colberg said. Monthly drug expenses averaged $82 per employee, about $3 less than projected.
According to a report commissioned by the task force, overall medical expenses for the school employees’ plans fell to $199 million in 2014, compared with almost $211 million in 2013.
Drug expenses fell to $52.3 million, compared with $68.7 million in 2013.
Bob Alexander, director of the Department of Finance and Administration’s Employee Benefits Division, said the drop in medical expenses stemmed in part from efforts to better manage the care of employees with costly medical conditions.
The plans also expanded a program that encourages employees to use generic drugs instead of more expensive brand-name drugs.
Alexander said the projections for expenses next year will continue to be updated on the basis of information about claims so far this year.
“We’re way far” from knowing how rates will change next year, Alexander said.
Rich Nagel, interim director of the Arkansas Education Association, said it’s too early to say what the association’s position will be on a rate increase for next year.
“I think everybody would feel much better if it were 3 or 2 or 1 [percent] or flat,” Nagel said.