Arkansas Legislative Council: Employee Benefits
May 26, 2022
Rapert [00:00:04] Morning. We’re going to go ahead and get started so that we can get through our agenda. And I want to welcome everybody here. I think that Deborah Ferguson is on her way, but I’m not sure. I’ve not seen her. But I do appreciate her leadership as co-chair here and appreciate everyone. Look forward to going through our work. Like to go ahead and ask the committee for– if they have any questions related to the consideration of the rules for the committee. They’re pretty basic. My understanding is these are basically the rules we operate in in most of the other committees. If anybody has any question on that, please say so or chime in and–
[00:01:00] Motion to adopt.
Rapert [00:01:00] All right. I have a motion to adopt the rules for the committee. Do I have a second? I have a second. All those in favor say aye. All opposed no. And the motion carries. Thank you, committee, for that. And now we’re at item D and would like to recognize Jill Thayer for presentation of the consulting services contract with Segal Group. You’re recognized.
Jill Thayer [00:01:25] Thank you, Mr. Chair. Jill Thayer, Bureau of Legislative Research. I was asked to– by the co-chairs to just provide you all with a little bit of information and background on the work that’s been done by the Executive Subcommittee up to this point on the EBD oversight and changes to those programs and let you know also what your duties and responsibilities are as a new subcommittee of the Legislative Council. And then following me, you’ll get to hear from the Segal Group. So I’m sure you’ll all remember last year you passed a law that abolished the state and public school Life and Health Insurance Board, which was the oversight board for EBD. And at that time, the powers of that board were transferred to the Board of Finance, and they had been handling all of those decisions for EBD up until this past session. In March of 2021, the Executive Subcommittee began a study on EBD and employee benefits in general in the state. In March of that year they released an RFP looking for consultant services to assist them with their study. We received six proposals in response to that RFP and the Segal Group was selected as the consultant to help the executive subcommittee. The contract with the Segal Group was approved by the Legislative Council in May of last year and they began immediately working with the Executive Subcommittee on their study and they worked with them from May to November of last year, working towards a final report and recommendations. Segal was asked to review multiple issues related to member and plan data for the Arkansas State Employee plans and the public school employee plans that are overseen by EBD. They looked at all funding sources for the plans, the administration of those plans, plan design and benefits. They examined recently passed laws in Arkansas that might impact the plans to advise the subcommittee on, on changes that may need to be made and then also provided information on best practices in other states. And so working through all of that, over those six months last year, the executive subcommittee received recommendations from Segal in seven different categories. And Segal is going to go over those with you in their presentation next. But out of that, the Executive Subcommittee came up with the final report. They added four additional categories beyond the recommendations from Segal, including creation of the new governing board structure for EBD, ongoing legislative oversight, which resulted in this subcommittee, changes to the PSC, which is the public school employee funding, and institution of minimum participation requirements for retirees in the plans. The Legislative Council heard this report in November of last year and adopted all of the recommendations. So after that, Segal continued to work with executive and with leadership within the General Assembly to work towards legislation for the fiscal session. And during the legislative session this year, you all passed ten acts, which includes two appropriations, and then also a concurrent resolution that amended your joint rules. I’m just going to touch briefly for you on what those are. Act 111 changed the method for PSC funding decisions. Act 114 created a new governing body structure for EBD, leaving in place the State Board of Finance and creating two advisory sub boards that are appointed that will advise the Finance Board on EBD matters. There were two appropriations passed that provided for stipends for those appointed members, as well as mileage reimbursement for this fiscal year and next fiscal year. Act 112 required that fiscal impact statements be done for all bills that will impact employee benefit plans in the state and also set a bill filing deadline of filing bills that do impact those plans within the first 15 days of a regular session and set a voting requirement for if you would like to introduce a bill of that nature in a fiscal or special session. Otherwise, those are not to be introduced. You passed House Concurrent Resolution 1002, which amended the joint rules with the identical bill filing deadline language that was in the Act. Act 108 dealt with funding triggers and created an optimal reserve balance for the plans and set that at 14%. This subcommittee will hear from the EBD director regularly regarding maintenance of that balance and any deviance from the balance lower or higher. Act 107 created a minimum active employee participation of five cumulative years in order to participate in the plans as a retiree and grandfathered in current employees. Act 109 reinstated the bariatric surgery program, which had expired at the end of last year. Act 110 removed the cap on monthly state contributions for budgeted state employee positions. And then finally, Act 113 is the Legislative Oversight Act, and it included creation of this subcommittee. So at the April Legislative Council meeting, you all adopted an amendment to your Legislative Council rules that officially created this subcommittee and set out all of the duties and responsibilities. And I’m going to just briefly go over those with you. All of the recommendations from the study that the executive subcommittee undertook over the last year that resulted in this legislation, including the work that Segal is doing right now on to RFPs for EBD are now in the hands of the executive branch, and you all now are the first layer of legislative oversight for those new changes and the EBD’s work going forward on these plans. So, under the new Legislative Council rules, the duties of this responsibility are that you will hear all matters related to these two plans that are under the purview of EBD. That includes items that normally would have gone to other subcommittees, such as contracts that would normally go to the review subcommittee. Today you’re going to hear two contracts from EBD, and you have review power over those. Council still has the final authority, but it doesn’t have to go through Review anymore. Those come here. Similarly with Rules. It’s a little bit different. You will hear all rules before they go to the Rules subcommittee. So you will hear them. You can take public comment on them. And you have the power to review them or to vote not to review them, and then report that to the Rules Subcommittee, who under the law still has the power of approval and then council has the final authority over those. You will get any proposed changes to the plans. After they’ve gone through the Board of Finance, they will be brought here for your input and advice and oversight. Potential funding changes to the plans will be brought here. And as I mentioned earlier, information regarding the reserve fund balance will be brought to you. And the EBD director, Mr. Bleed, will be bringing quarterly reports to this subcommittee that include information set out in the act. And then in addition to all of those duties, you were also assigned a study, both in the ACT and in the Legislative Council rules, wherein you will look at the feasibility of creating a diabetes management program for the two plans. Under the law, EBD will, the EBD director will assist you with this. And under our contract with Segal, they will also assist you with the study. In January of this year, we entered a new contract with Segal and you all have that in your packets, I believe, in front of you. And the purpose of that contract has two purposes. One, they are currently and have been for the last few months working with EBD to assist them in two procurements that were recommended by the executive subcommittee. One is for the MAPD vendors and one is for a new prescription vendor for the plans. And they’re going to talk to you about that. But they’re also going to come here and give you monthly updates on their work with EBD, and that’s to include the progress of those two procurements, implementation of the new contracts once those are entered, and then as we go forward with those new contracts, they will come and talk to you about the savings, if any, that are being realized under those contracts. And I believe attachment C to the contract in your packet sets out the work that they’ll assist you with on the Diabetes Management Program Study. Under that study, you all are to look at the feasibility of instituting this new program and then provide recommendations for possible legislation for the 2025 session. So it’s quite an extended time period. Segal is contracted with the Bureau through the end of 2024 to help you with that. So with that, I’ll take any questions.
Rapert [00:11:37] Members, do you have any questions. I do see at least one, senator Hammer, you’re recognized, sir.
Hammer [00:11:43] Thank you, Mr. Chair. Thank you, Jill. By any chance, do you have everything you just said written down that you could give it to us, that we could have for a file?
Jill Thayer [00:11:50] I do. And I can provide, I can provide that to you.
Hammer [00:11:53] Mr. Chairman–
Jill Thayer [00:11:53] If you don’t mind it being in my notes format. I can do that. Yes.
Hammer [00:11:56] Mr. Chair, that’d be okay if we get a copy of that? Just it’s a good summary. Kind of be a point of reference for me, please.
Rapert [00:12:02] Yes.
Hammer [00:12:03] Thank you.
Rapert [00:12:06] Members, any other questions? I see– I don’t know if it’s Senator Irvin or not. Who is– Senator Irvin? Yes. You’re recognized.
Irvin [00:12:19] Thank you, Mr. Chair. On the implementation of the fiscal impact of the legislation, will they have a timeframe so that we can kind of include that? I would think it would be a good thing to kind of include that within any kind of orientation that might occur after the November elections.
Jill Thayer [00:12:44] Do you mean the fiscal impact statements on the bills that are required?
Irvin [00:12:48] It would be nice to have something that since that’s going to be a new, a new requirement, I just think it would be a good thing to, to have something before any type of an orientation occurs with new members in the House and in the Senate or with the Senate and the House after the, after the the November election. So it’s just, it’s a recommendation that I think it would be nice to have.
Jill Thayer [00:13:12] Absolutely. And that is actually something that I’m working on because we are going to need that for our staff as well. Right now, we’re in the process– the executive subcommittee just authorized release of an RFP to find an actuary that will provide those fiscal impact statements for you all similar to the actuary you use for your retirement committee. So it will all be a part of that. So, yes, we will have something like that.
Irvin [00:13:37] Thank you so much.
Rapert [00:13:39] All right. Members, any other questions for Miss Thayer. My co-chair, Representative Ferguson.
D Ferguson [00:13:47] Thank you. Thank you, Mr. Chair. On that, talking about the fiscal impact statements, I am a little concerned about how those will be evaluated. For one thing, I know Senator Rapert and I have been going to NCOIL and Texas has done what they call a gold card for prior authorizations that– in other words, prior authorization is one of the biggest problems with, particularly Medicare Advantage plans, it’s about delaying and denying care. So what they’re saying, if like 95% of your prior authorizations have been approved as a provider, then you get what they call a gold card and you don’t have to go through the prior authorization process for a year. But there’s very little data out there to show the fiscal impact of that. So I guess I am concerned about just an actuarial doing it and not someone that’s really, really designated to medical billing issues.
Jill Thayer [00:14:48] Yes, ma’am. And the RFP is specifically geared towards health benefits, actuarial statements, and includes in the scope of work, the type of work that they will be doing and what we’re actually needing from them. I believe, I can’t remember, I think the end of June is when the proposals are due back and then the executive subcommittee will begin hearing that. They will at a certain point invite 2 to 3 vendors in to present, and that be a great time to be able to come in and ask them questions about their expertise in that area.
D Ferguson [00:15:20] So we will have an opportunity to question the data before they say it’s– in other words, we have an opportunity to question the data, not just take it at face value as this is the fiscal statement?
Jill Thayer [00:15:32] Well, yes, ma’am. Similar to what happens with the retirement committee. Those– it is in the scope of work that whatever actuary is selected will need to be present at committee meetings to present those. So you would have a chance to ask them questions then about the fiscal impact statement.
D Ferguson [00:15:48] And there will be an opportunity for them to revise that according to any concerns we have.
Jill Thayer [00:15:54] I would think so, yes.
Rapert [00:15:56] Yeah. I definitely think, madam co-chair, that the committee has the full power just like any other ALC review committee to be able to do this. And so from what I’ve gathered and read and talked with staff, I don’t think there’s anything off the table in terms of what we ask for. Any other questions? Seeing none, Miss Thayer, do you have anything else?
Jill Thayer [00:16:23] No, sir. Thank you.
Rapert [00:16:24] We appreciate the overview. And that helps, I think, give everybody a center on and we’re at. Thank you very much. Members, we’re at Item E now and we’re going to have an overview of the Employee Health Benefits Study and an update on current EBD procurements from the Segal Group. And I would like to invite all four of their members if they’re here and if someone could help arrange for a fourth chair, that would be great And, and members you should have– they’re going to have a PowerPoint presentation. I believe that they’ve given you a copy in your packets. If they have not, and you want one, we can have staff prepare one for you. And that would be exhibit E. So thank you for being here. What I’d like to do is go ahead and have you introduce yourselves. That way we’ve got all your names and in what capacity you’re here in and who you represent.
Vieira [00:17:28] Hello. Ken Vieira with Segal.
Rapert [00:17:31] I’m sorry. Speak up a little bit there, sir.
Vieira [00:17:33] The red’s on, right? Okay. Ken Vieira with Segal.
Rapert [00:17:36] Okay. Thank you.
Klein [00:17:39] Patrick Klein with Segal.
Rapert [00:17:41] All Right.
Schatten [00:17:42] Kirsten Schatten with Segal.
Rapert [00:17:43] You have to punch your button. But I think we got. I heard you.
Schatten [00:17:46] Kirsten Schatten with Segal.
Rapert [00:17:48] Thank you.
Slutzky [00:17:50] Hey, good morning. Jennifer Slutzky with Segal.
Rapert [00:17:52] All right. We appreciate all of you for being here and look forward to your presentation. You’re recognized.
Klein [00:18:03] Okay. So as Jill mentioned, we’re going to talk– give a brief overview of the project last year and then we’re going to get into some status updates on the two RFPs that we’re currently working on. So this first slide just provides a timeline of the work we did last year. So we were hired May 21, and our final report was delivered at the November board meeting. And as you can see, there was a lot of activity in between. So we attended monthly board meetings and presented on various topics. You can see those below. Some of the highlights, at the July meeting we did a full benchmark study. So we looked at your benefits versus other neighboring states as well as national comparisons. And one of the key things we looked at was vendor savings opportunities. So what’s available in the market? Where could the plans be more efficient? So our focus there was on the MAPD and the PBM markets. So we’ll talk a lot about that today. And then in August, we talked about funding and reserving. We had follow ups on Medicare Advantage. We looked at your medical vendor. And then in September, we came with all our initial recommendations, more follow ups. And then, like I said, in November we delivered our final meeting. So the report was adopted, and as Jill mentioned, several of our recommendations became bills. So we want to go over some of the recommendations in more detail, hit them at a high level, going to talk about plans and contributions, reserves and funding strategy, the MAPD, medical pharmacy, clinical, and we had some ad hoc ones, communication and additional items. And the first thing we looked at was your plan designs. We leveraged our benchmarking to compare your plans versus other states. We found that your plans were in line with other states. They have a nice spread. If you look at the table below, you got three plans, a high value, medium value, a lower value plan. You’ve got an HSA eligible plan. So from a recommendation standpoint, we didn’t feel that it was a high priority to make many changes on the plan design. Any changes would really be just cost shifting to employees and retirees. So then the next section we looked at was some of the funding. So the plan is funded through state contributions as well as employee contributions. The first piece that we looked at was the employee contributions. We again leveraged our benchmarking study to look at what employees were paying relative to, you know, your other neighboring states and other plans. And we felt like they were in line in 2021 and then 2022, there was some significant increases on the employee contributions that put EBD a little higher than benchmark. So from a recommendation standpoint, we didn’t feel like this was an area where we wanted to generate savings by increasing cost to employees any further.
Vieira [00:21:32] So I guess just a couple summary things on that. As Patrick said earlier, the plans that you’re offering we think are competitive and pretty much consistent with the market. So we were kind of okay with that. No real changes recommended. The contribution aspect of it, if you look at the numbers, it’s like 30% versus 15%. So is a pretty good spread. Your employees are contributing more than the averages. So over time, we’re hoping you can merge more on the state side and maybe back off some of the employer contributions if possible. So that was in general the recommendation.
Rapert [00:22:01] In your study, and I want to ask on that. You have any further, deeper comments on that in terms of how that– or obviously we know how it occurred. Decisions were made and that’s what happened is you ended up having employees shouldering more of that. So where did that rank? Did you– I don’t know that it specifically stated here were where we ranked in that.
Klein [00:22:32] So we did a full benchmark study and we could provide– I know that’s been published and we can provide that that shows all the details of the ranks for each different component. Off the top of my head, I just know that, you know, you guys were on more towards the back half than than the other–
Rapert [00:22:51] I think it’d be good for the for the committee actually to have that just for those that have the time and the interest that they can look at it. Because as we go forward, I think it’s important because ultimately all of this will come down to a bit of a public debate for all of those involved. So them having that information would equip them better than just the statement that the employees were shouldering more than the average.
Klein [00:23:16] Yeah, we were trying to figure out a good balance and what you want us to go over because I mean, we did three months of report and look at a whole session. And actually the report that we produced has every presentation in there. So I know it was presented to ALC and the ALC adopted it.
Rapert [00:23:29] Well, it may be that it’s in one of these previous and we just have staff provide it. So whatever the case, we’ll be, be happy to have that. I do have a question from Senator Ingram.
Ingram [00:23:38] Yeah. To follow up on what Senator Rapert was talking about, Ken, remind us, the benchmark, is that our peer state groups?
Vieira [00:23:47] Yes, sir.
Ingram [00:23:48] Yeah. The ones it touches, surround us?
Vieira [00:23:51] Yeah. I think it was seven states around.
Ingram [00:23:53] Yeah. Okay. I thought so. Thank you.
Vieira [00:23:56] And it showed that, you know, in general, your plans are similar, the design of them. But it showed that the funding levels were, from the state were lower than funding levels of other states. So it was like a little bit of a leveraging. So in order to make that money up, employees pay a little bit more than the other states. So and I think with a lot of the bills you passed in the latest session that was, you know, trying to fix a lot of those things. So.
Rapert [00:24:18] Yeah, thank you. I’ll let you proceed.
Klein [00:24:30] So the next section that we looked at was reserves and future funding. I think this is probably one of the main reasons for the project itself, because historically there’s been financial stress on the plan periodically through time. And, you know, one of the main reasons that we saw this was because there really wasn’t a long term strategy in place. So short term planning causes reactionary decision making. And I think that got the plan in some trouble in the past. So one of our solutions was to A) do a long term strategy. So look at things not only the year that we’re in, but project out the next three years and then also set a reserve policy which is very common in the other states that we work with. So typically states set some money aside for an IBNR and then also adverse claims. And so we looked at different states and we looked at your risk tolerance and made a recommendation on the reserve level. So as Jill mentioned, we recommended a 14% target. We have a range there, too. So if you ever dip below 12%, we recommend that action needs to take place immediately so we don’t fall underneath that 12% threshold. And also, the way the funding was set through the state on the ASC side was capped at $500. So we recommend that we remove that cap. So there’s flexibility and there really needs to be regular increases to that amount. That’s one of the reasons why the plan has been in trouble in the past, because that’s been capped and we haven’t seen regular increases.
Vieira [00:26:26] Any questions? Any questions on the funding piece? I think you guys did pass legislation to do a, a corridor and a risk tolerance and all that. So I think that was passed.
Rapert [00:26:39] Representative Meeks or someone in his seat? Representative Beck>
Beck [00:26:44] I moved around. I’m sorry, Mr. Chair. Thank you. And I’m relatively new to the committee, so this question– so it looks like your target, which you said was 14, if it gets below 12, you recommend– if it gets at 12, you recommend that we take an action. Obviously, it’s 16%. So, so it looks like you’re targeting, targeting a change of 2% up or 2% down. And but then later on, it says that your range of claim fluctuations would be 4%. So that seems like that’s a, you know, you’re saying your claims– assuming that fluctuation could go 4%, then that would throw us out of this range or are am I missing something?
Klein [00:27:29] So the IBNR is fairly easy to calculate. So that’s kind of a set number. There’s no range on that. So that’s 8%. And then the claims fluctuation is where we have the range. So if you add the 8% plus the four, that gets you 12, the low end of the range and then the eight plus eight gives you the 16 for the high end of the range.
Beck [00:27:47] Thank you.
Rapert [00:27:51] Okay. Members, any other questions on these recommendations? And I see also on here that you’ve stated– are you stating there on the increase for state employee rates 23 through 25?
Klein [00:28:17] That was the 5.4%, I think it was. That was a baseline with no changes. So we got these RFPs going out, which will impact all those rates. But that was a baseline. We did nothing. That was what we anticipated you need to have as a plan.
Rapert [00:28:31] So just to, I guess, put a finer point on this, to meet the annual funding increase or the annual funding increase needed to hit your target on reserve would be an increase of 5.4%, right, for the state employee rates?
Vieira [00:28:49] Yeah. Based on the current funding levels, and I’m not sure if you passed legislation to fund it differently since we presented back in November.
Rapert [00:28:58] And would– it seems to me that the legislature would have to consider when you make the statement that we are funding at lower levels than some other states in terms of the state contribution, that needs to be a consideration in terms of what ultimately you’re going to impact those rates or any increase on the employees, correct?
Vieira [00:29:18] Yeah, that’s correct.
Rapert [00:29:19] All right. I’ve got a couple questions here. Who is in 44? Representative Rye, I’m sorry. I didn’t see that.
Rye [00:29:29] Yes, sir. Thank you. Thank you, Mr. Chairman. This 5.4% increase, will that be a one time situation that will begin at a certain point and then go that way toward the future or will it be more than that? Will just be a 5.4, say in the 24th year?
Vieira [00:29:52] I mean, if all your assumptions came out and it was exactly what we we projected, then yeah, you would have 5.2, I think it was, right? 5.4. Yeah. But I mean I know there’s like for example, you’re doing a PBM RFP and a MAPD RFP which will affect the funding levels if there’s any other changes. This was a baseline projection and that would be annual. So every year, you’d need to plan on an increase of 5.2 and that was to put the target in that range. So if you have a good year and say your claims only went up 3%, you could adjust that rate going forward so you wouldn’t need a 5% the following year. So it’s kind of like it’s, it’s always projecting out three years and you’re kind of trailing it. So as you get your experience, you adjust that 5.2. So the 5.2 is all based on right now. But you know, as experience comes in, that would change.
Rye [00:30:42] Follow up?
Rapert [00:30:42] Yes, sir.
Rye [00:30:42] But the 5.4, once that’s established, would there be added fees on top or percentages on top of that through the years or would it just be that from that point forward?
Vieira [00:30:52] That would be the amount forward, 5.4 each year.
Rapert [00:30:58] I want to follow up on that. And I, I’m putting this on the table just for, for chewing on it. All right. I know that if you take it, the plan as it is, and you’re looking at the 5.4% increase, have you got a number that if the money was there right now to establish that reserve, what that number would actually be or what that 5.4% if you’re establishing the reserve how much that’s going to be? Is there anybody got that number?
Klein [00:31:35] D you have the exact number? I think we looked at it last year, but we could take that as a follow up.
Rapert [00:31:41] The reason I’m asking that is that if it’s a true reserve, right, then the whole idea is that you’re keeping that pot of money as that reserve for the health of the plan and to take care of any unexpected expenses, correct?
Klein [00:31:54] Yeah.
Rapert [00:31:55] And so the idea there is– the reason I’m putting this out there on the table for discussion is that we have an enormous surplus that, that is going to be discussed pretty soon here in this legislature. And my question is, would it be beneficial for some of that to be placed and it might lower the need for such a rise on a consistent basis? And would it? Because you don’t want to use one time money if you’re still going to have to do that. But if you’re establishing a reserve, which the whole idea is not to be using it unless emergency, would that, how would that affect the bend or how would that affect the need on your increase?
Vieira [00:32:34] So when we’re doing the projection, we’re projecting out three years. So if you wanted to fund that increase today, which is kind of what you’re saying, put more money aside then, yeah, that would be a lower number.
Rapert [00:32:43] That’s right.
Vieira [00:32:43] But it doesn’t change when you’re in year four–
Rapert [00:32:45] That’s right.
Vieira [00:32:46] –and you come out of it. All of a sudden, you might need a 20%, which is kind of I think that’s kind of what you were, traditionally maybe you did in the past, too. You’d have a bunch of money and you put it in there and you’d be good for a few years. Then all of a sudden, you know, you come out of it because trends, you know, catch up and passed–
Rapert [00:33:00] But that wasn’t always reserve. That was simply adding money to keep it from blowing up. And so anyway, it’s something that would be, I think, helpful. Senator Hammer, you first on the list again there, sir.
Hammer [00:33:13] Thank you, Mr. Chair. In your calculation of those projected cost increase or savings and I know, I think we’re going to get to a couple of things here in a second in the presentation and in comparing us to the states around us in our region, did you incorporate into your evaluation any innovative ideas that could be implemented in order to help keep the cost down? Or are we just doing what everybody else around us is doing with no innovative approaches to doing something different?
Vieira [00:33:49] Yes, we did. So, do you want to know– I mean, we have a bunch of things on the clinical side. We have the MAPD program, which you haven’t put in place yet that we’re recommending. We have the pharmacy program that we’re looking to redesign and implement. Those were the main things and and the clinical side. So those were the five or six main things.
Hammer [00:34:11] Okay. Go ahead.
Klein [00:34:12] Yeah, I just want to clarify, but the 5.4, that’s that’s a baseline number. So that doesn’t include any of those items that Ken just mentioned.
Hammer [00:34:21] So. So it’s 5.4 status quo. But, and is that going to be in the rest of the presentation, what you’re about to give as far as the comments or questions I was asking?
Vieira [00:34:34] I’m not exactly following, but the 5.4 was a baseline. We actually, in our report, we did do a–
Rapert [00:34:41] Excuse me just a minute. Make sure to pull that close. A couple of members are having trouble hearing you clearly.
Vieira [00:34:47] Sorry. The 5.4 is the baseline. And in our report, we actually said if you did this, this and this, this would have been your increase related to that. So there’s like a post doing the thing the number would be. So that was in there. Today we’re going through the three main things that, that we, we are implementing or we’re trying to implement that have the biggest savings and there’s no takeaways at all for members. It’s benefit enhancements primarily for this, so there’s, tried to get the things that were win wins for both sides. The state would save money. The members would have, you know, either no impact or a benefit enhancement.
Hammer [00:35:26] Okay. But again, the 5.4 that is the subject of conversation, that’s before what you’re going to recommend, so would that 5.4 actually come down? And is that going to be covered in the rest of the materials that we’re going to look at today?
Vieira [00:35:41] Yes.
Hammer [00:35:41] Okay.
Vieira [00:35:42] The final thing and the 5.4 was also done last November. So if there was legislation passed to change any funding levels since then, that 5.4 may be a different level.
Klein [00:35:53] So it is going to go down. But we don’t– we haven’t gotten the final results of the bids. So we’re in the process of it. So we don’t know the true savings yet. We’re working through that. So, no, there won’t be– we won’t have a slide at the end that says now it’s 1.2 because of X, Y and Z. Eventually we’ll have that, but not today.
Hammer [00:36:11] All right. Thank you.
Rapert [00:36:12] Okay. Members, we got two of you I’m going to recognize. And just so everybody knows, we’re on page 11 of nearly a 42 page presentation. So we’ll take these two questions and then if you would, hold them a minute, let them get through some more of the information, it may end up answering your question. Representative Lowery.
Lowery [00:36:32] Thank you, Mr. Chair. I just have a series of questions that are probably just to kind of help me catch up. I remember through the years of discussions in Education Committee that there were disparities between the amount that is paid out in plans for state employees and for teachers. Have these, has this all been merged now into one or are there still separate pools in terms of actual pay out of health cost?
Klein [00:37:07] It’s still separate pools.
Lowery [00:37:08] It’s still separate pools. Is part of your contractual obligation in terms of making recommendations looking at what those disparities are, what’s creating, because I know that there is a disparity, as we’ve seen through the years, that there’s higher cost in the teacher, the teacher pool, as opposed to state employees. Is that something that you actually look at and do a deep dive on?
Klein [00:37:40] I wouldn’t say we did a deep dive, but we did look– in our presentation, you’ll find some exhibits on the financial impact of merging the two groups together.
Lowery [00:37:49] Okay. And that’s later in the presentation?
Klein [00:37:52] It’s in our final report. So this is, this is really just kind of highlights of the recommendations. But it is–
Rapert [00:37:59] Representative Lowery?
Lowery [00:37:59] Yes.
Rapert [00:38:00] I want to interject, because there’s been multiple reports done on that. And I would be happy for staff to provide you with some of that data because they have done multiple reports on that. They’ve gone down in the differences in the ages and the demographics of each of the groups, all of that. That’s been done pretty much every year since I’ve been here, not every year in depth, but it’s been in cycles of the sessions because we’re always wrangling with that. And so I think there might be– some of those reports would be helpful if staff could just provide those and then we can do that. And she, Brenda also mentioned– Barbara, excuse me– has also said that we could get the final report sent to members that they’re talking about.
Lowery [00:38:46] Okay. All right.
Rapert [00:38:47] So we’ll do that.
Lowery [00:38:48] All right. Thank you.
Rapert [00:38:49] Thank you, Representative Lowery. 86, who do we have here? Senator Chesterfield. You’re recognized, ma’am.
Chesterfield [00:38:56] Thank you.Mr. Chair. Mine is a very quick question. And if we’ve already gone over it, I’m happy. The most concern that I’ve had expressed by both, especially by retired members, is Medicare Advantage plan. And their fear that they’re going to be made to become a part of it. Could you speak to that or is that for another time?
Schatten [00:39:15] We’re going to go into the Medicare Advantage plan now. Yeah.
Rapert [00:39:19] All right. Thank you, Senator. You’re recognized. And as I said, members, let’s let them get through some of this a little bit because we’ve got 42 pages. So thank you.
Schatten [00:39:29] Okay. So so, yes, in response to some of the questions, the Medicare Advantage and part D plan is a recommendation for savings. And just to let you know, it will not be a requirement. So a Medicare Advantage and part D plan is a fully insured plan offered by private carriers. It combines all of the benefits into one plan. So today what you have is Medicare covering the medical side, Blue Cross wrapping around those benefits after, after they’ve paid what they pay with Medicare, and then separately a pharmacy benefit. And so this is going to pull all those pieces into one plan. It is not an individual MAPD plan. I know people have heard a lot about individual PD plans. This is a group plan. It works very different. It’s not a closed panel. It is what’s called a passive PPO. So members can go to providers that accept Medicare anywhere and they get the same benefits in and out. We presented a lot of the benefits of these programs in the July and August meetings. But the way it works is the plan gets capitated payments from CMS that is based on the average fee for service for these different counties on the medical side. And so if you have coordination for these members and it’s not to deny care, it’s actually to coordinate care. So members, when they get to this point, have a lot of conditions and there’s not a lot of coordination going on. So, so physicians don’t often have people in their, in their practices that can coordinate all of the care going on. So the, so the issue is to coordinate for them, to make sure that they’re getting all those things coordinated together so there aren’t readmissions, things like that. And when they do that, it reduces the cost of care. So that’s on the medical side.
Vieira [00:41:42] And the big thing, I think on that to remember the Kirsten mentioned was, I mean, this is 100% different than an individual MAPD product. So an individual MAPD product will have a closed network panel real tight. You have to go to those providers. In this plan, this group passive PPO plan, Medicare is your network. So if your provider accepts Medicare, your member in this plan will have the benefit of seeing that doctor. So we’ve got to definitely differentiate individual versus group, because they’re separate things here. This is– think of it as, you know, a massive network that the medical management company, you know, helps patients and helps them get their care. So like Kirsten was saying, they’re getting managed now. I mean, before in the Medicare system, they’re– they go to their doctor and it’s like, it’s, it’s bedlam half the time. So, I mean, they really get it organized. The network is huge, so they’re not going to be denied service because of a certain doctor. Same as Medicare.
Slutzky [00:42:39] And if I may make a quick comment with respect to the network, 99% of providers, 99% plus do accept Medicare. So for your members, they will be able to truly see anyone who accepts Medicare in the plan. But that’s a 99% number. And I just wanted to share that.
Rapert [00:43:01] Okay. Representative Ferguson.
D Ferguson [00:43:05] Thank you. Let me, let me share a little reality with the committee about that. Yes, the red, white and blue Medicare, almost all doctors take, and it’s great. But what happens, a patient comes into the office, someone’s talked them into changing to a Medicare Advantage plan, and then the doctor can see them, but they, but they usually refuse to because they don’t take Medicare Advantage. They can see them. And I’m not sure exactly how this plan works, but they’ll come in and they’ll say, Yeah, you can see them, but you’ll have to file as out-of-network. Is that how this is going to be? Will the– they can see the patient, but if they’re not a united or whatever company you choose provider, will they be seen as an out-of-network provider?
Schatten [00:43:59] The way that it’s set up in a passive PPO is that the carrier will have contracted providers, you know, in and out of network, but then they will also have providers that accept but aren’t necessarily contracted. And then for the members, the benefits will be the same, whether it’s in or out of network, and it will be up to the carrier to work with all of the providers. And they have that information that we sent out with the RFP so that they’ll know exactly how to how to file those claims. So for the member, it won’t matter and they’ll make sure all of that is smooth.
Vieira [00:44:37] And by the way, the member cost sharing in all this in almost every single service is 0, 0.
D Ferguson [00:44:42] I understand, I understand that you’re saying it’s the same for the member. But I am just telling you that there are lots of physicians, particularly subspecialists, that will not see a Medicare Advantage plan. And because, I mean, you can say what you want. I mean, can I can go off a little bit? What happens with these Medicare Advantage plans, so the committee understands this, because if you’re not in a doctor’s office, you don’t understand. The way they make money is mining records for money. They come in, they audit your records, and they want to make sure that you’re upcoding everything to make the patient seem the most chronically ill as possible because they get paid a management fee based on the acuity of the patient. And they wear you out auditing records and coming in and questioning your coding and up coding and mining records for money. So that’s why providers won’t see these Medicare Advantage plans, particularly subspecialists. I just, I mean, I know this decision has already been made, but I think we have to do a lot of education with patients so that they understand what they’re getting. I mean, you get what you’re paying for. It’s going to be less. But the care and the ability to access care is going to be substantially less.
Schatten [00:46:12] So as part of our procurement, and we put this into many states, and there’s always skepticism at the beginning, always. And there’s always happiness once they understand how the plans work. And the carriers not only will do education with the members throughout the state and hold, hold meetings throughout the state, they will pick places that are easy for people to get to, make sure that all that’s available. But separate from the communication that goes on with the members, there’s a whole communication that goes on with the providers. And we’ve, we’ve gone into states where many of them, where it’s the first time moving from the, the current system, a wrap system over to an MAPD. And yes, there is a lot of communications that go on with the providers as well. I mean they have on the ground people visiting. They have people calling and making sure they understand. They have put together 150 different YouTubes to make sure people have it at their fingertips. But it’s very much designed to make it simple for the members, also to make it simple for the providers to understand how this is a different product, this group product, from what you see in the individual market.
D Ferguson [00:47:33] Yeah. I mean, I don’t want just the managed care company to come in and educate the patient. I want someone that has an alternative view of Medicare Advantage to let them know what they’re giving up when they go to a medicare Advantage plan. That’s going to be our challenge. It’s going to they’re going to look at it and see the cost is less. But that doesn’t mean they’re going to get care. Anyway, sorry.
Rapert [00:47:56] That’s all right. But and correct me if I’m wrong, we’re not saying that the retiree has got to now just go out and find you a medicare Advantage plan. You’re providing this as a, as a directed Medicare, maybe use that. This is the alternative plan for you, which is more of a group, correct?
Vieira [00:48:16] I mean, think of it as–
Rapert [00:48:17] Because I’ve had the experience that Rep. Ferguson’s talking about with a family member. And they came in, they come in, they get sold. And the next thing you know, they got a coverage problem. They got in all these kind of issues. And then it’s how you back them out of that. And so I am absolutely sensitive to the frustration that anybody would have there. But you’re trying to articulate that should not be the experience. It’s a directed situation, correct?
Slutzky [00:48:44] Yes. This is a plan that’s going to be designed with your members in mind, and only those members that are retired teachers or are working for the state can access this plan. So when we put out the RFP, we took into account the current benefits you had now and made sure that the prospective contractors that were bidding on it would at least mirror the current benefits. And in many cases and what we’ll see throughout the presentation is that they will have the ability to offer supplemental benefits that are very beneficial to the member. So beyond what Medicare allows, maybe additional vision or hearing benefits, there are benefits related to transportation, meals after a hospital stay. So the intent of this plan is really to provide the most optimal care for your members and to make sure the care is coordinated and that their outcomes show that they are either improving on their health status or at least staying the course and to not get that far down the line towards the chronic conditions.
Vieira [00:49:55] Think, think of it as, you know, your active members, their whole working career, they’re using Blue Cross and they have a network. So now they retire and they get on Medicare and nobody’s managing them anymore. So now what will happen for these patients that select this is their network will be the Medicare network, just like you have the Blue Cross network. Now you have the Medicare network. And yes, some will be under contract, some will accept payments, some there’ll be a different method to get paid. But it’s all going to be the same cost sharing. So you can see any Medicare provider and you really have to differentiate the individual market versus this group market. They’re nothing similar.
Rapert [00:50:35] I’ve got three questions pending here. Senator Hammer.
Hammer [00:50:40] Thank you, Mr. Chair. Refresh my memory on the RFP. Are we just going for one carrier or is it going to be multiple carriers that can participate in this?
Schatten [00:50:47] It’s going to be one carrier.
Hammer [00:50:48] Okay. Second question then is everybody’s going to be put in with the option to opt out or everybody’s going to be out with the option to opt in? Which way was it?
Schatten [00:51:00] Going in with the option to opt out.
Hammer [00:51:03] And how’s that going to be educated? You talked about education a while ago I just– what, what’s going to be required of either us as a state or the carrier to educate participants what their choice is?
Schatten [00:51:14] They’re going to set up meetings across the state and they’re going to do it twice. They’re going to do it this summer so people can start to get, get used to and understand this. They’re also going to have videos and–
Hammer [00:51:29] Everything you mentioned a while ago, plus letters from the retired association and all that stuff?
Schatten [00:51:33] And when they do these meetings, they will stay until every single person gets every single question answered.
Vieira [00:51:39] There’s also a period they can opt back out. So if you’re in January 2nd and you realize, oh, I didn’t want to be in that plan, you can go back to your other plan.
Schatten [00:51:47] That’s right.
Hammer [00:51:48] Okay. And real quick, I want to be real quick. So if somebody goes, they opt out and then they want to go be on a Joe Namath plan or something like that, they’re totally on their own on that. They’re going to be separated because they had to opt out in order to purchase from somebody else other than the carrier that’s going to have the contract to handle the population. Is that correct?
Schatten [00:52:08] No, they’ll be, they’ll be still in the plan, in the, in the state plan or the public school plan. So they will be put in these plans. If they opt out, they’ll go back to what they have currently.
Hammer [00:52:20] Okay. And then the last question is this. You have no idea or did you all do any actuarial work to determine how many employees might opt out that would have affected the projected savings that you’re presenting to us? Because we’re going in maybe with the assumption that everybody’s going to participate, but we really don’t know until they back out. So how did you arrive at a defensible number as far as what the projected savings are with that unknown?
Schatten [00:52:49] We’re assuming, because they’ll be put in this plan and then they can opt out, we’re estimating 75% in the projections will stay in the plan. That’s based on other states that we’ve seen that have had that similar structure. So that’s where we came up with those numbers.
Hammer [00:53:08] All right. Thank you. I’m sorry. Go ahead.
Schatten [00:53:10] I was just going to say and there’ll be a big incentive, right? It will be less expensive. Part of it is on the medical side. Part of it’s on the pharmacy side, why there’s so much savings there that we’re going to go through as well. But there’ll be a big savings to stay in this plan.
Hammer [00:53:26] All right. Thank you.
Vieira [00:53:27] And also, remember, on the PSC side, they didn’t even have pharmacy benefits. That was taken away. But on the MAPD side, they will have pharmacy benefits reinstated.
Rapert [00:53:37] Senator Ingram.
Ingram [00:53:39] Senator Chesterfield had to leave and asked me to ask this question: if she could get a list of the states that are utilizing group plans for Medicare Advantage and a contact to see if it is as glowing a review as is being presented to the Committee.
Schatten [00:54:00] We’ll be happy to provide that.
Rapert [00:54:01] It seems that I had someone tell me– is it nearly 38 states? Is that right? 38, is that correct?
Schatten [00:54:08] It sounds about right.
Rapert [00:54:10] Yeah. Yeah. So there will be plenty of people for her to call on, Senator.
Ingram [00:54:14] I share your concerns. I was on a hospital board and we had problems with Medicare Advantage. And I share the concerns that both you and the co-chair have. And now, whether it was individuals versus group, I don’t know if that makes the difference. But, but I’m very concerned about it as well. Thank you.
Rapert [00:54:35] Well I’m– so far, I have some confidence that the group situation here will be much better. Senator Irvin.
Irvin [00:54:42] Thank you. I think just to emphasize and echo those concerns from the chairs as well as members of this committee, I would do the same. There’s a big difference between, you know, somebody who will see a patient versus somebody who will not see a patient because– they may accept Medicare, but they limit that because of they have to make a business themselves. You know, those those doctors and those clinics, they have to, they have to pay their overhead. They have to make ends meet, right, and pay their employees. So there are limitations there. But if– since we are– my question is, since we are procuring this as a group Medicare Advantage plan, during the procurement process, is there not a way to ensure that if there are, you know, a lot of steps as far as audits of patients’ records and things like that, that that would be offset when we’re paying dispensing fees in addition to for pharmacists. So could there not be an offset if that actually did occur? Could we not write that into the RFP in the procurement process, that if these companies are going to do that and make it such a, you know, administrative burden on those providers, that they end up not seeing the patients, is there a way we can write that into the procurement to either ensure that it doesn’t happen or offset that administrative burden cost if it does happen? Because, because these, these doctors and providers don’t have the office staff to comply with that. And I know speaking from personal– I mean, this is a very, very big issue.
Schatten [00:56:34] So there are several things that go on there. So we talked about the fact that they can be under contract with providers and then they also can have providers that are willing to accept members, but not under contract. So when they set up those contracts with providers, they are paying them more. So if we start with a basis of 100% of Medicare as the starting point, so they’re not going to be paid less, but they do have bonus structures for gathering other information. And yes, while they do want to get the diagnosis coding correct, they also need this information because they have star ratings. I mean, they have ratings that are based on how they perform and the care that they provide. So if they’re under contract, it’s up to the physicians group or the provider to accept or not accept the contract. And they are set up to pay more for the things that they’re doing. Now, there may be some providers that don’t want to go through those, but are willing to accept because they’re getting paid 100% of Medicare and they’re getting paid faster. So it’s not having to adjudicate– someone goes into the office, it goes over to Medicare and adjudicates there. It comes over to Blue Cross, it adjudicates there. There’s a big lag in that. So they may not want to have those other things that you’re talking about, but they still will accept because they go, they know exactly where to send the bill, they get paid very quickly. So, yes, it’s up to the providers. Whether they want to be in a value based arrangement, i.e. being paid more for doing some other things. Or if they don’t want to go through those, they can accept but not go through those.
Irvin [00:58:16] Thank you.
Rapert [00:58:17] All right. Okay. Representative Ferguson.
D Ferguson [00:58:21] Yeah. I would be curious to know how many providers can actually reach that bonus level. When I talk to my doctors, it’s, it’s almost impossible. None of them get a bonus. For one thing, you carry what they call ghost patients. They assign you these patients. They’ve never seen them, but you’re responsible for their care, even if they don’t come to you. And I’m just telling you, doctors never– I want to know what percentage of patients in the plan you choose actually get a bonus because it’s an almost impossible task to, to achieve.
Schatten [00:59:00] And that may be a different structure than what’s happening in this plan. If they’re not coming, I don’t know if that’s a bonus or a capitation or, or, you know, something like that. But, but, you know, besides that, these programs have other ways of getting at the data that they need. So they have a program where they go out to members’ homes. They can come in if the member wants to. All of these programs are voluntary, by the way. They have disease management programs, they have caregiver programs, they have meals after, you know, when someone’s coming out of in-patient. Where do you go? They’re just trying to help coordinate all that care. They have– they even have if someone goes into the hospital and they’re released, not only do they provide meals, non-emergent transportation, but they also provide hours of care in the home that are, that are not skilled nursing with helping with activities of daily living. So they’re really trying to make sure these members are well cared for and they don’t end up being readmitted.
Rapert [01:00:09] Okay. All right. We’d like for you to proceed. And, members, if you got questions, please write them down for a moment. I’m going to let them go for a good while so that we can get further through this. Thank you.
Schatten [01:00:22] Okay, so, so on this page, we’ve talked a lot about the medical side. So also the pharmacy would be under the same plan. And currently you have a PBM and you’re receiving reimbursements from CMS called RDS, Retiree drug subsidy. RDS was set up when Part D was first set up and it was set up under that construct. Since then, the benefit has changed. So ACA came in originally, if you recall, we had the donut hole. It was set up under that construct. But under ACA, we closed the donut hole over over ten years. And it was also set up that manufacturers of the drug companies would pay 50% of the cost in the donut hole for brand drugs. And then I think in 2019, it was even changed to 70%. That money never came into the RDS program. And over time, as we’ve seen, more specialty drugs become available, and these very expensive drugs, more money is available under a Part D plan because you have more people out in the catastrophic. So moving from a construct where you have RDS coming in to all of these other subsidies coming in, that’s how we greatly reduce the cost for the pharmacy side of this. So it’s just leveraging federal money that’s available, manufacturer money that’s available, to greatly reduce the cost of the plan. So you put the medical and the pharmacy both together and that’s where you get the real savings. Like we said, we’ve implemented this for many states. We did our first one in 2007 in my own home state, where I’m a taxpayer. And we’ve done it for at least, you know, eight other states that we’ve done. We’re on second or third generations at this point and all going very well. And I think it’s a good idea to give you some names of some of the directors from these states that have these plans, because you’ll hear good things from them. Not only is it a savings on a cash basis, on an annual basis, if you think about your OPEB liability, you’re projecting these things out and coming up with a liability on your books at this point. And it will greatly reduce your OPEB liability as well. So we did a market analysis when we were going through this. We were here in July and kind of gave an overview of the program and then we took some high level data, sent it out to some vendors, came back, talked about what the savings would be, and at that point, we said that the MAPD rate would be roughly 50% of the current cost. We projected some savings there. And we also said that we expected those would be very conservative savings, and if we went out with an RFP, we would expect much more competitive bids. And we’re in that bid process right now. We can’t say much about it, but I can tell you that it’s going to far exceed what we were expecting. So, like I said, our recommendation was to conduct a form of procurement, which we have done to go into place 1/1/2023 providing not only good plan options to make sure you have– all the members have benefits as good as and even better than what they currently have. We’re going to get rate– we have rate guarantees for multiple years there and also medical loss ratio guarantees because we’re moving from a self-insured to a fully insured plan. If it comes in even better, we’ll get some of that money back. Again, plan design is better than it was. And we talked a little bit about that this is going to be an optional benefit, so members will be opted into this program and they can opt out. And Ken even said we’ve worked out with the carriers that we’re talking to that if somebody gets in there and they didn’t mean to be, they’ll even have some extra time to get out. One of the recommendations that we had made also was, originally we had projected that it might be a cost for the PSC because we’re adding pharmacy benefits back where there weren’t benefits before. And if that were the case, we might recommend reducing the value of the PSC drug plan. I can tell you that that’s not going to be the case. They will have the same benefits as the ASE and the savings will come, are coming in enough that there’s no reason to reduce those benefits.
Vieira [01:05:20] Okay. Should we move on to the medical? So on the medical side, we basically just did a high level review of your current vendor, which is– Blue Cross Blue Shield is your administrator right now. They do your medical network development, discounts, provider reimbursement, claims management, all that kind of stuff. And we went into our database and we compared financially, I guess, how the reimbursement for Blue Cross compares to all the other big networks that are in the state. And we did agree that Blue Cross was, in aggregate discount levels, they were the most financially beneficial to the state. So we think that was the appropriate vendor to have in place for financial reasons. There were two vendors that were fairly close to them. So the gap I think historically used to be pretty big between Blue Cross and everybody else. I think it’s pretty much it’s narrowing a little bit. And we also looked at the–
Rapert [01:06:19] Do you happen to know who those two are?
Vieira [01:06:25] United Health Care and I think Aetna was the other ones.
Rapert [01:06:30] Okay. Thank you.
Vieira [01:06:33] And then we did look at the ASO fees, which is the amount of you pay Blue Cross to administer the plan. And it was at 20.55 per member per month, which was competitive for a large group. So we thought that was reasonable as well. So overall, I think, financially, I think, you know, I think you’re in the range we would expect for them and I think, you know, they were a little bit ahead financially as far as aggregate discounts, provider reimbursements. So then we did recommend that over– of course, over time you will have to do an RFP for that and put that out to bid. And instead of using a network database, which we did, I think you would have all your claims repriced that it would be actual provider’s actual experience and have that repriced to get a more accurate estimate. We also wanted to maybe possibly look at other alternative ways to do some reimbursements. Total cost of care approaches, ACO pays, narrow networks, things like that. So I think in future procurement, you want to look at things like that. There’s also not a lot of performance care guarantees tied in there. So we recommend that you have some more guarantees as you go forward and then possibly, which we’ll talk about the medical management briefly later in this report, possibly ways to pull out components of this. Maybe you want to have a separate diabetes management firm do the pieces of this. I know EBD is looking at alternatives for that going forward. So that was it on the medical side. And then on the pharmacy side right now, you currently use– you currently use a PBM, which is net impact and you have EBRX doing your formulary clinic review and they also do your negotiations for your manufacturer rebates. That impact is kind of like a TPA. They’re processing claims, customer service, answering calls. They do some management on the retail network. In general, your generic dispensing rate’s really high. It was 93%, which is higher than the marketplace. But we cautioned against being too caught up in that because, you know, 53% of your cost is in specialty drugs. So, you know, we want to make sure that you’re managing the specialty drugs component of that. One other piece you guys do is called reference base pricing, which means that you set a– for a whole generic class, you set a price for those drugs, and as a state you’ll pay X for them. And if they take a different drug in the same class, the member picks up the difference. It’s not popular with PBMs to do reference based pricing. So in the new RFP, we recommended actually allowing vendors, they can bid that if they want to, but we’re allowing flexibility in that so that they can offer a different alternative. So the three main opportunity categories we recommended to look at, rebates jumped out as a huge component. And, you know, I know people don’t like to talk about rebates, but it’s a big component of pharmacy spend. So you guys, you’re paying about 11-12% of your gross cost. All our state clients in the marketplace is more like 25 to 35%. So there’s a spread there that’s just additional reimbursement for the same drugs that we’re hoping the procurement will allow you to get that reimbursement. We’re in that procurement, so we don’t have results back on that yet. But we estimated that to be somewhere between $25-50 million a year on the rebate spend. The specialty pharmacy side, you’re using a local specialty pharmacy, which we wanted to allow alternatives of that possibly. So in the RFP, we’re going to bid that and it looked like reimbursement on those is about 30% different than the marketplace. So that was also another opportunity. And the third place, third opportunity is really to have contract guarantees in place, which right now you have pretty much have no guarantees anywhere. And the marketplace usually has guarantees by, you know, whether it’s a generic brand, whether it’s a 30 day, 90 day, what kind of rebate you’re going to get– across the board, you’ll get guarantees in place. So we’re hoping to get that through the latest procurement. So those are three main areas. And then our final recommendation was really to market it, to put out an RFP. The key of the marketing was to be completely flexible. So this is EBD, your program. You guys can design it the way you want. So you can customize your formulary, customize your rules. The big components are to make sure we had the appropriate rebate guarantees, clearly defined what the the rebate pass through will be including manufacturers rebates, manufacturer admin fees all of the various components. We recommend looking at independent pharmacies differently, so there’ll be different guarantees for them. So when the RFP went out, there was a separate category for independent versus non independent. So that’s a recommendation. And then like I said before, the reference base pricing allowing bidders to either do that or not do it. But make it more of an option, not a requirement of the contract. So is there any question on those two sections, the medical and the pharmacy?
Rapert [01:11:43] We do have a question. And I’ve got– I want to ask on the specialty pharmacy you mentioned that you had. You said we use one? Do you happen to remember the name of that one?
Vieira [01:11:56] Pardon?
Rapert [01:11:58] The specialty pharmacy was mentioned that you use one.
Schatten [01:12:01] There’s not one right now.
Rapert [01:12:03] I thought you said there is one. You said there’s not one. Is that what you’re saying?
Schatten [01:12:07] There’s not one.
Rapert [01:12:08] Okay. Well, I misunderstood that when you said– I thought you said there is one.
Vieira [01:12:12] I could have said it wrong.
Rapert [01:12:15] That’s what I was– that’s reason I asked the question on that. Senator Hammer.
Hammer [01:12:21] Thank you, Mr. Chair. On the– you know, we battle PBMs all the time. And we’ve got state laws here trying to build a shield from some of their maneuvering. In the contract, what allowances are made or expectations or clarity is given of the expectation that our PBM laws, which may be different than another state, are enforced and are incorporated into the discussion of the contract that would be awarded.
Schatten [01:12:53] Your laws must be enforced, and, and they are aware of them. I mean, your laws are your laws, and they’ll have to work in that construct. Right.
Vieira [01:13:03] And you currently have a PBM, too, so you already have a PBM. So this is just allowing others to bid on it. And, you know, the goal was to do a real fair, open, honest procurement. And, you know, they know all the laws, and they see new ones every two or three weeks, I think that get passed. So, I mean, PBMs are aware of everything.
Hammer [01:13:22] All right. Well, there’s some concern coming across my phone from some. Just wanted that out there for clarification for the matter of record. The second thing is with regard– so they– so the local pharmacy– because if some of the local pharmacies– we’re a rural state– go away, it’s going to be a real inconvenience to, to some folks that are retired living in rural Arkansas. Did I understand you to say there would be something built into the contract or it’s already built into the RFP that, that at least gives some measure of protection for the local pharmacy, understanding free market and all that good stuff? So could you expand on that just a little bit without going too long on it, as far as whats going to be done for accommodating them?
Schatten [01:14:06] Yeah. So when we get guarantees and look at the reimbursements, we’re separating independents from the chains, so that it’s up to EBD, the state, how you want to reimburse those. So when we’re looking, when we’re going through a PBM RFP, we just want to see those things separately because at the end of the day, you can pay what you want to pay there. But as long as we can see them separately, we can do that analysis separately. They’re happy to do how you want to do it.
Hammer [01:14:40] Okay. Thank you. Thank you Mr. Chair.
Rapert [01:14:44] Okay. Senator Irvin.
Irvin [01:14:45] Yes, thank you, Mr. Chair. I had the same question you had on that specialty question, but is the dispensing fee part of the RFP or is that paid separately?
Schatten [01:15:00] It’s part of the RFP.
Irvin [01:15:02] It is going to be part of the RFP what we– so we have approved that though already through ALC. So that means that will just be part of the RFP?
Schatten [01:15:15] Well, well, whatever you’ve approved is, is what will be paid, right, if you have a certain dispensing fee. So when we go out and we do it, we’re asking for discount guarantees, dispensing fee guarantees, rebate guarantees on all these things. And we’re asking for them separately so that we can do an apples to apples comparison and not take into account the differences between those. You know, we don’t want it all rolled together because then we wouldn’t be able to pull those pieces apart.
Irvin [01:15:44] Right, but, but, but it’s all going to be paid through the PBM? It’s not going to be a separate– does that make sense? Is that correct? Jake’s shaking his head. I just didn’t know if they were getting different payments from different areas or if it was all going to be going through one.
Bleed [01:16:04] So the, the main thing that we contract right now for our PBM with is the network with the pharmacies. It’s that relationship with the pharmacy where they agree on how much they’re reimburse that pharmacist. The RFP that we have drafted and put out on the street has not yet been presented to ALC for approval. So it has not come to you all. But the reimbursement structure that we had in there is identical to our existing contract. And so, and that contract has gone through ALC.
Irvin [01:16:31] Okay. So it all come from the same place? And then–
Bleed [01:16:35] Yeah.
Irvin [01:16:35] Okay. Gotcha. And then quick question on follow up. Will the state laws that we have in place that deal with prior authorizations and those things apply also to the Medicare Advantage plans?
Schatten [01:16:54] I’m not sure.
Irvin [01:16:55] If you could research that, follow up with that.
Schatten [01:16:58] I will.
Irvin [01:16:59] That would be something very important that we would need to include in our RFP.
Schatten [01:17:03] Yeah, because they’re just under CMS regulation. But I will follow up with that.
Irvin [01:17:08] Right, but, but similar to the PBM legislation that we have worked hard to put in place, we also have extensive prior authorization legislation that we’ve passed in the state that needs to be respected in those medical plans.
Schatten [01:17:26] Yeah, it’s just CMS has legislation too, so I’m not sure how those two–
Irvin [01:17:31] Well, we would need an answer on that.
Schatten [01:17:33] Yeah.
Rapert [01:17:37] Okay. Proceed.
Vieira [01:17:40] Okay. So we’re going to go over to the clinical section and this will be fairly quick because, unfortunately, our clinician wasn’t able to be here. So I’m doing my best to summarize what we recommended. So we went, we went through and reviewed the wellness program in general, high level, and I think in general right now you get your screenings done, and there’s little actions taken, I guess, after that point. So I think the recommendation on the next page was to do more of a, more of a result based sort of approach, so more of a broader population health metric. So if you have the vendor have metrics that would be related to, you know, how your, how your population either gets healthier or screenings or etc.. So I think that was the major thing is to change the whole focus and have it be more results based. And that maybe if, you know, if you target into a certain population, you have metrics that track that population and there’s guarantees on the vendor that support that. So this was a high level review of the wellness. You know, I hit that good enough, but unfortunately I’m not a clinician. But she did look at it and I think we’re in agreement that needs to kind of take the next step. I think a lot of states did have that originally to just get your numbers and get your metrics. And now that it’s kind of like the next phase to use those to improve health. The biggest one I think that we focused on and a lot of states have been targeting and it’s not new to anybody is the the epidemic related to diabetes and the huge growth in diabetes across pretty much every state. So there’s a lot of point solution vendors out there now that are offering real solutions to that. So there’s, there’s in general, before they get diabetes, diabetes prevention programs that are fairly successful and then different approaches to diabetes management. There’s a lot of vendors out there now that have more targeted programs that have had very good success. A lot of those programs actually get their members to completely get off insulin. So there’s a lot of new programs like that. And we look to your diabetic population, success of the other programs, and the before and afters in savings, and we estimated that if you could get about 20% of your people to be engaged in these programs, you’d have somewhere savings between $10-14 million. That was on the diabetes piece. And then oncology, I know our clinician went through that during the pandemic a lot of the screenings have been missed. So an emphasis to get the age and gender-specific cancer screenings back on track and possibly do incentives for that, putting, you know, new programs in place for that and also doing– second opinions are now kind of like virtual. So there’s, there’s national oncology networks now and centers of excellence that you can tie into to get second opinions on cancers, which it seems like over the last few years we’ve seen that emerge in a lot of the states. So it’s kind of like a best practice to get a second opinion. That was on the oncology side. Musculoskeletal, I think this was your your second highest one behind diabetes. So a couple of getting in early on that for early interventions and getting into physical therapy and weight loss programs related to that. There’s a lot of virtual solutions out there now which allow people to, you know, do physical therapy on apps and other aspects like that. So I think looking at digital solutions was, I think, one of the major recommendations. There’s a lot of vendor partnerships as well with your local groups that she recommended you could get involved with. And then the last one was an onsite clinic. And this has been fairly interesting because I think the pandemic forced so much to be virtual that onsite clinics have really skyrocketed. And it’s not really– it used to be you’d have like a bricks and mortar location that would be where an onsite clinic would be. But now it’s like the way they’re all tied in, there’s like a, like almost like a hub and spokes approach. It actually gets into all the rural communities. So a recommendation really is to study that and to look at options for that because there’s a lot of emerging opportunity there. So that’s probably a weak discussion by me on the clinical side of it, but that was the general approach. The biggest, I think, was the diabetes program, and that’s something that I know that we’re going to be engaged or our clinician will be engaged with your committee to walk through opportunities in that. And I think probably the first couple will be educating in utilization of your current diabetes population and some statistics and looking at the marketplace opportunities, that kind of stuff. And then the last thing we looked at in our study was we just briefly got our communications experts to come in and do a brief review of your website, and they recommended some changes to it. I won’t go into all the details of that, but they reviewed everything and recommended some best practices, looked at what some sample larger states and clients are doing. And I know that EBD mentioned you guys were going through that right now. So you’re in the process of redesigning your website. So I think we were in sync with that.
Rapert [01:22:58] All right.
Vieira [01:23:00] I think we just have one final recommendation here and something Jill mentioned before. We recommended, like many other states have an actuarial note that accompanies bills that could have financial impact on the plan. I know in the past there’s been some changes to legislation where there were some unintended consequences. So we made that recommendation and I think there’s an RFP out right now for that service.
Rapert [01:23:32] Senator Hammer, do you have a question, sir?
Hammer [01:23:34] I do. Thank you. Going back to the point I raised about the PBMs and then Senator Irvin raised the point. In other states where you’ve implemented this and there has been a conflict between state law and federal law, whether that’s dealing with CMS, Medicare, whatever. Are you aware of any ongoing litigation where state law bumped heads with federal laws that would potentially come up as a result of the recommendations?
Schatten [01:24:03] I am not. I’m not. But let us follow up on that.
Hammer [01:24:08] If you don’t mind. Because I’m just saying to Senator Irvin’s point a while ago, if we’ve got state law and Medicare says this, but our state laws going to conflict with that, are we setting ourselves up for potential lawsuits? And if this has taken place in other states where you brought these recommendations, we’d like to know what their experiences are so we can kind of be aware what might be coming down the pipe.
Schatten [01:24:30] I mean, the truth is, part D is for everybody, right. So an individual can go into a part D plan. You have many in this state. All of your PSE member retirees are in an individual Part D plan now. So they would be under the same laws, but it would be under a group, under a group program.
Hammer [01:24:50] All right. Thank you.
Klein [01:24:57] So from the recommendations made in the report that was accepted in November, there’s been legislation. And on the forefront, we’ve got a new contract that just began in January. And the two main focuses now are what we’re currently working through, the PBM, and MAPD RFP. So we’re going to give you a status update on those. And then the next step is the feasibility of a diabetes management report. And so that hasn’t started yet, but as Ken mentioned, Joanna will be here and we’ll get started soon on that.
Rapert [01:25:36] Members, any other questions for the presenters from Segal? Seeing none, we thank you for your time.
Klein [01:25:45] We were going to go through the status of the RFPs.
Rapert [01:25:47] Okay. Are you going to do that? I’m sorry. I was trying to get you out of here.
Klein [01:25:50] We’re happy to skip it, but it’s only three slides.
Rapert [01:25:53] It’s a little addendum. Okay.
Slutzky [01:25:54] I’ll go through those quickly.
Rapert [01:25:55] All right. Well, I apologize. Go through them.
Slutzky [01:25:59] So, as we talked about, I’m going to take everybody through the status of the RFPs. We’re on Slide 37 on the monitor and if you’re following along in your packet. So the first couple of slides, I want to talk about the overview of the process that applied to both the MAPD and the PBM RFP. And then we’ll go into more detail about each. But again, I’ll go through that pretty quickly. So to start off, it was a very collaborative approach between the procurement office, the Department of Shared Services and the Office of State Procurement, EBD and Segal to work together. So we worked together to develop initial proposal drafts, which included a technical and cost proposal, and all other items related to analysis that we wanted to see to make sure any kind of disruption with respect to providers, with respect to formulary disruption were going to be mitigated. So we provided those drafts, worked closely with the other organizations, EBD and OSP, and finalized a draft that we really, finalized drafts that we really thought would be most optimal to your members and meet their needs the best. As part of the process Segal also developed data. We worked with your incumbent carriers. We worked with EBD to create a data extract to go out with the RFP because the cleaner and the more accurate the data is, the better that the carriers can analyze your plans and provide more competitive bids and really understand how your plan functions and what the claims really look like. So as noted at the bottom of Slide 37 and as we’ve said here many times today, we do have two RFPs that are out in the market. The first is one for Medicare MAPD Services for the group sponsored National Passive PPO plan. And that is for Medicare eligible retirees and Medicare eligible dependents of retirees. And the second RFP that is out in the market is for PBM services. So moving on to the next page, once each solicitation was ready and ready to be placed in the market, the state procurement website AR Buy had the appropriate RFPs posted. A bidders’ conference was held. It was led by, excuse me, the Office of the State Procurement with EBD and Segal participating. And there is also a question and answer period that’s part of the RFP process, and this allows the prospective contractors to ask questions. We take those questions back, we confer with each other, and then we develop responses to questions and provide those to the bidders. Segal managed an NDA process, which is just a non-disclosure agreement put in place to make sure that the data, your data that you’re releasing, that we are releasing with the RFP is protected. So we manage that process. Nobody received the data until there was a fully executed NDA in place. And then once the, once the process was closed, bids came back and we received from all prospective contractors a technical proposal packet, a cost proposal packet and any of the required forms or analyzes that we had asked for. And then we reviewed each of those packets. So on slide 39, I want to go into a little bit of detail specifically on where we are in the MAPD RFP and then we’ll do the same for the PBM RFP. Before I do that, does anybody have any questions about the overall process that I’ve described so far? Okay. I’ll keep going. So again, on Slide 39, presenting the two MAPD and RFP differently because the RFP are in different places. So with respect to the MAPD, the bids have already come back. Evaluators and with help from Segal MAPD experts, including Kirstin and myself, we reviewed and evaluated the technical proposal packets that came in and we gave our feedback to OSP and EDB with respect to what to look for, what were red flags, what were things we wanted to see. The evaluators, as described in your procurement process, completed an individual score worksheet. And then the next step was to hold interviews. And during those interviews, specific questions prepared in concert with Segal, EBD and OSP were asked of each of the carriers in the MAPD process. And then finally there was a final consensus meeting and final scoring was determined and recorded on the technical proposals as well as the cost proposals. Where we are today with respect to the MAPD is that we’ve identified strong prospective contractors, and discussions with those contractors are currently underway. And then once those discussions will be wrapped up, the details, the draft documents, those will all be finalized. They’ll become part of the contract. And then Segal will assist with negotiations, will assist with contracts. We’ll get those questions answered with respect to state law, and if the, if EBD and the Office of State Procurement is interested, we can assist with implementation of the plan as well. Okay. Slide 40 is just a timeline of the MAPD RFP. If you look at the bottom third of the slide, that’s where we are. We’re between the discussion kick off and the finalizing discussion step. We anticipate that the discussions will be finalized June 1st, and then ideally the contract will be awarded on June 15th, 2022. And that will allow ample time to do the implementation, to do a lot of the education that we’ve been talking about so we can really educate the retiree, or the carrier can really educate the retirees and get them comfortable with how the MAPD plan functions and that option. And then the last slide for today is a timeline of the PBM RFP. As I said earlier, this is in a different spot. We’re not quite as far along yet on this. The RFP went out about a month later than the MAPD RFP, and that’s largely because a PBM RFP is just very complex. We wanted to make sure we incorporated all the recommendations that we talked about earlier. So if you look at the top half of this slide, we have completed answering questions that were posed by the prospective contractors and now we are waiting for the proposals to come back. And those are due on June 10, 2022. And then the next steps list out, you know, what I had talked about earlier in the process. And again, ideally the contract will be awarded for the PBM RFP on August 15, 2022. Does anybody have any questions?
Rapert [01:33:44] Members, do you have any questions for the presenters? We don’t see any. Do you have anything else you’d like to state?
Vieira [01:33:53] Thank you.
Rapert [01:33:54] Thank you for your time and your work and your presentation, for answering our questions. Members, now I have Jake Bleed who is going to come for discussion. Actually two contracts that do need action and review, if you’d come to the table. And Barbara, did they get me those meeting dates that I talked about? Okay. Thank you. All right, sir. You’re recognized. I guess, formally just state your name and who you are for the record.
Bleed [01:34:37] Jake Bleed, Employee Benefits Division of Department of Transformation and Shared Services.
Rapert [01:34:41] All right, sir. You’re recognized.
Bleed [01:34:44] So, under the legislation that was adopted at the end of the ’23 session and then– excuse me the ’21 session, and then again here during the fiscal session, a variety of laws were adopted which changed the governance structure for the Employee Benefits Division. One of those laws transferred responsibility for decision making and approval of our actions over to the Board of Finance. That law then also applied some pretty broad language, stating that anything the Board of Finance really does or commits to do needs to come before the Arkansas Legislative Council for review. That includes the review of contracts. One of the things that Employee Benefits Division does is review or manage a number of different contracts. We’ve included an attachment to the quarterly report we sent over to the committee here a few, a month or two ago detailing just exactly all those different contracts. There’s big ones. There’s little ones. There’s everything in between. Two of those contracts are up for you all for approval for an extension. They are extensions of existing RFPs. These contracts both expire on June 30 of the current year. The first is an extension of our contract with CYC or Optum. This is the provider of our health savings account and our flexible spending account provisions which are provided to our members. We provide these pursuant to the law adopted a few years back. The administrative fee on these annually is about $125,000 a year total. So it is not one of our larger contracts. They are not seeking any change in the contract and simply wish to continue processing HSA and FSAs for our members going forward. And the second one is the Mainstream Technologies, which is our main I.T. provider. Mainstream operates the portal through which our members enroll and receive benefits. Most of our members, about 60% of our members are, of course, public school employees. Public school employees are not employees of the state. So we operate outside of the state network in a lot of different ways. Mainstream is integral to what we do. Our portal is constantly being worked on and evolving with different federal or state requirements. So this is an extension of a contract that we have in place with Mainstream. We spend about, just a little over $2 million a year on that contract. They are seeking an increase of those expenses from $125 an hour to $130 an hour. This is the first increase they’ve requested in some time. I was not happy about the increase, I’ll tell you that. But I felt that we could afford it because one of the things we’ve done internally is we’ve really worked on our staff training. We discovered that we had a whole lot of folks who were calling the consultant when they needed to really just be doing their job. By doing that, we reduced the amount of billable hours we were getting. So although we are getting an increase in this rate from Mainstream, the amount we are paying for Mainstream projection for the year is actually significantly less. And with that, I’ll answer any questions.
Ingram [01:38:24] Jake, back to the first one, the administrative fees. Would it be helpful, do you think, to the committee and to you all to break all these things down on a per member per month basis, so that we’ve got benchmarks that we can look at to see that our fee structures are, you know, fair.
Bleed [01:38:43] Sure. And so the Connect Your Care or the Optum $1.95 per member per month for the FSA and $1.75 per member per month for HSA. I don’t have in front of me how that compares nationally on the market, but it’s an extension of what we got when we bid.
Ingram [01:39:04] Yeah, offhand, those numbers sound in line, but that’s great. I think if you’ll include these with the report, that will help bring, instead of just big numbers. Thank you.
Rapert [01:39:19] Members. Do you have any other questions on these two items? Seeing none, I have a motion from Senator Sample to review these items. Is there a second? I have a second. All those in favor say aye. All those opposed no. The items are reviewed. And thank you very much.
Bleed [01:39:42] Thank you.
Rapert [01:39:43] Anything further from you, Jake? Nothing else from you, Jake.
Bleed [01:39:51] Thank you.
Rapert [01:39:52] All right. Thank you very much. Members, the last item is suggested meeting dates. And I wanted to– you’d just given me right here– do you have those? I don’t see those in front of me, so. They’re not there. So, members, do you have a copy of the meetings in front of you? I don’t have one for the chair, but. I do see that. And I just asked, by the way, for them to give me those dates on a bunch of them. And so you’ve got a– the June 15, the only thing that they said was the State and Provincial Trends in Energy and Environment conference is the 9th through the 12th, and then as Sen. Ingram notes, the SLC Oklahoma City and then NCOIL starts and ends there in Jersey City. And you got August, doesn’t look like an interruption there. September, that might could be an interruption for those of you on the Energy Council, because that’s September 15-18. And I don’t see any other issues there. So members on that meeting there in July, Representative Ferguson obviously is now an officer at NCOIL. I’m ending my tenure there. And so you’ve got with SLC and with NCOIL, what do you prefer to do on that? We’ve got a monthly meeting schedule, so I don’t know if we want to– what kind of leeway do we have, Barbara, on that? Well, we can meet on an alternative date? Yeah. Senator Sample mentioned meeting another time during the ALC meetings that we’ve got so. Well, this is a working session here. Let’s figure this out. Monday on that– that would be the Monday of that week? But we need– but we have to meet regardless? No? So we could just cancel the July meeting? Is that what you’re saying? I guess we’ll wait till June to see what happens, but I know some of these members will be scheduled to leave. So staff, just get with us if there’s a solution and we’ll communicate that to everybody. But I know that those two both probably have several people attending. Members, are there any other questions or issues for the committee before we adjourn? Thank you for your time and your efforts. We’re adjourned.