State and Public School Employees Life and Health Insurance Board Meeting
Minutes
June 21, 1:00 p.m.

Members Present					Members Absent
Preston Means					Dr. Bobbie Davis
Shelby McCook					Robert Watson
Joe Musgrove					Renee Mallory
Nancy Sheehan					John Mattox
Darrell Montgomery
Charlie Campbell
Vance Strange
Dr. Joseph Thompson

	Sharon Dickerson, Executive Director, Employee Benefits Division.

Others Present
Pat Minyard, Ashli Davis, George Platt, Leigh Ann Chrouch, EBD; Walt Morrison, UAMS; Bryan Melgrum, John Glassford, John Ryan, NovaSys; Barry Fielder, NMHC; Roy Lamm, Francis Browning, Rob Thorpe, QualChoice; Nicola Patterson, Julie Marshall, Eddie Freyer, USAble; Larry Carnes, FBMc; Ron DeBerry, Barbara Melugin, David Bridges, BCBS/HA; Don Barnes, Attorney General’s Office; Marc Watts, ASEA; Richard Brittain, DHS; Charles H. Heasellbein, AHTD Retiree.

Call to Order
Meeting was called to order by Preston Means. 

Approval of Minutes
A motion was made by McCook to approve the minutes of prior meeting.  The motion was seconded by Vance Strange.  Motion carried.

Financials presented by Leigh Ann Chrouch
There are only two school districts past due for May.  On the State side we had no past dues.  There were no questions regarding the financials.

ASE Active and All Retiree Rates by John Bauerlein
State employees are still in the black; the positive aspect is that we put $12 million of surplus allocated in the program.  We planned a million dollar a month loss but we are not seeing that yet.  There is a low rate increase for active employee group.  

On the school side the income was $500,000 for the month, and for a 7-month period we had $10.7 million of income for the whole period.  That is very positive, with a $16 million surplus.  This is a very healthy position for the school employee plan. Dickerson reminded everyone that the school employees utilize their benefits in the summer when they are out of school, so that number will decline this summer.

Means asked if we need to reassess rates for the next year due to the public school employee reserve accumulating.

Bauerlein reported the results being are positive for the public school employee and that is what we wanted because we are getting another $61 per member under the new legislation.  If it continues the way it is we don’t need to change anything.   

Charlie Campbell asked what would be a reasonable surplus.  Bauerlein stated that you want to target a surplus amount equal to the about one month worth of claims.  We are looking at about $16 million for the monthly claims volume for the school program.  If we start getting over $20 million we should start thinking hard about not letting it grow too much.
  
According to Means, one of the issues that led to the Legislature adding additional contributions for school employees was that it was a sick plan getting sicker and the influx of additional contributions would allow us to get premiums down where we were competitive with healthy, young, single premiums.  The goal is to get an influx of younger, healthier members in that group and be able to drive costs down.  If that happens, we really have the potential for building those reserves a lot quicker

QualChoice Disease Management/Attorney General’s Rep Opinion
Means suggested that since Don Barnes from the Attorney General’s Office was in attendance we would go to Committee Reports and get his opinion on the QualChoice Disease Management issue. 

Ms. Dickerson reported she had been in touch with QualChoice and had dialog back and forth and they committed to provide a disease management program for members transitioning in from TrestleTree.  She stated she had sent to Rob Thorpe the members with TrestleTree.  The total number is over 300, but not all are active in the Disease Management program.  She is hopeful this transition will be achieved in a relatively brief period of time.  Don Barnes was asked to state his opinion and he referred to his letter to Ms. Dickerson in which he stated that from the material provided to him it did indicate that QualChoice did indeed agree to provide disease management services in their proposal.  He is also of the opinion that we can collect some amount for their failure to perform the contracted-for-service, but the amount would be speculative at this point.  And, thirdly, he could not determine from the information provided him at this time whether this breach of contract allows EBD to terminate their contract with QualChoice.  He continued by stating we would have to analyze the magnitude and cost of their failure to perform in relation to the entire contract.  But suspects the facts, if fully developed, would support this action based on material breach of contract.

Election of Officers
Legislation requires only two elected positions.  After some discussion on those being considered for Chairman and Co-Chairman it was determined they would like to continue with the same officers.  Means then opened the floor for nominations.  Dr. Thompson nominated Preston Means as Chairman and Dr. Bobbie Davis as Vice Chairman.  Darrell Montgomery made a motion to close nominations.  Dr. Thompson seconded the motion.  Motion carried.  Means thanked the board members for their vote. 

Board Schedule
Dickerson suggested that we change the meeting dates to every other month, the second Tuesday of the month is currently that date that we meet, but we can make changes to accommodate schedules. At this time there is no need for a July meeting. If a situation arises a special meeting will be called.  Everyone was in favor of this change, and possibly later going to quarterly meetings. The regularly scheduled August 9 board meeting may be changed after a new calendar is  sent out polling board members for the desired week day for these meetings.

Medicare Retiree RFP, by George Platt
George Platt headed up the evaluation process of the ARHealth RFP for Retirees and their dependents.  He briefed the Board that the results, although still needing to be confirmed by procurement, showed that EBD would be partnering with Health Advantage to manage the ARHealth program and to further explore self-administration.  This program will merge the state and school Medicare retirees and their dependents into one plan consisting of a Medicare F-type plan for the retirees and an HMO-type plan for dependents.  Dickerson stated that the final numbers were not yet available and there would be no presentation.  She asked that they recognize the hard work performed by the evaluation team consisting of Platt, Leigh Ann Chrouch, Ashli Davis, Shelby McCook and Louise Mann.  Dr. Thompson asked how many proposals were submitted and was told there had been four – Health Advantage, Novasys, QualChoice and United.

McCook made a motion that the Board approve and accept the results of the evaluation of the submissions as performed by the Evaluation Committee and submitted to the Office of State Procurement.  Montgomery seconded the motion.  Motion carried.

Rates - by John Bauerlein
This is a first for the subsidy approach for the retiree side.  We have had out there for a while a 75% subsidy for employee only active coverage, whatever is left over is what we allocate toward dependents.  We have been hovering around 75% active, just over 50% for dependent coverage.  On the retiree side we have a new 60% subsidy for retiree only, and 50% subsidy for dependent cost.  The same subsidy for pre-65 Medicare eligible and non-Medicare eligible but the rates are different.  For Medicare eligible the rates are somewhat lower.  The state contribution is $320 for budgeted position, an increase over where we were with subsidy 2005 rates with $280. The other new funding is the $3.2 million Part D subsidy.   You will continue your 10-25-50 drug plan, and file for the subsidy. Applications are due the end of September.  That money will go back into health care affordability for the retirees. 

We are solidifying our rate structure, at the same time a golden opportunity to make this happen while not having a hit on the retirees in the process.

Also, to qualify for the $20 Health Risk Assessment credit you have to return the questionnaire and be a non-tobacco user. 

Next, the retiree non-Medicare eligible is where the PPO had a significant decrease in rates.  There are not many actives and the retirees are subsidizing the actives, so we quote them separately.  

AR Health is on par with the PPO, lower than the HMO.  It is voluntary for retirees not Medicare eligible, and for those who are dependents of a retiree over 65 Medicare eligible it is mandatory.  Dr. Thompson reiterated that most non-Medicare eligible retirees will see a reduction in premiums.  Means pointed out the contribution for the state employees are not related to any mandated legislative action, it is strictly administrative.

Dr. Thompson wants to advertise these lower rates so that we can get more healthy people in the Plan.  This is primarily for the schools. Thompson suggested press releases through July, talking about the legislative action reducing the premiums for public school employees.  

Bauerlein continued discussing the rates, pointing out that ARHealth fills in the gap between Medicare and the plan.  The current premium for retiree Medicare eligible only drops slightly.  They would not be enrolled in Part D, but would retain the current state drug program.  The school and state retirees are under one rate structure under ARHealth.
For comparison purposes, Geurtsen stated a survey showed the HMO 2006 rates would be about 13.5% higher than they currently are for 2005 in the southwest – Arkansas, Texas, Arizona, New Mexico.  Rates for the HMO 2005 over 2004 were 13.4%, and it was 19% for 2004 over 2003.  Dickerson stated that we are doing well when you compare these numbers. 

McCook on behalf of Benefits Sub-Committee moved that state active and retiree rates be approved as submitted. It was clarified these are the base rates without the tobacco load.  Sheehan seconded the motion.  Motion carried.

The tobacco issue was reintroduced by Darrell Montgomery.  Means wants it to be a separate issue.  It was clarified that the rates were approved without the tobacco discount.

PSE Retiree Rates
The public school rates become effective September, 2005.  We have determined the PSE retirees have changed their plan (Medicare Part D) mid-year, becoming effective January 1, 2006, extending the coverage from October 2005 to January 1, 2006 with the current plan.

School retirees are paying a substantial premium due to drug coverage.  For the Retiree Medicare eligible only the premium is $327/mo.  We are removing drug coverage and the monthly premium for health coverage will go to $49/mo. and they are on their own for Part D, an estimated $35/mo. 

Dr. Thompson reiterated the need to communicate to the school retirees a new risk they did not have last year.  Not anywhere equal to state employees where they have drug coverage.   Musgrove stated we do have an obligation to explain difference and risks.  Dickerson assured the Board that each individual will receive a letter and the information will be included in the newsletter, and they will receive a Guide to Enrollment.  Vendors will be sending out information as well.  There will be three separate mailing direct to individual homes.  Means wants it in clear verbiage.

Bauerlein stated there is still problem with early retirees.  All we can get them is $79/mo. of subsidy.  It is an affordability issue.  Dickerson stated she had spoken with one of senators called regarding the school retiree issue he asked how much money is needed to put the PSE retirees on the same benefit plan as the ASE retirees.  He said it he would like to address it in the next session.   Means stated the public school early retirees are basically seeing some increases in their premiums.  The over-65 school retirees have reversed positions.  They were paying a lot of money for not much.  Now they have been moved around so that their premiums are much more in line with the benefits.  

McCook made the motion was made to adopt the public school retiree rates as presented. Montgomery seconded.  Motion carried.
With reference to the $20 tobacco discount, Dickerson stated we are limited in the number of fields available in payroll deductions.  We do not have the options of $10, $20 or $30.  Dr. Thompson reminded the Board made a strong decision about a year ago to move in this path. He continued by saying smokers in a health plan cost $1600/year per member more than non-smokers, $133/mo.  We want to look at our experience so that we can get an exact amount.  We are raising everyone’s premiums and offering a discount for non-smokers, not penalizing smokers.  Asked what the easiest is administratively.  Dickerson replied that one dollar amount would be easier.  We cannot have two dollar amounts.  If we are going to have HRA discount and a tobacco load, it needs to be the same amount.  Platt clarified that if you are a smoker and fill out the HRA, you do not get the benefit of the $20 credit.  If you refuse to fill it out and are a non-smoker, you do not get the $20 credit.  It is a limitation by all the payroll systems.  Theoretically, you can add as many levels as you want but it would a major impact on the volume of the various payroll systems. Platt went on to say he would ask you to try and keep it at just one level per employee, whether they smoked or whether they completed the survey.

Charlie Campbell made a motion to approve the $20 tobacco discount in the 2005-2006 ASE rates.  Dr. Thompson seconded. 

There was some discussion about the reason for the credit – are we trying to get them to quit smoking or is it to compensate for the cost to the Plan?  Musgrove replied that primarily is to compensate Plan for cost.  His suggestion was to increase the tobacco discount.  As a pool, smokers cost the Plan a lot of money.  In response to this statement, Dr. Thompson pointed out that Musgrove was not on the Board at the time they made the decision, but originally we were doing this to make people aware and reward them to quit.  If we were going to do the other, which is to compensate the Plan, we would use an actuarial cost of what smokers cost.  And that would be $133/mo. charge.  We are not doing that.  We are using a nominal amount to raise people’s awareness, and hope to get them to engage in the services available.  Five years down the road we may move to the compensation factor.

McCook asked about the school district plan.  Dickerson stated that it does share the $10 HRA built into it this year.  This is the first year for the schools.   

Dr. Thompson made a statement as a member, not the Board, that the payroll systems need to be able to handle multiple discounts next year.  You have 12 months to make that happen.

Campbell feels there are more global issues that are on the table.  He stated “When we looked at various lifestyle modifications we needed to address, it was generally agreed that tobacco was the first one to start with.  I made the motion because I have been involved in health care management, and unless we do something to address lifestyle modification over the long-run, we are going to continue to pursue a method of either lack of control, or it doesn’t work.  We can go back to the Legislature and ask them for additional money, we can accept below 20% inflation, and we have reached the point in health care we get excited when we are talking about below 20% inflation.  The reason I made the motion to pursue this is that this Board has gone for a period of time saying we buy into the concept of adopting strategies to support lifestyle modification, when there is overwhelming evidence that these lifestyles are detrimental and are bankrupting health-care delivery systems.  We’ve gone through tobacco programs, we’ve reached the point where now with all the surveys, all the opportunities for these individuals to address that lifestyle modification, if we don’t do this then we need to come up with some other strategy, which I believe does not exist out there, to try and address this over the next two years, or five years, or ten years.  If we don’t the health-care delivery system as we know it in this country is going to collapse.”

Strange referred to the Surgeon General’s statement on cigarette packages, and stated we will have to do something more significant.  The pocketbook is probably the best place to hit.

Dr. Thompson asked Dickerson if it is impossible to have three different incentives this year.  Dickerson asked for one year to work on it.  There continued to be discussion on ways to set the payroll systems up to accommodate multiple deductions.

McCook moved to amend allow $10 / mo per member for completion of HRA, and additional $10/mo. applied to any household that has at least one smoker, and to include direction for computer people to address computer system issues before next meeting

There was a sub-motion by Dr. Thompson to add per adult member a health discount of $10 for completion of Health Risk Assessment and $10 discount for per adult member non-tobacco user.  If not possible in all systems, then a $20 discount for non-smoking status.  McCook seconded. Approved

McCook recommended that Dickerson write to all the payroll system directors and ask if they can accommodate the additional payroll deduction for the tobacco discount. Thompson seconded. Approved

Committee Reports, by Sharon Dickerson
The Board requested a comparison of service between Corphealth and the State Health Department Tobacco Cessation Program.  Dickerson reported that they have looked at both programs and feel the Health Dept is moving in the same direction as CorpHealth, but not there yet.  At this point, June 21, the program with Corphealth is better than the State Health Dept.  Since the Health Department is moving in that direction, what we have to do is look at the quit-rate and look at the cost. Both programs are similar.  We will continue the same benefits through the Health Department.  

CorpHealth has incorporated an obesity plan into their program.  Means mentioned that the Arkansas Health Department originally was not willing to partner with us.  Now they have a low participant level and are coming to us to help get their number up.  He asked where we are contractually.   Dickerson said that it is an annual contract and is renewable in October.  We could terminate this portion of the contract.  

McCook made the motion that we ask the State Health Department for grant money available to fund our tobacco cessation program.  Montgomery seconded.  
Motion carried.

Dr. Thompson made a motion that in lieu of a negative answer that we continue with current structure unless we have replacement funding from the State Health Department.  Seconded by Strange.  Motion approved.

DUEC, by Sharon Dickerson
Dickerson reported on the rebate issue.  She reported the without the rebates the Plan would stand to lose an estimated $355,000/year.  Dickerson suggested that we put Welbutrin XL and Paxil CR back on 2nd Tier. 

Campbell commented that he did not approve of bundled rebates.  Means agreed with Charlie’s statement and stated we need to get away from bundle rebates.  At some time in the future we need to address this issue.

Dickerson discussed Nexium – the Committee recommended that the Plan pay up to $.90 a tablet ($27.90 for a 31 day supply) and the member pay the remainder.  The over-the-counter Prilosec $5 co-pay program will continue.

Also, Dickerson stated the Pharmacists’ Generic Incentive Program was discussed and it was decided it was best for the Plan to continue to pay the pharmacist to continue to work for the Plan by dispensing generics, thus allowing the member to obtain the generic at the $10 co-pay.  It was agreed to continue the OTC Prilosec $5/member co-pay, and keep the option of Omeprazole at the $10 co-pay in the event supply issues resurfaced.  

Means discussed the $50 deductible, and the fact that you go to the 2nd Tier and it cost us more money.  

Musgrove made a motion to adopt these recommendations.  No discussion. Motion seconded by Campbell. Motion approved.

Feasibility Study Update, by Milliman
Bauerlein introduced Andrew to discuss the preliminary Feasibility Study.  His report estimates the need of an estimated 187 to 237 employees for EBD to implement self-administration based on Milliman's national standards.  Some of these positions already exist in other state agencies and would not result in new staffing requirements.  Andrew pointed out that this estimate was very close to the original estimate made by the EBD management staff back in March 2005.  It is estimated that the corresponding per member per month administrative cost would range from $15.56 to $20.03 resulting in a financial savings of 2.3 to 9.3 million dollars per year.

In reference to the Payersoft benefit administration system, Andrew discussed that not all options are being used and a full system analysis would be required to determine if they would fully meet the need.  He pointed out that outsourcing portions of the operation is always an option.

Strange asked if office space was taken into consideration. Andrew replied in the negative.

Directors Report , by Sharon Dickerson
The Quality Committee and new DUEC will try to meet in August.

No other business to discuss.  Vance Strange and Marc Watts expressed their appreciation for all the email information.

Meeting adjourned.