The state Board of Finance on Friday approved a proposed state contract with UnitedHealthcare Insurance Co. to provide Group Medicare Advantage with prescription drug coverage for eligible retirees in the state's health insurance plans for public school and state employees.
The state's Employee Benefits Division will contract with the firm to offer Medicare Advantage services to eligible retirees in calendar years 2023, 2024 and 2025, and additional years can be added upon conclusion of the initial three-year term, said Jake Bleed, director of the state's Employee Benefits Division. UnitedHealthcare Insurance Co. is one of three companies that submitted bids for the contract.
There are about 16,000 retirees in the state's health insurance plan for public school employees and about 14,000 retirees in the state's health insurance plan for state employees, he said.
Retirees, who are 65 or older or who are otherwise eligible for Medicare, will be automatically enrolled in the Medicare Advantage program and will be given the opportunity to opt out of Medicare Advantage and retain existing benefits, Bleed said in a memo to the state Board of Finance.
The benefits offered under Medicare Advantage will mirror existing benefits, but also offer additional services including coverage for vision, dental and hearing and other benefits that are not currently provided to retirees, he said.
"We feel like it is a very rich program for them to consider," Bleed told the board of finance.
The Medicare Advantage program will offer significant savings to retirees and the state, he said.
UnitedHealthcare will work statewide to educate retirees and health care providers on the program and ensure all retirees have an opportunity to make an informed decision, Bleed said.
The proposed contract with UnitedHealthcare will be governed by stringent performance guarantees that the Employee Benefits Division will oversee and stipulates minimum amounts the vendor must spend in providing benefits to members, he said.
In calendar year 2023, the firm will be paid $165.31 for each Medicare Advantage retiree per month in the state employees' health insurance plan and $85.31 for each Medicare Advantage retiree per month in the public school employees' health insurance under the proposed contract, according to Bleed's memo.
The state will cover most of the cost with the retirees covering the rest, Bleed said.
In calendar year 2024, the firm will be paid $170.31 for each Medicare Advantage retiree per month in the state employees' health insurance plan and $90.31 for each Medicare Advantage retiree per month in the public school employees' health insurance plan, Bleed said in his memo.
In calendar year 2025, the firm will be paid $175.31 for each Medicare Advantage retiree per month in the state employees' health insurance plan and $95.31 for each Medicare Advantage retiree per month in the public school employees' health insurance plan.
With 50% of the eligible retirees enrolling in Medicare Advantage in 2023, the state's health insurance plan for state employees could save $25.7 million and the state's plan for public school employees could save $9.3 million, Bleed projected.
With 50% of the eligible retirees enrolling in Medicare Advantage by 2025, the state's health insurance plan for state employees could save $30.4 million and the plan for public school employees could save $10.1 million, according to Bleed's memo.
Board of Finance member Andrea Lea, the Republican state auditor from Russellville, said "this sounds too good to be true." But Bleed said the federal government provides significant subsidies to companies offering Medicare Advantage coverage.
The Medicare Advantage program has been in effect since 2008 and has been successfully adopted by many states, he said.
In response to Lea's questioning in March, Bleed acknowledged there is skepticism among some retirees that "this is too good to be true." Last year, the Segal Group consulting firm recommended to the Legislative Council that the Medicare Advantage benefits for the state and public school employees' plans should be set, so the benefits are at least equivalent to the current benefits, and that the prescription drug coverage for public school retirees is reinstated. The state should structure contributions to incentivize the Medicare Advantage program so the lower premium yields savings for both the state and retirees, according to the consultant.
The state should expect savings of at least $34 million to $41 million for the state employees' plan and "we would expect [this] number to grow during a competitive bid," the Segal Group said last year. The consultant said reinstating prescription drug coverage to the public school employees' plan for retirees will likely be cost neutral during a competitive bid.
SHARE OF COSTS
In other action, the state Board of Finance on Friday adopted a policy aimed at more fairly and accurately spreading the increased cost of health insurance across members of the state's health insurance plans for public school employees and state employees, and the state.
The policy is aimed at preventing fiscal crises and meeting the annual challenge of funding employee health insurance in a planned and organized manner, Bleed said in a memo to the finance board.
Under the policy, the state will adjust premium rates to reflect the actuarial risk that individual members pose on the plans and ensure that state contributions are uniformly allocated across the plans, he said.
Bleed said the state's share of costs is not consistent across the health insurance plans and are comparatively low to neighboring states. On average, the state pays about 65% of premium rates for its employees, he said.
Adopting a higher uniform rate of 80% of the premium rate will require time to accommodate the resulting increase in state funding, he said. The policy for the state to cover 80% of the cost and employees to cover the other 20% would be implemented in the state's health insurance plans over the next five years, he said.
The state Board of Finance also voted to eliminate the monthly wellness credit of $25 per month offered to members of the plans and the $25 monthly contribution for nonparticipants in the wellness program.
Instead, the Employee Benefits Division recommends that "all employees begin transitioning to new premium rates ... as if they received the wellness bonus," Bleed wrote in his memo to the state. "In other words, the minority of the employees who do not meet wellness and are paying the additional $50 fee would no longer be required to pay the penalty in 2023. While this would impose additional cost on the plan, this cost will be less than the cost of wellness testing and will greatly simplify enrollment and eliminate bureaucracy for our members." Bleed said the plans are still encouraging members of the plan to go to the doctor.
"We are not proposing the elimination of the wellness program." Bleed said he expects the Employee Benefits Division to propose rates soon for the members of the health insurance plans for the 2023 calendar year