While advisory groups are developing recommendations for broader changes, the administrator of the state’s health-insurance plans for teachers and other school employees told lawmakers Monday that steps have already been taken to reduce the amount the plans pay for medical and drug expenses.
Bob Alexander, director of the Department of Finance and Administration’s Employee Benefits Division, told legislators that the division last year hired a new company, American Health Holding Inc., to handle its case management for patients with large medical bills and began requiring hospitals to notify the company when someone covered by one of the plans is admitted.
Dwight Davis, director of the Evidence Based Prescription Drug Program at the University of Arkansas for Medical Sciences’ College of Pharmacy, said changes to the plans helped reduce prescription drug costs for teachers and state employees from a monthly average of $80.46 per covered employee last year to less than $60 so far this year.
At a meeting Monday of the State and Public School Life and Health Insurance Program Legislative Task Force, the chairman, Sen. Jim Hendren, R-Sulphur Springs,took note of the drop in drug spending.
“We need to figure out how we fixed the prescription program and do the same to the medical side,” Hendren said.
The task force, which is researching possible changes to the plans, was created last year during a special session in which the Legislature approved spending $43 million to prevent a large premium increase for public school employees.
The state funding, school district contributions and premiums are expected to cover claims this year. Next year, however, the plans face a projected $71 million gap between premiums and medical claims unless premiums are increased, benefits are cut or additional money from the state or school districts is allocated.
A report by the Division of Legislative Audit, presented to the task force Monday, found that the plans took in $276.3 million in revenue in the fiscal year that ended June 30, 2013, while paying out $280.2 million in claims.
Some legislators expressed alarm at the figures.
“To say this is shocking is an understatement,” said state Rep. Allen Kerr, R-Little Rock. “This is catastrophic.”
The Legislative Audit report also examined the plans’ case management and prescription drug programs.
It found that the Employee Benefits Division didn’t refer three of the six patients with the largest medical claims in 2012 for case management in a “timely manner.”
It also found that the division’s former Executive Director Jason Lee delayed or limited the Drug Utilization Evaluation Committee’s consideration of some recommendations from the Evidence Based Prescription Drug Program.
The committee recommends to a state board which drugs should be covered by the plans.
“The process to determine and limit the DUEC agenda may result in more efficient Board meetings, fewer member complaints, and greater confidence in the plan,” the report says. “However, cost-savings are potentially lost due to the delay or lack of implementation of cost saving recommendations as well as a lack of transparency before the Board.”
Lee resigned in June 2013 for a job with a private insurance company. Alexander, who took over as director in September, said he doesn’t limit the drug evaluation committee’s agenda.
He said he implemented the change because “they just gave me the agenda, and I didn’t know there was any other way to do it.”
Alexander said some of the drop in drug expenses is due partly to employees switching from the gold plan, which has no deductible, to the cheaper bronze plan, which has a deductible of $2,000 for an individual or $3,000 for a family.
The cost-saving measures implemented last year included limiting the coverage of testosterone treatment and requiring prior authorization for compounded drugs costing more than $200. The plans also began requiring employees to pay more for several expensive drugs that have cheaper equivalents.
Last year, Alexander convened a group of pharmacists to study ways to further reduce the plans’ drug costs.
The options being explored include adopting a more restrictive list of covered drugs and negotiating prices with drug manufacturers.
The State and Public School Life and Health Insurance Board’s benefits subcommittee is also studying possible changes to the teachers plan. The board is expected to set rates for 2015 by July 1.
Arkansas, Pages 9 on 02/25/2014