Board decides to hold steady on health insurance premiums for public school, state workers

Health insurance rates for public school and state employees will stay the same next year, for the second year in a row, a state board decided Tuesday, despite a projection by actuaries that state employees' rates will need to rise by double digits in 2020.

The State and Public School Life and Health Insurance Board also voted to lower the deductibles for the school employees' plans, which have more reserves built up than the state employees' plans and aren't expected to need a rate increase until at least 2021.

Chris Howlett, director of the Department of Finance and Administration Employee Benefits Division, said he doesn't think the state employee plans' reserves will be depleted as quickly as the actuaries predict.

While the projections are based on an assumption of annual growth of 5 percent in medical expenses and 8 percent in drug expenses, the plans' expenses have actually been growing at a rate of about 3 percent a year, he said.

And in the past several years, expenses have usually come in below projections, he said.

"Typically, when we're seeing numbers projected to that degree, we have not arrived at any of those results in the last eight to 10 years," he said.

The health plans cover about 45,000 school employees and 26,000 state employees, along with employees' family members and retirees.

For the most popular plan, known as the premium plan, state employees pay $107.92 a month for individual coverage or $498.88 for family coverage.

That plan has a deductible of $500 for an individual or $1,000 for a family.

For school employees, the maximum monthly premiums for an individual range from $183.46 for the premium plan, which has a $1,000 deductible, to $11.26 for the basic plan, which has a $4,250 deductible.

The cost of family coverage ranges from $833.44 a month for the premium plan, which has a $2,000 family deductible, to $275.62 for the basic plan, which has an $8,500 family deductible.

Those premiums are in addition to the $157.50 that school districts pay on behalf of each employee enrolled in coverage. Some districts contribute more than the minimum to reduce what employees pay.

Next year, the deductible for the school employees' premium plan will fall to $750 for an individual or $1,500 for a family. For the basic plan, it will be reduced to $4,000 for an individual or $8,000 for a family.

For the medium-priced classic plan, the deductible will fall from $2,000 to $1,750 for an individual and from $3,000 to $2,750 for a family.

Employees pay $46.02 a month for individual coverage or $358.32 for family coverage under that plan.

Thanks to lower-than-expected spending in recent years, the state and school employees plans have built up enough reserves to keep rates the same in 2019, said Gaelle Gravot, an actuary with the consulting firm Cheiron of McLean, Va.

But if medical expenses grow 5 percent a year and drug expenses grow 8 percent, the state employee plans' reserves will be exhausted in 2020, creating the need for a 20 percent increase, she said.

The board faced a similar scenario last year and ended up keeping the rates the same. As it turned out, lower-than-expected expenses left the plans with enough reserves to delay the need for a large increase for at least a year.

At a meeting last month, board member Rett Hatcher, who is deputy director of the Arkansas Teacher Retirement System, suggested increasing the rates for the state employee plans by 3 percent in 2019 to build up more reserves.

On Tuesday, however, he said he is comfortable keeping the rates the same.

He said the actuaries didn't account for restrictions on hiring imposed by Gov. Asa Hutchinson, which has reduced the number of employees enrolled.

Meanwhile, state funding has remained steady at about $174 million a year.

"We have the same amount of state dollars going in as state contribution, but it's being spread over fewer employees," he said.

He also said he didn't want to increase rates for state employees right after they receive their first merit-based pay increases in several years.

Those increases are set to take effect July 1 under a pay plan that went into effect last year. Previously, state employees could receive merit-based bonuses, but not salary increases, for good performance.

"People in dark masks came to my house in the middle of the night and said this is very satisfactory, so it is satisfactory to me," he joked during the meeting.

Marc Watts, senior legislative analyst with the Arkansas State Employees Association, said his group is happy with the board's decision to keep rates the same.

In an emailed statement, Cathy Koehler, president of the Arkansas Education Association, the state's largest teacher and support-staff union, called the decision on school employee plans "good news ... especially considering educators' compensation struggles to keep up with the cost of health insurance premiums."

"Today the system is in a position to meet immediate needs, however, that can and likely will change over time," she said. "We will continue to keep an eye on the overall health of the [public school] insurance program."

Metro on 06/20/2018

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