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2 state health plans facing deficits

Projected $22M shortfall prompts call to seek outside advice by Michael R. Wickline | March 12, 2021 at 4:39 a.m.
Rep. Jeff Wardlaw, R-Hermitage, speaks on House Bill 1662 during the Arkansas House of Representatives general assembly meeting Thursday, March 11, 2021 at the State Capitol in Little Rock..(Arkansas Democrat-Gazette/Staci Vandagriff)

A legislative panel on Thursday authorized the Bureau of Legislative Research to issue a request for proposals from consultants to help develop and implement a strategic plan and legislative framework for two state health insurance plans that cover more than 37,000 public school and state government employees and retirees.

The Legislative Council's Executive Subcommittee approved the issuance of the request for proposals after subcommittee members learned that these two health insurance plans have projected funding shortfalls of about $22 million for this calendar year and state officials are reviewing options to cover them.

According to the request for proposals, the Executive Subcommittee's objective is to give the council detailed and accurate information about a multiyear strategic path, including legislative-initiated funding, employer subsidies, plan design consideration and network operations.

"The final work product shall constitute a spectrum of options with reasonable assumptions as to the economic, logistic, legal and political ramifications of the various options," according to the bureau's request for proposals.

[RELATED: See complete Democrat-Gazette coverage of the Arkansas Legislature at arkansasonline.com/legislature]

The bureau plans to issue the request for proposals Monday. The deadline for consultants to submit proposals is April 12, said Jill Thayer, legal counsel to bureau Director Marty Garrity.

The Legislative Council could consider approving a final contract for the selected consultant on May 21 at what could be the council's first meeting after the end of the regular session, Thayer said. The consultant would be required to present a final report to the council on Oct. 15, she said.

The consultants' work will cover "many different areas of the group health plan, areas to include quality reporting on providers, funding strategies, allocation of premium dollars, allocations of employer subsidies to help individuals throughout the spectrum of employment," said Jason Lee, whom the bureau hired as a consultant to help develop the request for proposals.

"So it is a wide-reaching consulting scope that will ideally provide enough information and dialogue to look at how to strategically place direction and advice for the council over to [the state's Employee Benefits Division] for the next many years," Lee, a former division director, told the Executive Subcommittee. "This is not a short-term 'find a silver bullet' type of discussion."

Senate President Pro Tempore Jimmy Hickey, R-Texarkana, asked whether the consultant would be looking "at whether we would stay with our current structure, what I call self-insurance, or possibly move to a carrier to an insurance agency.

"What we have seen with the money that we've put in over the last few years [to the two plans] ... this is not working right, " he said.

A Legislative Council co-chairman, Rep. Jeff Wardlaw, R-Hermitage, said an Employee Benefits Division consultant has projected a $19 million shortfall for the public school employees plan and a $3 million shortfall for the state employees plan.

"So how do we fix these deficits to move forward to make it to those long-term solutions" recommended by the consultant that is hired, he asked Amy Fecher, secretary of the Department of Transformation and Shared Services.

Fecher said, "I believe that we are going to have a fix before October for 2021.

"I think that we can address the 2022 issues from October on, but I think we are going to have a solution in 2021," she said.

Hickey pressed whether there is any solution besides providing more funding this year.

"If there is another solution out there, I would sure like to know it," he said.

The state budget administrator, Jake Bleed, said, "We are looking right now at any and all solutions."

Hickey said, "We are in session, so we are either going to have to come up with some money or we are not going to come up with some money, so what if we don't come up with the money here in this calendar year, what's going to happen?"

Fecher said she believes there is a high probability that the school employees plan will go into a deficit.

Hickey said he saw no other solution other than putting $21 million in the plans.

Fecher agreed, saying, "Not for '21."

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