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State called on to use surplus on health plan

by Michael R. Wickline | May 16, 2021 at 4:53 a.m.
FILE — The state Capitol is shown in this file photo.

The Arkansas Education Association is calling on state officials to use part of the general revenue surplus to address the funding shortfall in the state's health insurance plan for public school employees.

The association stopped short Friday of specifying how much of the surplus it wants to tap.

Through the first 10 months of fiscal 2021, the state's net general revenue has exceeded its April 2, 2020, forecast by $716.8 million, or 15.1%, the state finance department reported earlier this month.

Last year's forecast had anticipated a recession spawned by the coronavirus pandemic.

But, Arkansas' tax collections in fiscal 2021 have been bolstered by net collection increases tied to last year's income tax deadline shift from April 15 to July 15 and federal stimulus payments that have boosted consumer spending.

"Following the announcement of a $700 million surplus, we believe some of those funds should be used to prevent teachers and education support professionals from massive rate hikes that will likely force many to drop the plan," Tracey-Ann Nelson, the association's executive director, said Friday in a written statement.

After addressing the current funding shortfall, the association "looks forward to working with policymakers to establish a reasonable and sustainable plan, governance, design and funding solutions to ensure an affordable plan with meaningful benefits," she said.

In a special session in 2013, the Legislature approved transferring $43 million in state surplus funds to bail out the public school employees' health insurance program.

Gov. Asa Hutchinson said Friday that "I expect to use state general revenue to be part of the solution to meet the needs of our state health insurance plan, but there needs to be other adjustments made.

"It is important to have the legislative review completed before a final solution is adopted," the Republican governor said in a written statement.

"There should be interim steps taken by the Board of Finance, and then there should be a long-term action plan developed," he said.

Senate President Pro Tempore Jimmy Hickey, R-Texarkana, said Friday that it's premature to decide whether the insurance plan should receive surplus state funds.

"We are in the middle of trying to figure it out," he said.

The public school employees in the insurance plan are probably going to have to pay higher premiums, and it's possible that the state will provide more funding next year, Hickey said.

"I understand those stakeholders want us to put in the money," he said, but lawmakers have to balance that against other demands, such as taxpayers wanting to pay lower taxes and state Department of Human Services advocates wanting more money for services.

A Legislative Council co-chairman Rep. Jeff Wardlaw, R-Hermitage, said "I think there will be some surplus on the front-end" for the insurance plan, but he doesn't know how much.

Some people have confused the consideration of health insurance benefits with retirement benefits, he said.

"We are not talking about retirement," Wardlaw emphasized.

The state Board of Finance is to meet Tuesday morning to continue its review of the recommendations of the now-dissolved State and Public School Life and Health Insurance Board for the public school and state employees health insurance plans in 2022.

The finance board will make recommendations for changes to the Legislative Council.

Act 1004 of 2021 -- sponsored by Hickey in the Senate and Wardlaw in the House -- transferred the governance of the two health insurance plans on a temporary basis from the now-dissolved insurance board to the finance board.

Under the defunct board's proposals for 2022, active school employees would face a 10% increase in premiums. Retirees under 65 would face a 15% increase, while retirees older than 65 would see a 20% increase.

Active state employees would see their premiums increase 5%, while retirees, regardless of age, would have a 10% increase in their premiums. The state also would increase its monthly funding per employee by $50 a month under this plan.

Both plans would reduce the wellness credit for active employees from $50 to $25 a month, create a $50-a-month non-wellness contribution for active employees and eliminate the wellness preventive-screening requirement to see doctors in person.

Those proposals are projected to reduce the public school employees plan's forecast deficit from $70 million to $29.7 million for 2022 and turn the state employees plan's projected deficit of $33.3 million into a surplus of $6.2 million, according to state officials. Both plans have dwindling reserve funds.

The Arkansas Education Association said the health insurance's board proposals would increase the monthly contribution for a single employee on the classic plan by 45% from $71 to $103 each month.

A spokeswoman for the state Department of Transformation and Shared Services said a single employee on the classic plan, who receives the wellness credit, would face that increase under the health insurance board's proposal.

The education association said in its news release that "these dramatic increases in insurance premiums will erode the progress made in teacher pay this year and drive educators who are not teachers out of the plan altogether.

"This reduced pool will make the plan less financially secure and more expensive to operate while robbing people of a key benefit that helps secure a stable workforce," the group said.

Hickey said it's possible that the public school employees' premiums will increase more than the dissolved health insurance board recommended.

But "I don't think anybody wants to see it," he said.

During the Legislative Council executive subcommittee's interview of two consultants, a few lawmakers raised the possibility of a study on merging the insurance plans for school and state employees that collectively cover more than 100,000 employees and retirees. The two health insurance plans' benefits collectively cost $662 million in 2020.

The Legislative Council's executive subcommittee Wednesday authorized the Bureau of Legislative Research to enter contract negotiations with the Segal firm to be the bureau's consultant in reviewing the insurance plans. That authorization was made after it interviewed two consultants -- Segal in Atlanta and Cheiron Inc. in North Carolina.

Segal presented a maximum bid of $575,000, while Cheiron submitted a maximum bid of $393,750. Cheiron is the former actuary for the state's Employee Benefits Division, and its project team included a former deputy director for the division. Sen. Missy Irvin, R-Mountain View, said Segal would provide a fresh and new look at the health insurance plans.

The Legislative Council's Policy Making Subcommittee is to consider the negotiated contract with Segal on Thursday, and the full council is to consider the proposal Friday

The aim would be for the consultant to present a final report to the Legislative Council in October.

Hickey and Wardlaw said combining the health insurance plans should be studied.

"I was serious when I said all things are on the table," Hickey said.

Wardlaw said it's also possible that providers for the two health insurance plans would change.

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