The Board of Finance on Friday authorized the state's Employee Benefits Division to proceed with issuing a request seeking proposals for a vendor to provide a group Medicare Advantage plan for retirees in Arkansas' health insurance plans for state and public school employees.
The state's health insurance plan for public school employees includes about 16,000 retirees, and the state's health insurance plan for state employees has about 14,000 retirees, state Employee Benefits Division Director Jake Bleed said afterward.
The division will issue a request for proposals soon, then will score the proposals submitted by vendors and negotiate a proposed contract with the highest-scoring vendor, he told the board. The division will ask the board to consider approving the contract in June or July, and then the Legislative Council will consider taking action on the proposal, he said.
Bleed said he wants to make sure there is sufficient time to educate retirees in the state's health insurance plans for public school and state employees about their options for coverage through a group Medicare Advantage plan.
Under a group Medicare Advantage plan, retirees will enroll in a program specifically designed for them and built according to the requirements of the state, he wrote in a letter dated Wednesday to the state Board of Finance.
This plan will only be available to state and public school retirees and will be significantly different from Medicare Advantage plans available to the public, Bleed said.
"The proposed plan will in many ways mirror existing benefits, but at lower costs for the member and with other perks which are currently unavailable," Bleed wrote in his memo to the finance board. "The proposed plan, however, may not be the best fit for all Medicare-eligible retirees, and a strict 'opt out' option will be included, giving retirees a choice of whether they should keep their existing plans."
Under the proposed request for proposals, Arkansas would offer a Medicare Advantage plan with prescription drug benefits for all state and public school retirees in the state's health insurance plans for public school and state employees, he said. Enrollment would occur in October 2022 with coverage starting Jan. 1, 2023, he said.
"Bids will be requested from companies with nationwide networks of doctors and hospitals and will be limited to those with broad, PPO-style networks who have at least a four-star rating with the federal Centers for Medicare and Medicaid Services," Bleed wrote.
"We anticipate that this option will provide retirees with an opportunity to save money on their health insurance while also opening benefits which are currently not offered," he said. "It also will save the state significantly, ensuring that retirement health insurance remains a viable and important benefit now and in the future."
Under questioning from finance board member state Auditor Andrea Lea, 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.
During Friday's finance board meeting, state Rep. Debra Ferguson, D-West Memphis, said she wants to make sure that the provider network includes out-of-state providers in border cities.
Bleed said the aim is to provide a broad provider network that includes out-of-state providers.
He said a majority of states already provide a group Medicare Advantage plan to retirees in their state health insurance plans.
Board member Susannah Marshall, who is the state's bank commissioner, said "we would be a late adopter at this point."
In other action, the state Board of Finance authorized the state's Employee Benefits Division to proceed with issuing a request for proposal for a pharmacy benefit manager.
The division will procure a pharmacy benefit manager to operate a statewide network of pharmacies, process pharmacy claims for reimbursement and assist the state in claiming rebate dollars made available by drug manufacturers, Bleed wrote in his memo to the state Board of Finance.
The Employee Benefits Division or its partners will continue to manage the formulary, he said.
The division will require the pharmacy benefit manager to provide complete transparency on rebate dollars collected by the pharmacy benefit manager and request that 100 % of the rebates collected by the pharmacy benefit manager come back to the state, Bleed said.
In addition, the division will require the pharmacy benefit manager to include "fair reimbursement" for community and locally-owned pharmacies as well as larger chain-owned providers, he said. The contract will continue services currently provided by MedImpact Healthcare Systems Inc, he said.
The request for proposal seeking a vendor to be a pharmacy benefit manager will be awarded to the highest-scoring vendor based on technical and financial scoring, Bleed said. Services procured will be made available to members starting Jan. 1, 2023, he said.
Last year, The Segal Group estimated a competitive procurement should generate savings of $25 million to $50 million a year through greater rebates, assuming the same plan design and formulary.
Bleed said the state's health insurance plans for public school and state employees are now on a good financial foundation to allow the board to make decisions for the long-term benefit of the plans.
The state Board of Finance has governed the plans since Act 1004 of 2021 dissolved the 15-member State and Public School Life and Health Insurance Board, which was largely appointed by the governor, and transferred its duties to the finance board.
The Board of Finance has 10 members who include the governor, treasurer, auditor, secretary of the Department of Finance and Administration, securities commissioner, bank commissioner, and two appointees each named by the House speaker and Senate president pro tempore.
Under Act 114 of 2022 enacted in the fiscal session, the state Board of Finance continues to be the governing board for the two health insurance plans and the state insurance commissioner has been added to the board solely for voting on health benefit plans.
Under Act 113 of 2022, the Legislative Council is required to create the Employee Benefits Division Oversight Subcommittee, which has oversight over all decisions by the Board of Finance related to the state's health insurance plans for public school and state employees.
Lea said the Legislature will make the final decisions on these matters, not the state Board of Finance.