The third meeting of the Blue Ribbon Panel on Public Employee Health Benefits was held on Wednesday, July 13, 2005, at 9:00 AM, in Room 129 of the Capitol Annex. Representative Harry Moberly, Co-Chair, called the meeting to order, and the secretary called the roll. (Senator Buford, Co-Chair, was out of town and unable to attend.)
Present were:
Members: Representative Harry Moberly, Jr., Co-Chair; Senators Julie Denton and Daniel Mongiardo; Representatives Bob DeWeese and Jimmie Lee; Bob Arnold, Jerry Bailey, Carol Carman, Brad Collins, Victor Cooper, William Hanes, Gary Harbin, Cheryl Hayes, J. D. Jones, Arletta Kennedy, Susan Lehmann, Thomas Loving, Milton Mains, Michael Mayo, Brent McKim, Wanda Mitchell-Smith, Richard Remmers, Erwin Roberts, Jim Sproul, Jude Thompson, Nancy Toombs, Nancye Vincent, and J. P. Wiles.
LRC Staff: Mark Roberts, Joyce Crofts, Betsy Johnson, Alisha Miller, Karen Powell, Greg Freedman, Rhonda Franklin, Frank Willey, and Peggy Sciantarelli.
The minutes of the May 24-25 meeting were approved without objection, upon motion by Representative Lee.
Representative Moberly noted that Mark Roberts, staff coordinator for the Panel, will retire from LRC July 15. He expressed appreciation for his good work and his assistance to the Panel and its subcommittees. The members also expressed their appreciation with a round of applause.
The purpose of the meeting was to receive and discuss the recommendations of the five Blue Ribbon Panel subcommittees: Benefits, Governance, Group Makeup, Technology, and Wellness. Representative Moberly thanked the members for their hard work. During the individual presentations, subcommittee chairs also expressed appreciation to their members and staff.
Representative Lee, Chair of the Benefits Subcommittee, said that their responsibility was to focus on the structure of coverage and benefits, pharmacy costs, market problems, network, consumer-directed plans, utilization, and "calendar year versus fiscal year." He then reviewed the 23 recommendations offered by the Subcommittee:
¨ Continue on a calendar year basis for 2006 plan year, unless concerns about a plan year based on fiscal year are resolved.
¨ Retain similar plan structures after June 30, 2006 and retain co-pay structures as currently used.
¨ Permit adoption of HRA/HSA instead of the Essential plan. Premiums for all plans will continue to be based on the experience of the entire state group.
¨ Continue to provide fully paid individual coverage. Increase the state contribution for family coverage, including providing the same level of subsidies for retirees.
¨ Change the current employer contribution for those waiving coverage under the state plan to a health reimbursement account (HRA) and reduce incrementally over 5 years the state contribution for persons who opt out of the state plan. Investigate the feasibility of providing a larger employer contribution to those employees who do not have other coverage and who use their employer contribution to provide medical services for their dependents.
¨ Expand wellness programs to promote good health.
¨ Recommend that the membership and responsibilities of the group evaluating the drug formulary be spelled out in statute. Stipulate that they may consider factors other than medical necessity for therapeutically equivalent drugs.
¨ Subject the state plan to the utilization review statutes KRS 304.17A-600 to 304.17A-633 that provide for internal and independent external appeal processes. The decisions made as a result of the external review are binding and are to be based upon medical necessity.
¨ Develop consumer-friendly information tools so members can compare providers relative to their cost and quality.
¨ Require the Commonwealth, not the members to pay any out-of-pocket administrative fees, including any fees associated with HRAs or HSAs, and require that the accounts be offered through the Commonwealth.
¨ Establish tiered co-pay structure for prescription drugs to encourage the use of therapeutically equivalent alternatives and develop a program to inform members about the cost of therapeutically equivalent alternatives.
¨ Keep the current reduction of prescription drug co-pays after 75 prescriptions during the plan year.
¨ Explore the possibility of participation in a multi-state consortium to purchase prescription drugs.
¨ Require the Secretary of the Personnel Cabinet to promulgate administrative regulations to establish the state employee health insurance plan.
¨ Require the Secretary of the Personnel Cabinet to provide detailed calculation outlining the development of the funding rates, including base claims, trend assumptions, administrative fees, and any other plan adjustments every six (6) months and as requested by the House or Senate Appropriations and Revenue Committee. The report shall be made available to the State Group Health Insurance Board, the Employee Advisory Committee, and legislative committees of the General Assembly, upon request.
¨ Require an ongoing evaluation of network requirements and provider reimbursements to assure access to quality care.
¨ Establish by statute a Self-Insurance Premium Pool for deposit of all employer and employee premiums, drug rebates, and other program income. The use of these funds would be restricted in use for claims payment and to hold required reserves for the self-insurance program. Any funds that remain in the Pool after all claims and administrative fees have been paid will not lapse and all interest, investment proceeds, and other income shall accrue to the Pool.
¨ Evaluate member cost sharing so members can continue to receive preventive and cost-effective care so their conditions do not worsen.
¨ Provide network for retirees and other covered individuals who live outside of Kentucky.
¨ Provide clear, consistent, and easily accessible coverage and provider network information.
¨ Require that Medicare be deemed the primary coverage for dependents eligible for Medicare, except where prohibited by federal law. Require this information to be clearly communicated to members.
¨ Require the Personnel Cabinet and the Cabinet for Health and Family Services to study for future implementation a tiered co-payment system for hospitals based on outcomes and report to the General Assembly.
¨ The Commonwealth should consider implementing a sliding scale for contributions based on the state employee's salary. This would allow lower paid individuals to have a higher percentage of their premium subsidized, thereby encouraging enrollment into the plan.
Brief discussion followed. In response to questions from Senator Denton, Representative Lee said that the Subcommittee did not have enough information to specifically examine costs but that costs would have to be considered relative to any legislation proposed in the 2006 General Assembly. He said the recommendations do not require that current copay amounts remain without modification; the recommendations just require that the copay structure remain, but the amounts of copay may change based on cost. He went on to say that the subcommittee members felt they would be abdicating their responsibility if they did not recommend that the Commonwealth continue to provide fully-paid individual coverage and increase the state contribution for family coverage. Regarding the drug formulary, the Subcommittee envisions a committee that will look at the therapeutic value of drugs and the formulary structure, and that the formulary would be based on what is best for participants in the health insurance group. They advocate that the pharmacy benefit manager serve in an advisory role.
Senator Denton, Chair of the Governance Subcommittee, reviewed the recommendations of that Subcommittee:
¨ Recommend that the plan year not be changed from the calendar year.
¨ Require the Secretary of Personnel to submit information to the Employee Advisory Committee at least 60, rather than 30, days prior to issuance of the RFP and require the Employee Advisory Committee to submit its recommendations at least 15 days prior to issuance of the RFP.
¨ Recommend the Secretary of Personnel create a Summary Plan Description (SPD) setting forth the benefits and plan provisions and to include those provisions it deems necessary in administrative regulations.
¨ Establish a fund; set requirements for reserves; direct that funds for incurred but not reported expenses be set aside solely for that purpose; stipulate how surpluses may be utilized; provide that funds do not lapse and may not be used for purposes other than providing benefits.
¨ Require quarterly financial reports, including information on claims, enrollment, and expenditures, to the Legislative Research Commission, Employee Advisory Committee and Kentucky Group Health Insurance Board.
¨ Require inclusion of the information on the state group fund in the annual report of the Kentucky Group Health Insurance Board; include data on administrative oversight of the third party administrator, disease management programs, wellness programs, case management audits, a comparison of actual results to performance guarantees, and educational and communication efforts; require the report to be sent to local government and non-executive branch state agencies participating in the group; change the deadline for the annual report from October 1 to December 1.
¨ Recommend that the membership of the Employee Advisory Committee and the Kentucky Group Health Insurance Board remain as currently provided by statute and recommend that these two groups explore options for improving and promoting communication with state group members concerning the state health plan.
¨ Recommend that legislative staff attend meetings of the Employee Advisory Committee and the Kentucky Group Health Insurance Board and receive copies of minutes and reports.
Mr. Sproul expressed concern about mid-year changes to the drug formulary, whether participants in the state group will have an opportunity for input, and who would oversee the plan design. Christine Wilcoxson of the Personnel Cabinet explained that deletions from the formulary would occur when benefits are renewed annually, as is the case now, but that drugs might be added to the formulary at any time. Senator Denton said that the Employee Advisory Committee and the Group Health Insurance Board would provide a source for feedback from plan members. She also explained the oversight role of the General Assembly. Representative Lee stressed the importance of having a pharmacy and therapeutics committee to oversee the drug formulary and said that the formulary and certificate of coverage/summary plan description should be incorporated by reference into an administrative regulation. Representative Moberly reminded the members that the Benefits Subcommittee has also recommended that decisions made under the state health plan be subject to an appeals process. Mr. McKim said that the Subcommittee was concerned about the need for an open and transparent process that will provide the public ample time for input and feedback prior to substantive changes in the plan structure, as well as provide for a long-term view of the health insurance plan.
Erwin Roberts and Arletta Kennedy, Co-Chairs of the Group Makeup Subcommittee, reviewed the following recommendations offered by that Subcommittee:
¨ The Executive Branch should be encouraged to study the issue of "Adverse Selection in PEHI plans" including the effect of current employees that waive coverage.
¨ The premiums charged for different plan types and coverage tier levels to retirement systems, local governments and "quasi" agencies shall be the same statewide as those charged to state agencies and local boards of education.
¨ Provide that for employees of state government and local school districts that waive coverage under the State Group Health Insurance Program, the employer would contribute $200 per month in FY 2006-07 and FY 2007-08 to a Health Reimbursement Account for the employee. Also, require that the employer shall deposit in the Self Insurance Premium Pool $34 per month for each employee that waives coverage.
¨ KRS 18A could be amended to provide that employees who begin membership in a state administered retirement system or an optional retirement plan authorized under the provisions of KRS 161.567 on or after July 1, 2006 shall be eligible to purchase coverage through the Public Employee Heath Insurance plan upon retirement providing the following conditions are meet. (1) The employee must have participated in the PEHI plan for at least the last ten years of qualifying service prior to termination or retirement. (a) Time that the employee was on sick or military leave during this period would be qualifying service. (b) The ten-year requirement would be waived if the employee becomes disabled or is killed in the line of duty as defined in KRS 16.505(19) or 61.621. (c) The ten-year requirement would be waived for employees whose employer joins the PEHI program during the last 10 years of the employees service as long as the employee does not waive coverage and maintains coverage from the time the employer joined the PEHI program and the termination/retirement date of the employee. (2) Retirees who are not eligible to participate in the PEHI plan shall be eligible to be reimbursed the dollar value of their earned benefit and obtain coverage through their former employer, the private market or through some other means based on authorized contributions. (3) Beginning with the 2006 actuarial report, the Kentucky Retirement System recommended employer contribution rate for CERS should be split between school board and non-school board based employers based on entering the CERS system after July 1, 2006.
¨ A study should be conducted to determine the feasibility of including state sponsored foster parents in the Public Employee Health Insurance plan with them paying the required premiums.
Mr. Sproul pointed out that if state-sponsored foster parents were to be included in the health insurance group, this would appear to increase the effect of adverse selection.
Panel member Bill Hanes, Executive Director of Kentucky Retirement Systems, said he had proposed the Subcommittee's recommendation to amend KRS Chapter 18A to address the "unescorted retiree" issue. He explained how the recommended legislative changes would, over a period of time, alleviate inequities and the adverse selection caused by unescorted retirees, as well as address the County Employees Retirement System issue of local governments subsidizing noncertified school board employees. He noted that the recommended changes would only apply to persons who begin membership in a state administered retirement system or optional authorized retirement plan on or after July 1, 2006. There was an extended period of discussion, during which Mr. Hanes answered questions and heard opinions from the panel members. Mr. Hanes said that the recommended plan is not a panacea but will deal with the problem on a long-term basis. Representative Moberly and Mr. Harbin said that the Panel needs to look further at the issue of eligibility in the state group for vested members of the Teachers' Retirement System who have not attained 10 years of service.
Senator Mongiardo, Chair of the Technology Subcommittee, reviewed and explained the Subcommittee's recommendations relating to the use of technology in health care and the medical malpractice issue:
¨ State should indicate its full support of SB 2 in the contract with TPA in accordance with guidance set by the Kentucky e-Health Network.
¨ State should incentivize more rapid implementation of IT in its contract with TPA.
¨ General Assembly should pass resolution to request that Congress amend HIPAA and STARK so as to allow for IT to be shared in the health care field.
¨ General Assembly should consider tax credits for purchase of IT by providers.
¨ Contract with TPA should include a pilot program to pay for e-mail consultations for state health insurance.
¨ Incentives for reporting errors should be implemented in contract with TPA.
¨ State should develop a mechanism for reporting of medical errors—need protection of information and no punishment of doctors.
¨ General Assembly should consider eliminating municipal tax on medical malpractice insurance.
¨ General Assembly should consider connecting interest rate on judgments to prime rate.
¨ Supreme Court should consider requiring that an affidavit be filed by attorney in malpractice complaint stating that the attorney has had the case reviewed and there are reasonable grounds for going forward. General Assembly should consider Ohio statute requiring certified letter to doctor that case is being investigated—this letter tolls the statute of limitation for 180 days from date of sending letter.
¨ Implement a Sorry Works! pilot project using university to gather data.
¨ Contract with TPA should develop “branding” of providers who implement IT and/or meet specific certifications of quality for state health insurance.
Senator Mongiardo said that health care is the only industry that is still run today like it has been for the past 200 years. He said it is a very information-intensive industry, in which the information is now mostly based in paper—a very slow process which leads to errors, inefficiency, and cost in both dollars and lives. He went on to say that Leapfrog, an organization comprised of many of the Fortune 500 companies, is trying to drive change in the way the health care system is operated, by pushing information technology. Kentucky needs to take a similar initiative and expand on it by helping incentivize the changes necessary to improve quality and efficiency in the health care delivery system. He also said that the decision-making process needs to be placed back with the patient and the doctor.
Senator Mongiardo said he is believes the Panel should endorse the recommendation to establish a "Sorry Works!" pilot project because it is the right thing to do. He said that the University of Michigan decided to implement a similar program and, as a result, has seen a 60 percent reduction in medical malpractice costs. He said that Dr. Steve Kraman (vice chairman of the Department of Internal Medicine at the University of Kentucky and a former chief of staff at Lexington's VA Medical Center) has agreed to advise hospitals that participate in the pilot project.
Mr. Bailey asked whether it would be possible to implement the Technology Subcommittee's recommendations relating to the TPA contract, in view of the fact that the RFP has already been released. Secretary Roberts said he did not know—that it would depend on limitations of the RFP. Representative Moberly said he would think that the RFP would allow some flexibility in the contract. He said he thinks that the recommendations relating to technology and medical malpractice are of primary importance for the Panel to consider and also for emphasis in the TPA contract.
Representative DeWeese, Chair of the Wellness Subcommittee, reviewed the recommendations of that subcommittee:
A wellness program, incentives, and a disease management program should be a part of any plan which is implemented for the state employee health insurance group.
The Executive Branch should seek legal guidance in designing and implementing a wellness program and incentives to comply with HIPAA and other applicable laws.
Any wellness program that is implemented should include Health Risk Assessments with the appropriate incentives similar to those in the University of Kentucky Model.
The Executive Branch should utilize Public Health Departments and Universities, and other available resources when possible in implementing a wellness program.
The use of information collected in the health risk assessment should follow HIPAA and federal guidelines on privacy and confidentiality.
The state should look at cost drivers among the state employee group in designing a disease management program.
Focus should be given to outreach services on wellness and disease management for the 50-65 age group.
The Legislature should consider including in the budget for state employee health insurance, money to provide incentives to those who participate in wellness program.
Representative DeWeese said that wellness and disease management in an aging population are very timely issues that will eventually have a profound effect on the cost of health care, as well as the quality of life of the covered members. He said the Subcommittee received a wealth of knowledge as they heard testimony from many sources, including insurance carriers and local health departments.
When asked by Representative Moberly, Representative DeWeese gave examples of incentives offered by wellness programs and said that some programs pay the cost of participation in weight loss and smoking cessation programs. Senator Mongiardo said that SKYCAP (Southeast Kentucky Community Access Program), an eastern Kentucky lay health worker program that provides case management services, saw significant reduction in health care costs in only one year.
Representative Moberly asked the members to continue studying the recommendations, which staff will consolidate into a single document and mail to the members prior to the final meeting on July 19. He said that at that meeting the Panel will adopt its final recommendations by voice vote—or roll call vote when indicated—and members will be allowed to have their objections to particular recommendations recorded in the meeting minutes.
Secretary Roberts said he will not be able to attend the final meeting. He and Representative Moberly commended staff of the Personnel Cabinet, the Health & Family Services Cabinet, and others for their cooperation with the Panel. Representative Moberly also thanked the House of Representatives' actuary, David Wille, for his assistance. Business concluded, and the meeting was adjourned at 11:20 a.m.