The 1st meeting of the Subcommittee on Benefits of the Blue Ribbon Panel on Public Employee Health Benefits was held on Wednesday, June 15, 2005, at 10:00 AM, at the Gheens Academy, Louisville, Kentucky. Representative Jimmie Lee, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Jimmie Lee, Chair; Senator Tom Buford, Representative Harry Moberly Jr; Jerry Bailey, Victor Cooper, Shawn Crouch, Lee Guice, Cheryl Hayes, Brent McKim, Richard Remmers, Jude Thompson, and Nancy Toombs.
Guests: Mark Birdwhistell, Shawn Crouch, and Chris Corbin.
LRC Staff: Greg Freedman, Rhonda Franklin, and Jamie Griffin.
Representative Jimmie Lee welcomed new member Victor Cooper who was serving on the Subcommittee on Technology.
Representative Lee stated that a copy of the budget language from House Bill 1 from the 2004 Special Session had been passed out to each member and he wanted to bring to everyone's attention the language that says "State Group Health Insurance Fund". He stated that the reason he wanted to bring this to everyone's attention is that he has received phone calls from various constituents in his district and around the state regarding rumors that co-pays would change and a number of things were going to happen after January 1. He said that the budget language states, “It is the intent of the General Assembly to maintain the same level of benefits, co-payments, deductibles, maximum out-of-pocket expenses, and other features in the plan year 2006 as provided in plan year 2005.
Mark Birdwhistell, Undersecretary for Health, presented data on prescription drug use. He said PricewaterhouseCoopers analyzed prescription drug experience for two years--2003 and 2004. Among the key statistics is the increasing age of the public employee group which increased from 35.8 years in 2003 to 36.9 years in 2004. Although the use of generic drugs has increased 5.5% from 44.2% to 46.6%, it needs to be higher. The use of brand drugs when a generic is available is very high and grew to over 7%. It should be below 3%. Pharmacy costs increased more than 13% which is not sustainable. Public employee utilization of prescription drugs is higher than the industry standard. The number of prescription drug claims per member per year rose from 17.36 in 2003 to 17.86 in 2004 which is much higher than the industry benchmark of 14.46. Three plans are available to public employees. Commonwealth Premier has 4,739 members, Commonwealth Enhanced has 109,865 members, and Commonwealth Essential has 113,720. The three tier benefit structure is working. However, the flat dollar copays for prescription drugs has resulted in members contributing less proportionately, because while the contribution remains flat, prescription drug costs are rising by 13%. A wider differential in the contribution between brand and generic drugs could increase generic use. The group average age is 36.9 years and increasing. It is estimated to be nearing 40 years of age within the next three years. The two age categories of 50 to 59 and 60 to 64 represents 37.4% of the public employee membership but accounts for 65% of prescription drug costs. Utilization by members who are 50 to 74 years old is well beyond industry norms.
Representative Lee stated that private carriers have disease management control to hold down costs. He asked if our increase is due to age, management and not keeping up with the population.
Secretary Birdwhistell stated that it is difficult to invest in disease management and wellness programs when there is a new procurement each year. Disease management needs to be a long-term investment to yield benefits. The twelve month cycle destroys the effectiveness of disease management. It takes months of claims analysis to determine who to target for disease management.
Victor Cooper pointed out that in the case of some drugs, for example statin drugs for cholesterol, a person may develop reactions to the drugs which leads to more costs because a physician will order a variety of tests to determine what is causing the symptoms when all along it was a reaction to the prescribed drug. Disease management programs need to educate physicians on drug reactions.
Secretary Birdwhistell stated that the group needs a state-of-the-art pharmacy benefits administrator. A lot can be accomplished without changing benefits but by educating employees about drug choices.
Brent McKim questioned whether the data is age and gender adjusted. This is important because Kentucky's group includes teachers and retirees. This is not true in most other states.
Secretary Birdwhistell said we need to focus less on the differential with other states and instead focus on things like our underutilization of generic drugs compared to brand drugs. The top six drug categories represent 42% of drug costs. The top six categories are psychotherapeutic, antidepressant drugs (Zoloft, Prozac) which accounts for 25.4%, antihyperlipidemic drugs (cholesterol drugs) which accounts for 24.9%, gastrointestinal drugs which accounts for 17.8%, unclassified agents which accounts for 13.1%, anti-convulsants (epilepsy) which accounts for 9.8%, and antidiabetic drugs which accounts for 8.8%. The top 10 categories of drugs represent 54% of total drug costs and represents 35% of prescriptions. An analysis of prescriptions indicates that the public employee group is using expensive drugs. He stated that a review of drug use found one member with diverticulitis who had 132 prescriptions and was seen by 60 providers in a one year period. A member with asthma had 135 prescriptions and was seen by 22 providers. A member with a digestive disorder had 66 prescriptions and was seen by 24 providers. A member with MS was seen by 50 providers in a one year period.
Chairman Lee noted that safeguards were needed in a self-insured system to prevent just looking at costs and not therapeutic value. He stated that this needs to be discussed at the next meeting.
Secretary Birdwhistell said that after instituting changes in the Medicaid program there appears to be decreases in utilization and an increase in the use of generic drugs.
Richard Remmers pointed out that pharmacy costs are about 20% of total costs and members must not lose sight of tying this to overall medical costs. Drugs should not be isolated as a data class by itself.
Jude Thompson stated that there seems to be a small use of mail order prescription drug services. Data that shows savings from mail order drugs needs to be provided.
Secretary Birdwhistell said the data on mail order drugs is not very good and it appears not to be working the way it should.
Chairman Lee asked that data be provided on savings in other states from use of mail order services and what states are doing with mail order services.
Chris Corbin of the Office of Insurance and Shawn Crouch of the Cabinet for Family and Health Services presented information on four consumer-driven health plan products: Flexible Savings Accounts (FSA), Medical Savings Accounts (MSA), Health Reimbursement Arrangements (HRA), and Health Savings Accounts (HSA).
Shawn Crouch stated that managed care focuses on the supply of care while consumer-driven plans focus on the demand for care. The objectives of consumer-driven plans are to change participant health and healthcare purchasing behaviors, reduce costs for discretionary care, reduce costs for chronic conditions, reduce acute care costs, and reduce long term costs. Federal guidelines for high deductible health plans are for individual plans a minimum deductible of at least $1000 and a maximum deductible of $2650. For the family plan it is a minimum deductible of at least $2000 and a maximum deductible of $5250. There is a trend of more large employers offering high deductible health plans.
Chris Corbin stated that flexible Spending Accounts have existed since 1979. Although funds remaining in the account at the end of the plan year cannot be rolled over to the next plan year, the IRS has recently changed the rules to allow an extra two and one-half (2 1/2) months after the plan year to use funds in the account. FSAs can be funded by both employer and employee contributions. Medical Savings Accounts have existed since January 1, 1997. Funds may roll over from year to year. MSAs are for self-employed persons and small firms of 50 or fewer employees. The employee must be enrolled in a high deductible health plan. Health Reimbursement Arrangements have existed since June 26, 2002. HRAs are funded solely by the employer. Amounts can be carried over from year to year at the discretion of the employer. Health Savings Accounts have existed since January 1, 2004. The employee must be enrolled in a high deductible health plan. Funds may be rolled over from year to year. Both the employer and employee may contribute to the account. Over 425,000 HSAs currently exist and over 50,000 are being opened each month. By 2012 it is expected that 17 million persons will have an HSA.
Chairman Lee state that the Subcommittee on Benefits will tentatively meet Friday, July 8, 2005 at 10 a.m. in Frankfort. He stated that PricewaterhouseCoopers will be asked to be there as well as insurance consultant David Wille. He stated that the Subcommittee will discuss what its mandate is, suggestions concerning benefits, change from a calendar contract year to a fiscal contract year, and consumer-driven health plans.
With no further business, the meeting adjourned.