Call to Order and Roll Call
The third meeting of the Interim Joint Committee on State Government was held on Wednesday, September 25, 2013, at 1:00 PM, in Room 154 of the Capitol Annex. Senator Joe Bowen, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Joe Bowen, Co-Chair; Representative Brent Yonts, Co-Chair; Senators Walter Blevins Jr., Ernie Harris, Stan Humphries, Christian McDaniel, Morgan McGarvey, Gerald Neal, R. J. Palmer II, Albert Robinson, and Damon Thayer; Representatives Kevin Bratcher, Dwight Butler, John Carney, Larry Clark, Leslie Combs, Will Coursey, Joseph Fischer, Derrick Graham, Mike Harmon, Kenny Imes, James Kay, Jimmie Lee, Mary Lou Marzian, David Meade, Brad Montell, Sannie Overly, Tanya Pullin, Jody Richards, Tom Riner, Steven Rudy, Kevin Sinnette, Diane St. Onge, Tommy Thompson, and Ken Upchurch.
Guests: Joe Cowles and Sharron Burton, Personnel Cabinet.
LRC Staff: Judy Fritz, Alisha Miller, Kevin Devlin, Brad Gross, Greg Woosley, and Peggy Sciantarelli.
Approval of Minutes
The minutes of the July 24 meeting were approved without objection, upon motion by Representative Rudy.
Subcommittee Report
Senator Bowen, Co-chair of the Task Force on Elections, Constitutional Amendments, and Intergovernmental Affairs, read the report of the Task Force’s September 24 meeting. The report was adopted without objection, upon motion by Representative Yonts.
Kentucky Employees’ Health Plan (KEHP)
Guest speakers from the Personnel Cabinet were Joe Cowles, Commissioner, Department of Employee Insurance, and Sharron Burton, Deputy Executive Director, Office of Legal Services. They gave a comprehensive overview of KEHP for the 2014 plan year, accompanied by a PowerPoint presentation.
Mr. Cowles said the themes for plan year 2014 are wellness and consumerism. He has been working with his counterparts in Indiana, Georgia, Tennessee and Missouri for about 16 months to learn about their plans’ wellness opportunities. Ninety-eight percent of Indiana’s public employees are enrolled in a consumer driven health plan.
Loss of grandfathered status under the Affordable Care Act in 2014 is responsible for some of the new plan year changes. There was little change in 2013 due to retaining grandfathered status for the plan design elements and employee/member contributions. In 2014 wellness is being emphasized through the HumanaVitality program. The Compass ChoiceRewards pilot program has been introduced to incentivize members to shop for medical procedures and diagnostic tests and subsequently share in any savings from their choices.
In total, Kentucky has received $95 million from ERRP (Early Retiree Reinsurance Program), a reimbursement program of national health care reform. About 50,000 early retirees are KEHP members, and Kentucky was the seventh largest recipient of ERRP funds. By law, the funds are used to reduce benefit or premium cost increases. Kentucky’s remaining funds will roll over to the 2014 plan year and must be utilized by December 31, 2014, when the program ends.
The employer contribution will increase two percent for 2014, while annual trend projections were 8-9 percent. The new plan year focuses on shared employee and KEHP responsibility and accountability through greater price transparency, clearer choices for employees, enhanced health improvement programs and services, and accountability for health through meaningful incentives and consequences for employee actions and outcomes. Premiums will slightly increase for some plan options and decrease for others. Premiums will be improved for many dependent tiers. The plan designs reflect some of the mandates and benefit enhancements of health care reform, such as preventive services at no cost to members. Wellness offerings are expanded through the HumanaHealth and Compass ChoiceRewards programs. The nonsmoking premium incentive increased and expanded to include all tobacco products; it formerly applied only to the plan holder but in 2014 will also apply to covered spouses and dependents age 18 and older.
Commissioner Cowles said it is his and KEHP’s goal to improve health status in the Commonwealth. Kentucky ranks 45th among all states in major health status categories. Eighty percent of health care costs derive from chronic health conditions like diabetes, obesity, and heart disease. Kentucky has a lower life expectancy at birth than the South and the nation as a whole and has a higher percentage of overweight or obese adults and children, adult smokers, and adults reporting asthma prevalence and poor mental health. These are the challenges faced by KEHP, which has 270,000 plan members. Approximately 160,000 of the members are primary plan holders.
The LivingWell Promise that is being integrated into the 2014 plan is patterned after the successful Partnership Promise benefit design implemented by Tennessee in 2011. The state of Georgia began offering a similar benefit design in 2012 with its Wellness Promise. Data shows that in Tennessee the wellness promise concept resulted in a reduction of chronic disease and improved health among plan members.
The two LivingWell plan options that will be offered in 2014 require the plan holder to make a LivingWell Promise. These plans offer better benefits in the form of lower member coinsurance, lower deductibles, and lower out-of-pocket maximums. By choosing a LivingWell plan, members agree to complete an online HumanaVitality Health Assessment between January 1 and May 1, 2014, and to keep contact information current. Only the primary plan holder is required to complete the LivingWell Promise. Spouses and dependents covered under the plan will not be required to complete the health assessment. However, with the cross-reference payment option, both plan holder and spouse must fulfill the LivingWell Promise.
Plan members who elect the LivingWell Promise will receive reminders from KEHP to complete the health assessment. Failure to fulfill the LivingWell Promise in 2014 will make the plan holder ineligible for LivingWell plan options in 2015. If not fulfilled because of a physical or mental health condition, KEHP will work with the plan member to develop an alternative way to qualify for a LivingWell plan option. The HumanaVitality Health Assessment consists of a series of questions about health habits and takes approximately 15 minutes to complete. Based on responses to the questions, the plan member will be provided with a Vitality Age and goals for living a healthier lifestyle but is not required to meet the goals suggested by the health assessment. KEHP will not collect personal health information from the health assessment, and any information disclosed during the assessment will be kept confidential. KEHP may receive aggregate data from HumanaVitality based on the assessments completed by all members.
Open enrollment for 2014 is available October 1-31 and is an active, mandatory enrollment. Everyone must elect a new health insurance plan option or waive coverage. Anyone who does not make an election or waive coverage by October 31 will be automatically enrolled in the Standard CDHP (consumer-driven health plan), single coverage plan option. Benefit fairs will be held at 17 locations beginning October 1. Free flu shots and health screenings will be offered, and all locations except Jefferson County will have an enrollment kiosk.
Based on a study of state and local governments by the Kaiser Family Foundation, the employer contribution by the Commonwealth of Kentucky for individual employee coverage is 91 percent, compared to a benchmark of 87 percent suggested by the comparator group. The employer contribution for family coverage is 79 percent, compared to the benchmark of 76 percent. Four plan options are available for 2014. All plans cover in-network preventive care at 100 percent. There is no comparative plan for the 2013 Capitol Choice plan, which is being replaced by the Standard CDHP plan. Benefits analyzers will be mailed soon to all members in letter format.
The LivingWell CDHP—similar to the 2013 Maximum Choice plan—requires the LivingWell Promise and has the highest actuarial value of the four plans. It features an employer-funded HRA (health reimbursement account) of $500 for single coverage and $1,000 for couple, parent-plus, and family coverage. HRA funds can be used to reduce the deductible, and unused funds roll over to the next plan year. The plan pays 85 percent coinsurance; plan members pay 15 percent.
The LivingWell PPO (preferred provider organization) plan has the second highest actuarial value and requires the LivingWell Promise. It is similar to Optimum PPO, which had the highest membership in 2013. The plan features copays for most medical services and all pharmacy services. Coinsurance is 80 percent paid by the plan and 20 percent by members.
The Standard PPO plan does not require a LivingWell Promise. It is similar to the 2013 Standard PPO and features copays for some medical services. Pharmacy copays are subject to a minimum of $10 and a maximum of $25. Coinsurance percentages are 70 percent paid by plan/30 percent paid by member.
Standard CDHP has the lowest monthly employee premium—$12.98 for single, non-tobacco users. It does not require a LivingWell Promise. It includes an employer-funded HRA of $250 for single coverage and $500 for couple, parent-plus, and family coverage. Coinsurance percentages are 70 percent paid by plan/30 percent paid by member.
Employee monthly premiums for single coverage for the LivingWell CDHP and LivingWell PPO increased about $17.00, compared to their 2013 counterparts. Parent-plus, couple, and family premiums remain flat or are reduced. The employee contribution for family coverage in LivingWell CDHP—the highest actuarial value plan—is $337.98. The LivingWell PPO employee contribution for family coverage decreased slightly—from $650 in 2013 to $642.98 for 2014. The biggest premium increases in 2014 were for family cross-reference in the LivingWell plans; however, those premiums still reflect a significant discount when compared to full family coverage. Cross-reference members enrolled in the 2013 Optimum PPO plan who are willing to choose LivingWell CDHP in 2014 will pay approximately the same premium as in 2013. Based on health policy and in order to incentivize wellness and consumer-driven health care, premiums for LivingWell CDHP are priced no higher than for the Standard PPO. As a benefit enhancement for 2014, medical and prescription drug costs in the CDHP plans, and medical copays in the PPO plans, can be counted toward the deductible.
Mr. Cowles concluded the slide presentation with a review of the benefit grid and discussion of the HumanaHealth Nurse Support and the Compass ChoiceRewards programs. He said that KEHP has been enrolling as many as 2,500 members per month in the nurse support programs and that they have had a significant positive impact.
Responding to questions from Senator Bowen, Mr. Cowles said that ERRP funding was established by the Affordable Care Act. As to 2014 premiums, the Commonwealth budget provided for a two percent increase in the employer contribution. Some employee premiums increased and some decreased, but the overall increase in employee premiums was less than two percent.
Representative Marzian expressed approval for the health plan’s wellness and consumer-driven approach and asked whether plan holders will have access to a detailed list of covered preventive services. Mr. Cowles said the 2014 health insurance information on the Personnel Cabinet web site includes a list in the Frequently Asked Questions section.
When asked by Representative Carney, Mr. Cowles said that unused HRA funds from the 2013 plan year will roll over to 2014. Representative Carney said it is imperative to find a way to involve more physical activity in schools. In addition, the issue of emergency room costs incurred by the uninsured needs to be addressed.
Representative Riner asked whether KEHP is open to suggestions for questions to be included on the health assessment. Mr. Cowles said he is not in charge of the questions because the health assessment is a HumanaVitality product. A demo of the health assessment questions can be viewed on the Personnel Cabinet web site. The optional biometric screening is a mini-physical but is not required by the health assessment.
Responding to questions from Representative Thompson, Ms. Burton discussed essential health benefits covered under the Affordable Care Act and said KEHP covers the majority of those, except for pediatric dental and vision benefits. Mr. Cowles said the loss of grandfathered status in 2014 required benefit changes that added cost to the plans. Coverage of preventive care at 100 percent was the primary new benefit enhancement. Other enhancements include coverage of clinical trials and the allowance of certain costs to be attributed to the maximum out of pocket. Representative Thompson lauded the fact that the overall premium increase for employees is less than two percent.
When Representative Graham expressed concern about the premium increases and the impact on families, Mr. Cowles said he believes the 2014 plans are the best that KEHP could afford to offer, considering the budgeted amount available, health care cost trends, and additional costs related to health care reform. Hopefully, the wellness initiative will lead to a healthier pool of members, help reduce or level out costs, sustain benefits for a longer period of time, and lead to a healthier pool of employees transferring into the retiree health plans.
Representative Graham suggested that KEHP consider rewarding those who fulfill the LivingWell Promise with a reduced premium the following year. Mr. Cowles said he is open to the idea. Premium discounts are offered by some states, and Toyota is planning to offer a discount next year. He pointed out that KEHP’s wellness program already provides monetary incentives for achievement of certain goals.
Representative Lee said, based on the phone calls he has received, employees are confused about the new plans and unhappy about the premium increases. He asked whether factors other than claims cost and health care reform mandates—such as increased management costs by Humana—led to the higher deductibles, copays, and out-of-pocket maximums. Mr. Cowles said that TPA (third party administrator) costs, which fall within his purview, usually remain flat or may increase less than one percent each year. With expiration of many drug patents, KEHP was actually able to reduce costs under its contract with Express Scripts. Claims costs usually increase seven to nine percent—or maybe five percent in a good year. Data for 2013 through June 30 indicates claims increased about five or six percent. Without the benefit of ERRP dollars in 2014, KEHP would have faced more difficult cost decisions.
Mr. Cowles said the KEHP plan is fiscally sound with no intent to build surplus funds. He empathizes with employees’ concern about premium increases. KEHP’s goal is to create the best plan possible with the funds that are available. He added that normally less than two-thirds of plan members meet their deductible, and less than two percent reach the maximum out of pocket.
Adjournment
Senator Bowen thanked the speakers and reminded committee members that Mr. Cowles had offered to meet with them individually if they have additional questions. With business concluded, the meeting adjourned at 2:36 p.m.