Call to Order and Roll Call
The second meeting of the Interim Joint Committee on State Government was held on Wednesday, September 23, 2015, at 1:00 PM, in Room 149 of the Capitol Annex. Senator Joe Bowen, Presiding 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 Julie Raque Adams, Ralph Alvarado, Denise Harper Angel, Christian McDaniel, Albert Robinson, and Damon Thayer; Representatives John Carney, Leslie Combs, Will Coursey, Jim Gooch Jr., Derrick Graham, David Hale, Mike Harmon, Kenny Imes, James Kay, Martha Jane King, Mary Lou Marzian, David Meade, Phil Moffett, Brad Montell, Darryl Owens, Tanya Pullin, Jody Richards, Tom Riner, Steven Rudy, Sal Santoro, Diane St. Onge, John Tilley, Tommy Turner, and Ken Upchurch.
Guests: Representatives Ruth Ann Palumbo and Jerry Miller; Joe Cowles and Sharron Burton, Personnel Cabinet.
LRC Staff: Judy Fritz, Alisha Miller, Karen Powell, Brad Gross, Greg Woosley, Kevin Devlin, Terrance Sullivan, and Peggy Sciantarelli.
Recognitions and Approval of Minutes
Senator Bowen recognized in the audience Hancock County Judge/Executive Jack McCaslin and magistrate Chic Roberts, accompanied by Representative Dean Schamore. Later in the meeting, the minutes of the August 26, 2015, meeting were approved without objection.
2016 Kentucky Employees’ Health Plan (KEHP)
Joe Cowles, Commissioner, Department of Employee Insurance, Personnel Cabinet, and Sharron Burton, Deputy Executive Director, Office of Legal Services, Personnel Cabinet, reviewed the 2016 Kentucky Employees’ Health Plan. They provided print copies of their slide presentation.
In January 2015 Anthem replaced Humana as plan administrator. Other KEHP vendors are CVS/Caremark, WageWorks, VitalsSmartshopper, and Humana Vitality. Benefits for 2016 are unchanged, and employee premiums will not increase.
KEHP, self-insured since 2006, has 153,000 planholders and 266,000 covered lives. Total plan spend is approximately $1.6 billion annually. School boards represent 54 percent of covered lives; state agencies represent 20 percent. LivingWell CDHP, the highest value plan, currently has the largest number of enrollees—118,033, or 40 percent. LivingWell PPO has 37 percent; Standard CDHP, 8 percent; and Standard PPO, 5 percent. Planholders who waive coverage and have a health reimbursement account (HRA) represent 10 percent of covered lives. Single coverage plans in 2015 include 33 percent of covered lives; 28 percent of covered lives are enrolled in family plans.
Mr. Cowles said he receives many calls from other states. Tennessee, for example, is trying to replicate KEHP’s success with the consumer driven (CDHP) plans. There has been a dramatic increase in CDHP enrollment in Kentucky. In 2013, consumer driven plans represented 28,565 covered lives but in 2015 cover 140,292 lives. This is one reason why KEHP has been able to accumulate substantial savings and to maintain rates, benefits, and coverage levels for the last several years. Enrollment in LivingWell plans increased from 81.22 percent in 2014 to 86 percent in 2015. Consumerism and wellness components put in place in 2014 continue to be effective. Medical and pharmacy claims cost in 2014 decreased to the 2011 level, and it is projected that 2015 claims cost will be even lower. The 2015 savings can be attributed not only to more informed consumers making better choices but also to improved discounts achieved when Anthem became plan administrator. Completion of the LivingWell Promise exceeded 97 percent in both the 2014 and 2015 plan years—a significantly higher success rate than that of similar plans in Tennessee and Georgia.
KEHP has partnered with local health departments to provide the biometric screenings (Vitality Checks). There was a slight decrease in health risk assessments completed in 2015 but a significant increase in the number of biometric screenings. Completion of either complies with requirements of the LivingWell promise. New data reveals that 27,000 members have achieved silver status in 2015. Silver status and device usage increased dramatically from July 2014 to July 2015. More than 11,700 members are participating in the new 15-Day Dash walking challenge.
Ms. Burton said there are no premium increases in 2016. KEHP is offering the same health plan options and coverage levels as 2015. This is due to lower plan medical and pharmacy expenses, improved member consumerism, and continued wellness participation. Open enrollment will be held October 12-26. The first of 14 statewide benefit fairs will be held in Frankfort on October 1.
Active enrollment is not mandatory for 2016. Enrollment will only be required to change a health plan, elect or choose to keep the employer-funded health reimbursement arrangement (HRA), or to elect a healthcare or dependent care flexible spending account. Members who failed to complete the LivingWell Promise in 2015 must enroll online and select either the Standard PPO or the CDHP plan for 2016. Otherwise, they will be automatically defaulted to the Standard CDHP single coverage plan.
LivingWell CDHP is the highest actuarial value plan. LivingWell PPO has the second highest actuarial value. Both plans require completion of the LivingWell Promise between January 1 and May 1, 2016. Standard PPO and Standard CDHP plans have the third and fourth actuarial value, respectively, and do not require the LivingWell Promise. In addition to local health departments, Vitality Checks are available at Kroger and Walgreen clinics, select KEHP onsite locations, or from a member’s primary care doctor.
Mr. Cowles said that while premiums will not increase, the employer contribution will increase two percent, which was included in the last budget cycle. More than 90 percent of the benefits analyzers to be mailed to members recommend either the Standard CDHP or the LivingWell CDHP plans. The Diabetic Value Benefit is new in 2016. Diabetic members will pay reduced copays and coinsurance, with no deductibles, for nearly all of their maintenance diabetic prescriptions and supplies. Mr. Cowles said this benefit represents additional cost to the plan but should prove to be an appropriate and cost-efficient investment. In 2014, Kentucky became one of the first states to offer a diabetes prevention plan and is a model for its 16-week Diabetes Prevention Program (DPP). Diabetes is expected to be a huge cost driver in the future. Almost 24,000 KEHP members are diabetic; probably 80,000 are pre-diabetic. Diabetic claims now total about $70 million annually, and that cost is expected to increase substantially.
A telemedicine benefit—LiveHealth Online (LHO)—was launched in June 2015. Kentucky is one of the first four or five states to offer this service. It provides instant doctor visits through live two-way video chat—at no cost to members. The doctor will answer questions, diagnose health problems, and may prescribe basic medicines when needed. The cost to KEHP is $50 per visit, which is less than visits to a physician’s office. Mr. Cowles said he is confident the service will save money. Reducing the number of visits to emergency rooms and urgent treatment centers will also contribute significant cost savings. LHO will improve access for rural members, create a viable medical service alternative, and reduce lost employee productivity. There have been 6,714 LHO registrations and 545 visits. The service is not designed to replace the primary care doctor.
Representative Graham commended Mr. Cowles and Ms. Burton for their hard work. He also commended the Governor and the entire administration for their efforts to promote wellness and provide health care coverage to state employees at the lowest possible cost.
Answering questions from Senator Alvarado, Mr. Cowles said the average age of members is about 37, but KEHP has a large pre-65 population. The early retirees receive the same premium rates as an 18-year-old. KEHP pays $1.33 in claims per every dollar paid by the retirement systems. The promotion of generic medication usage in 2014 has saved probably $10 or $15 million. The number of members who smoke is self-reported and is about 15 or 16 percent. Smokers pay higher premiums, and a smoking cessation program is available to members. Senator Alvarado commended Mr. Cowles and his staff for a job well done. He said he can understand why other states are looking at KEHP. He is impressed by the large drop in claims cost, the exercise programs that have been implemented, and the success in motivating members to engage in their health care and choose lower cost options. He suggested that the KEHP model should be considered for Kentucky’s Medicaid program. Indiana and some other states offer tiered coverage levels for Medicaid recipients.
Senator Bowen said that Senator Alvarado’s points are well taken. Society is better served and costs can be reduced when people engage in their own health care.
Representative Carney commended Mr. Cowles and staff. He said it is good news that premiums will not increase in 2016. The Humana Vitality point system and other KEHP initiatives are working well and, he believes, will continue to get better. He concurred in Senator Alvarado’s suggestion that KEHP could be a model for Kentucky’s Medicaid program.
Representative King said she appreciates the new LHO telemedicine option. She serves counties that are predominantly rural, and LiveHealth Online will be helpful to KEHP members in her district.
Representative Montell commended Mr. Cowles and staff for their work. He referred to the transfer of $63.5 million from the Public Employee Health Trust Fund to the General Fund, which was a provision of the updated budget bill enacted in the 2015 regular session. He asked whether those funds, if they were still available to KEHP, could be used in constructive ways to hold down future premium costs or make the plan more efficient. Mr. Cowles said KEHP is expected to accumulate a significant surplus in 2015, based on current projections, so today the answer would be “not necessarily.” The program has been performing very well for the last two years. However, claims are likely going to increase in the future, and it is possible that in three to five years those funds might be needed. HRA funds are preserved in the trust fund. More than 100,000 plans include HRA funds, which roll over if unused. Some members’ HRAs have accumulated as much as $10,000. Unused HRA funds represent an accrued liability and cannot be taken. Representative Montell thanked Mr. Cowles for his candid answer. He said legislation has been prefiled for 2016 to redirect the $63.5 million—for which KEHP appears to have no current need—from the General Fund to the retirement systems. He hopes the General Assembly will give serious consideration to that legislation in the 2016 regular session.
Representative St. Onge commended KEHP for the new Diabetes Value Benefit. She also questioned why only individuals with group coverage are eligible for the waiver general purpose HRA—a question that she also raised during the previous interim. Ms. Burton said that the U. S. Departments of Treasury, Labor, and Health & Human Services jointly issued guidance regarding non-group coverage in September 2013. The federal government’s interpretation of the law is that persons cannot have the stand-alone general purpose HRA unless they can attest to having other group health insurance. Persons covered by government-sponsored plans like Medicare or Tricare are also not eligible. Representative St. Onge said the federal government’s exclusion of individual private insurance coverage makes no sense to her. Mr. Cowles agreed that it makes no sense. He said the exclusion, which went into effect for the first time in 2014, resulted in about 3,500 members moving to a limited purpose HRA.
Representative Harmon commended KEHP for offering LiveHealth Online and said he used it recently when he had a bad case of poison ivy. He accessed LHO on his mobile phone, was given a list of several doctors, and was helped in about five minutes. A prescription was called in for him from California, and he picked it up the same day.
Representative Riner said he appreciates the emphasis on diabetes and asked what is being done to motivate the pre-diabetic population to make lifestyle changes. Mr. Cowles said diabetes prevention classes are conducted at several state government sites in Frankfort and in counties around the state. The program is championed by Kentucky’s Health and Family Services Secretary Audrey Haynes. Kroger onsite clinics and local health departments are also participating. Classes are actively recruited each month, and about 500 have joined so far. Members can also self-refer to the program. Diabetes prevention programs can reduce the influence of type-2 diabetes by more than 50 percent. Upward of 80,000 KEHP members have conditions that can lead to diabetes. The diabetes prevention program is free to members but costs the plan about $350 per individual.
Senator Bowen thanked Mr. Cowles and Ms. Burton and said the committee appreciates their thoroughness and expertise. There being no further business, the meeting was adjourned at 2:12 p.m.