Interim Joint Committee on State Government


Minutes of the<MeetNo1> 5th Meeting

of the 2017 Interim


<MeetMDY1> October 25, 2017


Call to Order and Roll Call

The<MeetNo2> fifth meeting of the Interim Joint Committee on State Government was held on<Day> Wednesday,<MeetMDY2> October 25, 2017, at<MeetTime> 1:00 PM, in<Room> Room 154 of the Capitol Annex. Representative Jerry T. Miller, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Representatives Jerry T. Miller, Co-Chair, and Kenny Imes, Co-Chair; Senators Ralph Alvarado, Denise Harper Angel, Morgan McGarvey, Dorsey Ridley, and Albert Robinson; Representatives Lynn Bechler, Kevin Bratcher, Tom Burch, John Carney, Will Coursey, Joseph Fischer, Derrick Graham, Dennis Horlander, Dan Johnson, DJ Johnson, Mary Lou Marzian, Reginald Meeks, Phil Moffett, C. Wesley Morgan, Jason Nemes, Sannie Overly, Jason Petrie, Rick Rand, Jody Richards, Bart Rowland, Tommy Turner, Ken Upchurch, Jim Wayne, and Scott Wells.


Guests: Thomas Stephens and Jenny Goins, Personnel Cabinet; John Steffen and Emily Dennis, Registry of Election Finance.


LRC Staff: Judy Fritz, Alisha Miller, Karen Powell, Kevin Devlin, Michael Callan, Roberta Kiser, and Peggy Sciantarelli.


Approval of Minutes

A motion to approve the minutes of the September 27 meeting was seconded and passed without objection.


2018 Kentucky Employees’ Health Plan

Thomas Stephens, Secretary of the Personnel Cabinet, and Jenny Goins, Commissioner of the cabinet’s Department of Employee Insurance, discussed the Kentucky Employee’s Health Plan (KEHP) and highlights of the 2018 plan year.


They said that KEHP is the largest self-funded health insurance plan in the state. School boards comprise 54 percent of the membership, early retirees 20 percent, state agencies 20 percent, and quasi-governmental agencies 6 percent. KEHP became self-funded in 2006. Annual amount spent is approximately $1.7 billion, with 296,000 covered lives.


In 2017, KEHP received the “health champion” designation from the American Diabetes Association. The State Wellness Director is Twany Beckham—formerly on the 2012 University of Kentucky NCAA championship team—has worked with the statewide wellness champions. They now number more than 140. There is an increased focus on engagement and outreach. First quarter data for 2017 shows that 10 or more public schools have reached silver status, which means each member averaged 4,000 points in the Go365 LivingWell initiative. About five schools and two state agencies—including the Personnel Cabinet—have reached platinum level.


In the LivingWell plans, there was 94 percent completion of the LivingWell Promise in 2017, which allows members a premium discount in plan year 2018. Since the Go365 (formerly named Humana Vitality) health initiative was started in 2012, there has been a 702 percent increase in wellness activities. The “wellness age” of members in the LivingWell plans who completed a health assessment or biometric screening has been reduced by a half year.


The LiveHealth Online Medical benefit is free to members and has saved KEHP approximately $1.9 million. It provides access to a physician 24 hours a day, seven days a week. The benefit, which is intended for general care, has been used by 9,545 persons. LiveHealth Online Psychology was added in 2017 and has been used by 475 persons. Vitals SmartShopper is another cost-saving program, in which members shop for cost-effective health care services and earn cash rewards. Nine percent of households use this benefit.


The Diabetes Value Benefit, which started in 2016, provides diabetic medications and supplies at low or no cost. Although pharmacy costs increased 13.9 percent, KEHP costs stayed flat for those members because medical cost decreased seven percent. The number of scripts per patient decreased 3.5 percent. There has also been 10.3 percent less emergency room utilization and 6.5 percent fewer hospital acute admissions. KEHP has been working with the states of Georgia, Tennessee, North Carolina, and Oklahoma regarding diabetes prevention. Program successes will also be discussed with the Chamber of Commerce in Louisville next week.


As part of engagement and outreach to explain programs and benefits, KEHP has committed to a “feet on the street” approach to meet with people where they are. Programs need to be marketed to consumers and users in ways other than direct mail.


In 2016 and 2017, the trend increase for medical and pharmacy costs was seven percent. In an effort to ensure good benefits and lower costs, in 2015 KEHP changed vendors. Anthem became the third party administrator, CVS/Caremark the pharmacy benefits manager, and WageWorks the FSA/HRA administrator. Go365 stayed as wellness program administrator, and Vitals SmartShopper remained as transparency vendor. Through the new contracts, KEHP was able to achieve a 11 percent negative cost trend in 2015. Since then the trend has increased somewhat, which is typical. The allowed pharmacy and medical costs per member per month is now $486, which is $5 more than in 2014. Medical care costs tend to increase, but KEHP is continuing to look at ways to lower cost—for example, through LiveHealth Online, the diabetes value benefit, and the wellness program.


The total allowed cost per member per year for KEHP is 6.8 percent higher than in the public sector and 3 percent higher than in the private sector. Based on claims data, KEHP has more members with chronic or crisis conditions than the benchmark. The goal is to transition them from at risk status to a condition that is more sustainable.


For plan year 2018, the employer cost increase was 1 percent, and the cost increase for employees was 3 percent. The LivingWell PPO couple and family coverage had the highest premium increase. The premium for single coverage in the Standard CDHP plan increased from $13.10 to $26.20 per month. KEHP considers the rates good when compared to surrounding states. The last rate increase was in 2014, except for a 1 percent increase last year in the two standard plans. For 2018, no changes were made to deductibles, co-insurance, or co-payments. The healthcare FSA maximum annual contribution increased to $2,600. The HRA maximum carryover is $7,500, and the cabinet has been communicating with members who are approaching their maximum. The number of members affected by the carryover maximum is low.


As of October 23, enrollment in the LivingWell CDHP plan is 55 percent, LivingWell PPO 35 percent, Standard CDHP 7 percent, and Standard PPO 3 percent. These numbers will change daily until open enrollment finalizes in December and do not include all retirees. Enrollment in the Flexible Spending Account (FSA) Healthcare benefit increased 9 percent from last year; enrollment in the Dependent Care FSA benefit increased 13 percent.


KEHP has issued a Request for Proposal (RFP) for a dependent eligibility audit. The RFP closes November 9. The last audit was completed in 2010 and resulted in a savings of about $5 million when dependents no longer eligible were removed from the plan. This type of audit should be done every 5-7 years.


Two new employee voluntary life insurance plans have been added in 2018, along with three new dependent life insurance plan options. All life insurance plans have lower monthly premiums. During open enrollment, so far there have been more than 15,000 life insurance additions or changes.


The Cabinet has combined some staff operations that resulted in a cost saving. Part of that money will be used to decrease premiums for optional coverage. The Department of Employee Insurance has 47 staff members, but its operating costs amount to less than .63 percent of the overall $1.7 billion health plan budget.


Concluding the presentation, Secretary Stephens complimented Commissioner Goins and her staff and thanked them for their contribution to a well-run operation.


Responding to an inquiry from Representative Miller, Commissioner Goins explained how members earn cash rewards through the Vitals SmartShopper program. KEHP saves money through the program and has also given back $1.5 million to members as rewards since the program went into effect in 2013.


In response to Representative Carney, Commissioner Goins said that KEHP pays $49 for each call to LiveHealth Online Medical and about $80 per visit to LiveHealth Online Psychology. Both services are free to members. Representative Carney said he learned about LiveHealth Online from a colleague at the school where he worked. He suggested that it might be beneficial for schools to have on-site coordinators to promote interest in the program. Commissioner Goins agreed and said that state wellness director Twany Beckham is working with schools as part of the Go365 LivingWell initiative.


Responding to questions from Representative Bechler, Commissioner Goins explained how to use Vitals SmartShopper for an MRI procedure when an x-ray is required beforehand. She said she would double-check on this question and reply back to him. She also explained the grievance process and procedures to follow for those who miss the open enrollment deadline or want to change plan selection subsequent to enrollment. She said that KEHP will make things right for people as much as possible, as long as IRS rules are complied with.


Representative Graham asked for clarification of what happens to excess funds in health reimbursement accounts when the carryover balance exceeds the $7,500 cap. Commissioner Goins said it is employer money. For the Waiver General Purpose HRA or the Waiver Dental/Vision HRA, the excess goes back into the trust fund.


Senator Alvarado asked what has led to higher premium costs in 2018. Commissioner Goins said that the amount of chronic conditions has changed little since about 2002. After KEHP experienced a negative cost trend in 2015, medical and pharmacy costs increased in 2016, and usage has also increased. Anthem, which became the TPA in 2015, has a large network of providers, and people are becoming more comfortable about seeing their doctors.


There were no further questions. Representative Miller thanked Secretary Stephens and Commissioner Goins for their presentation and their assistance to the Committee.


Registry of Election Finance – Status Report and Priorities for the 2018 Legislative Session

Guest speakers from the Registry of Election Finance were John Steffen, Executive Director, and Emily Dennis, General Counsel. Mr. Steffen said that since the 2017 enactment of Senate Bill 75, relating to campaign finance, the Registry has been in the process of updating its website, reporting forms, guidebooks, and informational and training materials. The forms and their online presentation are being remodeled to make them clearer to users. With funds budgeted to improve the “IT” system, Kentucky Interactive LLC was contracted to do the work. The Registry thinks it now has a more reliable and secure system. The main focus is to upgrade and improve the operation going forward.


Ms. Dennis said the Registry is defending a federal lawsuit. The case involves challenges to various aspects of Kentucky’s campaign finance laws, as well as challenges to the Legislative Code of Ethics. In June, the court issued a Memorandum Opinion and Order that found all of the claims of the plaintiffs against the Registry moot except for one claim that involved the constitutionality of caucus campaign committees. The court’s order upheld the contribution limit of caucus campaign committees as defined in the statute but invalidated the definition of “caucus campaign committee” as violative of the Equal Protection Clause [of the Fourteenth Amendment to the United States Constitution]. The Registry believes that the court applied an incorrect standard of review and made a clearly erroneous finding of fact. In addition, the Registry thinks that the court’s action may not have been authorized, because the plaintiff’s complaint did not specifically challenge the definition of caucus campaign committee. The complaint was never amended to challenge the constitutionality of that provision. For this reason, the Registry has filed a motion to reconsider and amend the order and to stay enforcement of the order. While confident that the order should be amended, the Registry is also arguing that a stay is appropriate in order to give the legislature the opportunity to remedy the issue by amending the statute. The definition as it is currently written includes the words “Republican” and “Democrat,” and because it includes those words the court found that the legislature was giving deference to those political parties and, in so doing, was violating the Equal Protection Clause. The change that needs to be made to the definition is a simple one, and it is important to resolve the matter. Mr. Steffen and Ms. Dennis asked that the legislature consider making this a priority in the 2018 legislative session.


Ms. Dennis went on to say that she has made a good faith argument that the definition is constitutional as written. By alerting the State Government Committee today regarding the federal lawsuit, the Registry is in no way waiving that argument, because the caucus campaign committees as they are presently constituted do emanate from the rules of the House and the Senate. The Registry was able to find that Republican caucus groups had given to Independent candidates in the past. Caucus groups are not in any way bound to give to members of a certain political party, so this is not a concession that the provision is unconstitutional. The Registry does, though, see why there is reason for concern. She said she would be happy to provide copies of the order and the arguments she has made to amend the order. Representative Imes thanked Ms. Dennis for the explanation and said that clearing up ambiguity about the definition should be a relatively easy fix.


When Representative Miller asked about the software packages used by candidates, Mr. Steffen said the systems are cumbersome and difficult to use. It is his goal to replace those and for the Registry, rather than an outside party, to ultimately be the provider.


When asked by Representative Imes, Mr. Steffen reviewed the changes made by Senate Bill 75 to primary and regular election filing deadlines. They agreed that the filing deadline for the annual report probably should be December 31 and that it would not be unreasonable to make the candidate’s 60-day post report serve as the annual report due on December 31.


In response to a question from Representative Imes, Mr. Steffen said that with the changes in Senate Bill 75, the 15-day pre-election report must now be received by the Registry 15 days before the election, when it only had to be postmarked 15 days before the election prior to the 2017 changes. This eases earlier concerns about having the reports available for public review in a timely manner.


Representative Moffett said he hopes the new “IT” system will include a function for importing from a candidate’s bank account. Mr. Steffen said he cannot answer that definitely today but that a phone app will be created for that purpose. The system will be much more mobile than before.


Senator Ridley asked whether the court decision changed the function of the caucuses of each chamber and party. Ms. Dennis said there has been no immediate change because the motion to amend is still pending, but that is part of the problem. The court’s order, by determining the definition to be unconstitutional, makes it void in the statute because caucus campaign committee is not defined elsewhere. The plaintiff offered two alternative arguments of what caucus campaign committees could do. The way the order is written, not even the plaintiffs know what it means.


When asked by Senator Ridley, Mr. Steffen confirmed that KREF Form 001 (Appointment of Campaign Treasurer) is available and was revised to eliminate the $1,000 checkmark.


Senator Ridley questioned whether a candidate for office is permitted to open a bank account, requiring money to be deposited, before the Registry gives a campaign number to the letter of intent to file for office. He said this should be explained in writing to potential candidates. Mr. Steffen acknowledged that money must be paid to the bank to open an account and said that the Registry will not “nitpick.” He added that they have recently worked on language in the handbook to help address that question.


Senator Ridley asked whether the Registry is going to send notification to candidates in a primary regarding report filing prior to the date the report is due. Mr. Steffen stated that the Registry’s new system should be able to send out reliable reminders electronically for most reports, perhaps even the annual report. He stated that the Registry would be sending out reminder cards in about two weeks.


Representative Graham said that, in advance of a potential special session to address underfunding of the pension systems, he hopes the interim State Government Committee will have a meeting for the purpose of discussing and debating the recent proposals. Representative Miller said he would pass along Representative Graham’s comments and that he believes there are plans to hold a hearing at some point, perhaps in a special meeting of the Public Pension Oversight Board.


Representative Miller thanked the speakers from the Registry. With business concluded, the meeting was adjourned at 2:32 p.m.