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Public Retirement System Modernization Rfp and Business Case document sample
Governor’s Blue Ribbon Commission on Public Employees Retirement Systems Workgroup 3: Developing Sustainable Healthcare Plans and Benefits for Public Employees June 4, 2007 2pm – 4pm Capitol Annex, Room 154 Workgroup Members Present: Mark Birdwhistell, Secretary, Cabinet for Health and Family Services (CHFS) Charlie Borders, State Senator, 18th Senatorial District and Chair, Senate Appropriations and Revenue Committee John R. Farris, Secretary, Finance and Administration Cabinet Rep. Jimmie Lee, on behalf of Representative Harry Moberly, State Representative, 81st Legislative District and Chair, Appropriations and Revenue Committee Frank Hatfield, Retired Superintendent, Kentucky Retired Teachers Association Bryan Johnson, on behalf of David Jones, Retired Chairman and Co-Founder of Humana, Governor’s Business Executive Appointee Sylvia Lovely, Executive Director, Kentucky League of Cities Brent McKim, Kentucky Education Association Absent: David Jones, Governor’s Business Executive Appointee Harry Moberly, State Representative, 81st Legislative District and Chair, Appropriations and Revenue Committee Other Attendees: Brad Cowgill, State Budget Director, and Chairman, Blue Ribbon Commission Workgroup One Mike Burnside, Deputy Secretary, Finance and Administration Cabinet Staff: Shawn Crouch, CHFS, Chief of Staff Chris Corbin, Executive Director, CHFS, Office of Health Policy Trudi Matthews, Senior Policy Advisor, CHFS, Office of the Secretary Melissa Adkisson, Division Director, CHFS, Office of Health Policy Annette Gatewood, Executive Assistant, CHFS, Office of Health Policy Call to Order The meeting of the Governor’s Blue Ribbon Commission on Public Employees Retirement Systems Workgroup 3 was called to order by Secretary Mark Birdwhistell on Monday, June 4, 2007 at 2:00 p.m. in Room 154 of the Capitol Annex. Welcome and Introductions Secretary Birdwhistell welcomed the group and asked that each member introduce themselves. Review of Minutes The minutes were approved as distributed. Benefits Consultant Update Secretary Birdwhistell introduced Deputy Secretary Mike Burnside, Finance and Administration Cabinet, who provided an update on the Benefits Consultant RFP. Deputy Secretary Burnside stated that responses have been received for the Benefits Consultant RFP and that evaluations will be completed within the next two weeks. He further stated that contract negotiations for the Legal Services RFP are in progress and final selection should be made before the end of June. Medicaid Modernization Overview Secretary Birdwhistell introduced Trudi Matthews, Senior Policy Advisor for CHFS. Ms. Matthews provided an overview of the Medicaid Modernization Act (MMA) of 2003 and its effect on retiree benefits, including the outpatient prescription drug benefit for Medicare recipients, known as Part D. Part D went into effect January 2006 and offers employers a 28% drug subsidy to encourage them to continue offering creditable drug coverage to retirees. In passing MMA, Congress was concerned that employers currently providing retirees with drug coverage would drop that benefit allowing their retirees to enroll in Part D. To protect against this, Medicare offers employers a 28% subsidy payment to continue credible drug coverage. In 2006, over 80% of large employers took the subsidy and continued offering drug coverage to their retirees. As a result, an average savings of $546/retiree was reported by large firms. In 2007, only 78% of large employers took the subsidy and 2% of employers chose to become a stand-alone drug benefit plan rather than taking the subsidy. Ms. Matthews stated that in order for employers to qualify for the drug subsidy, they must offer “creditable coverage” which is defined as a benefit that meets a standard roughly equal to what is offered through Medicare Part D. Presentation on Kentucky Retirement Systems (KRS) Secretary Birdwhistell introduced Rick Schultz, Senior Advisor, Kentucky Retirement System. Mr. Schultz provided a brief history on the transition of KRS (which manages the Kentucky Employee Retirement System, KERS; the County Employee Retirement System, CERS; and the State Police Retirement System, SPRS) from a fully-insured plan to a self-funded model for calendar year 2006. In 2006, five plans were offered, 3 2 self-funded plans and 2 Medicare Advantage plans (HMO and PPO). The HMO and PPO were not offered in 2007. Secretary Birdwhistell asked about the benefit changes between 2005 and 2006. Mr. Schultz responded that during the transition to a self-funded plan, KRS tried to mirror the plan design that the fully-insured product offered. Mr. Schultz commented that one of the challenges KRS has faced is the population of members who have exhausted their Medicare benefits. KRS becomes responsible for hospital stays when the emergency reserve days are exhausted. Sylvia Lovely, Kentucky League of Cities, asked Mr. Schultz if deductibles and co-pays are renegotiated by KRS every year. Mr. Schultz replied that these rates have remained flat but that if an increase in trends should occur, those amounts could be changed. A member asked Mr. Schultz if all major pharmacies participated in the Advantage 90 plan. Mr. Schultz responded that about 60% of them do. Discussion commenced regarding the Consumer Directed Health Plan (CDHP) options. Mr. Schultz commented that there is potential for offering a CDHP to their members, and that this option is currently under internal review. The CDHP is an option that was offered to retirees under the age of 65 by the Department of Employee Insurance. The CDHP promotes consumer responsibility by giving the member more control over their healthcare expenditures. Representative Lee inquired about over-the-counter (OTC) medications and if they qualify for coverage under the KRS plans. Mr. Schultz replied that when an OTC equivalent is available members are notified by mail. He further commented that the first quarter has been focused on an OTC educational component and that a push for preauthorization will occur later this year. Representative Lee then asked if an OTC equivalent should be available, would KRS require that the member purchase the OTC rather than the prescription. Mr. Schultz responded yes and that KRS will pay for the OTC medication. Representative Lee asked how the medication would be dispensed and Mr. Schultz answered that that would be up to the pharmacy to determine, however a dispensing fee would likely still be charged. Secretary Birdwhistell commented on the issue of active employees who are not in the state health care system until they retire, also known as “unescorted” retirees. State employees who chose a flexible spending account rather than a health plan benefit also qualify as “unescorted”. Seeking clarification, Mr. Brent McKim stated that for a state or school board employee who opted for a flexible spending account, the state still has an obligation to provide 3 health insurance or the payment to the flexible spending account. This is not the case with the city and county employees who choose to opt out as the state never had an obligation to pay towards their retirement. In conclusion, Mr. Schultz commented that for 2006, KRS realized a $41 million dollar savings through cost-sharing which included co-pays, out-of-pocket deductibles, rebates, and the subsidy program. Discussion and Next Steps Secretary Birdwhistell stated that at the next workgroup meeting, representatives from the Kentucky Employees Health Plan (KEHP) will provide an overview of the active state employee plan, which includes a number of pre-65 retirees. After hearing from KEHP, a side-by-side comparison of all benefit plans presented thus far will be distributed to the workgroup. Additionally, information will be distributed on other retirement systems from surrounding states sharing comparable demographics to Kentucky. The next meeting date of Workgroup 3 will be determined at a later time. Adjournment The meeting was adjourned at 3:40 p.m. 4
"Public Retirement System Modernization Rfp and Business Case"