Legislative Memo Outlines Public School Employee Insurance Changes

Last week, House Speaker Davy Carter (R-Cabot) and Senate President Michael Lamoureux (R-Russellville) charged the heads of the legislative education and insurance committees to come up with a framework for a solution to the public school employee insurance crisis by Friday, Oct. 4.

Deadline met.

A memo circulating among Arkansas lawmakers this morning (Oct. 4) outlines a number of short-term and long-term fixes to the troubled insurance fund, which is facing a $54 million deficit and looming 50% rate hikes to teachers and public school employees.

Rep. James McLean (D-Batesville), chair of the House Education Committee, confirmed to Talk Business that the memo is the one requested by House and Senate leadership.

“I think this is where we can start to build a consensus we’re going to need to have a special session to get this issue taken care of and fixed,” said McLean, who cautioned that it is a starting point for discussion and comments with other legislative members.

“This will be the plan, or most of this will be the plan, that will be essentially provide for some architecture for legislation for a special session,” McLean added.

The details of the plan include:

Short Term Funding Options (Effective Jan. 2014) – From EBD – $54 million needed to keep 2014 premiums at 2013 level

• $36 million from surplus, $18 million passed along to PSEs [public school employees] (about 16% premium increase)
• $43 million from surplus, $11 million passed along to PSEs (about 10% premium increase)

Long Term Funding Options (Effective Jan. 2015)

Ongoing funds anticipated to replace the one-time funds from above. NOTE: This assumption does not account for any premium increases or any decreases that occur as a result of plan design changes.

Governor’s suggestion is an equal 1/3 split between state, school districts, and PSEs

• $18 million from State (possible sources)
• $10 million (Governor)
• $5 million by adjusting the rate allocated per budgeted position in agency budgets
• $3 million general revenue
• $18 million from school districts
• Professional Development categorical fund ($2 million)
• Reduce required PD hours and reallocate supporting funds ($12 million)
• Facilities funding ($4 million)
• $18 million premium increases to PSEs

Long Term Structural Modifications

• Restructure Insurance Board
• Increase PSE representation on Board
• Appointments split between Speaker, Pro Temp, Governor
• Require Board to provide more education of participants on plan options
• Require preferred rate premiums for non-tobacco users; participation in wellness plan
• Require districts to send foundation funds from matrix to EBD, regardless of PSE participation rate
• Require deductible for all plans (changes current no-deductible Gold Plan)
• Incentivize Bronze Plans by allowing districts and state to contribute to PSE Health Savings Accounts
• Require reinsurance Task Force on State and Public School Employee Insurance Reform
• Establish a task force to do a comprehensive review of the entire ASE and PSE insurance system.
• Include experts from medical, insurance, human resources, others to be identified
• Determine affects on ASE and PSE insurance system by changing market and regulatory conditions.
• Require an interim report and recommendations to Insurance and Commerce and Education Committees by 9/30/2014.
• Continue working with final report and recommendations due 6/30/15. General Assembly can choose to extend the Task Force if needed.