Pennsylvania taxpayers will pay roughly 14 percent more for some Senate medical and drug benefits after lawmakers recently renewed the plans without making changes.
If the committee responsible for the benefits had eliminated only indemnity plans, a rare insurance coverage that is virtually non-existent in private industry, the state would have lower health costs this year.
The reason is that the new premiums for the Preferred Provider Organization plan, the only other medical benefit plan the Senate offers, are slightly lower this year, according to the new contracts.
This fiscal year, which started July 1, indemnity plans with drug coverage will cost $12,566 for single coverage and $35,543 for family coverage, an average increase of $3,100.
The PPO premiums, which will cost $6,969 for single coverage and $19,311 for a family, are $76 to $287 a year cheaper than last year, even with the increased drug coverage costs this year.
The difference is significant for taxpayers, who pay almost all of the Legislature’s medical benefits. The employees contribute 1 percent of their salary toward the cost of their health plans. The average lawmaker contribution is $780 a year.
Had the Senate replaced indemnity plans with a PPO, at least a 10 percent savings would have been seen immediately through negotiated fee rates and other managed care features, estimated Ross Schriftman of Ross Schriftman Insurance in Horsham.
The Senate’s health benefits are more expensive than the House’s, where employees have four plan choices (including an indemnity plan) with premiums ranging from $4,543 to $20,420 this year for medical and drug coverage.
Only one House medical contract, which had expired June 30, also was renewed without changes, according to the Chief Clerk’s Office. The remaining medical plan premiums are the same as last year.
The renewed plan, an HMO through the University of Pittsburgh Medical Center, had 19 legislative employees enrolled last year at a cost of $146,000. Under the new contract, the premiums increased a little more than 5 percent, according to contract documents.
Medical benefits for 2,800 state legislative workers was the subject of a three-part series in the Bucks County Courier Times and The Intelligencer. The series, which ran in May, generated dozens of calls and emails from readers across the state who were angry that lawmakers kept expensive, taxpayer-subsidized health benefits while calling for deep cuts in education and other programs to fill a $4 billion budget hole.
In late June, Senate Chief Clerk Russell Faber said he didn’t envision any decisions involving changing the health benefits would happen until the Senate reconvened in late September.
“And again, I don’t have a timetable at this point,” he wrote in an email.
The Senate can change its health benefit contracts at any time “via amendments,” Faber added.
In the recent fiscal year, taxpayers footed most of the $16.8 million cost for Senate medical and supplemental health benefits for roughly 900 employees, according to the Chief Clerk’s Office.
The indemnity plan alone cost $6.1 million, though it currently enrolls only about one-third of Senate’s employees. The PPO plan costs were $5.8 million last year.
Among senators, the enrollment swings the other way, with about 60 percent enrolled in indemnity plans. The number includes seven of the nine senators who sit on the Committee on Management Operations, which decides the Senate’s benefits.
In recent years, the Senate’s indemnity premiums have increased far faster than the PPO, rising 42 percent between 2009-10 and 2011-12 while PPO premiums increased less than 1 percent, according to contract information.
Indemnity plans, also known as fee-for-service plans, saw their popularity among private-sector employers drop dramatically in the 1990s as more businesses converted to managed-care plans with cost-saving features.
Last year, only 1 percent of U.S. employees in private industry were covered under traditional indemnity plans, according to Mercer’s National Survey of Employer Sponsored Health Plans. Mercer is a major national health care consultant firm. Only 5 percent of active state employees in the U.S. were enrolled in traditional indemnity plans as of 2009, according to the National Conference of State Legislatures.
What makes indemnity plans so expensive is what makes them so attractive to consumers. They typically don’t have provider networks like managed care plans, meaning the insured can be treated by any health care provider who accepts the plan.
Generally, with an indemnity plan, the insured person pays 100 percent of medical bills until an annual deductible is met. After that, the plan pays a portion of the medical costs, usually 80 percent, and the insured picks up the rest. Plans usually have an out-of-pocket maximum, after which the plan pays 100 percent of medical bills.
Until recently, Tommy Tomlinson, R-6, and Stewart Greenleaf, R-12, were the only Bucks or Eastern Montgomery county state senators enrolled in indemnity plans. They both switched last month to a PPO, the Senate Chief Clerk’s Office confirmed.
Tomlinson said in May that he met with Joseph Scarnati III, who chairs the Senate benefits committee, and Scarnati reacted “positively” to dropping indemnity plans and raising employee contributions to “at least” 20 percent of the cost of the plans.
At the time, Tomlinson vowed to introduce legislation next session to raise employee contributions to at least 20 percent of the cost of the plans if the benefits committee did not. Reached last week, Tomlinson said the health plans were discussed in caucus, and a COMO meeting is scheduled for September, where they will be discussed again.
If a compromise isn’t reached, Tomlinson affirmed that he would introduce legislation to increase lawmaker contributions.
Tomlinson said he’d model the bill on one introduced in the House by Bucks County Rep. Frank Farry, R-142, which seeks to raise lawmaker contributions to 20 percent of plan premiums and would be phased in over 10 years.
“The problem is what is happening to the cost of health care and I don’t know what that answer is,” Tomlinson added. “I think we should be doing our fair share to ease that burden.”
In the House, only one of Bucks County’s 10 representative, Katharine Watson, R-144, was enrolled in an indemnity plan, but she also promised in May to switch to the less expensive PPO. The newspaper is awaiting confirmation of the change from the House chief clerk.
Jo Ciavaglia: 215-949-4181; email: jciavaglia@phillyBurbs.com; Twitter: @jociavaglia
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