To read the entire State of Health series click here: here
Posted: February 15, 2012
The Pennsylvania Senate is dropping its rare and expensive employee medical plan and increasing medical and drug co-pays, changes expected to save the state more than $1 million a year, according to the Senate's top ranking lawmaker.
The Senate Committee on Management Operations, whose nine members decide on employee benefits, approved the elimination of indemnity health plans in December, Senate President Pro-Tempore Joe Scarnati confirmed in a Feb. 9 letter to the Bucks County Courier Times.
Scarnati estimated that the two changes would result in a savings of more than $5 million to $6 million over a five-year period.
Lawmakers, employees and retirees enrolled in indemnity plans will be moved into the other available health plan option, a Preferred Provider Organization plan, effective April 1, Scarnati said.
About 60 percent of senators are enrolled in indemnity plans, compared with only one-third of other Senate employees. The Senate provides health benefits for roughly 860 active employees.
In an email Tuesday, Scarnati estimated that $2 million would be saved over three years just by eliminating the indemnity plans. The savings is derived from also increasing current PPO co-pays from $5 to $10 for office visits, $10 to $20 for specialists and $25 to $50 for emergency room visits without admission.
Also at the December meeting, Management Committee members approved increasing some prescription drug co-pays for active and retired employees effective April 1, a move expected to save $1 million over three years.
Co-pays for name brand drugs with no available generic will increase from $12 to $25, and brand name drugs where generic is available will jump from $26 to $40. The $6 co-pay for generic drugs won't change.
Scarnati didn't mention increasing employee contributions toward health premiums. Senate and House employees contribute 1 percent of their salaries toward their medical and health benefits. For the average lawmaker, that's about $800 a year, which is less than the monthly premiums for some plans.
"As we shrink the costs of health insurance by moving from the indemnity plan to the PPO and through prescription co-pay increases, the 1 percent of salary covers a greater portion of the total cost of health insurance," he said Tuesday.
Scarnati added that outside counsel has advised Senate leadership that the 1 percent contribution rate is "likely legally locked in" for current employees, although the 1 percent obligation is subject to an ongoing review.
Also, the Senate and House leaderships are in ongoing conversations about the possibility of offering the same health plan to cover both chambers, Scarnati said.
The Pennsylvania Legislature's expensive taxpayer-subsidized health and medical benefits were the subject of a three-part series titled "State of Health" in the Bucks County Courier Times and The Intelligencer in May, and several related follow-up stories.
Following the series publication, which led to a public outcry about the benefits, Bucks County Sen. Tommy Tomlinson, R-6, vowed that he would introduce legislation to raise employee contributions to at least 20 percent of the cost of the plans and eliminate indemnity plans. Tomlinson and fellow local Sen. Stewart Greenleaf, R-12, both switched from indemnity plans to the cheaper PPO option in July.
The Courier Times was unsuccessful Tuesday in reaching Tomlinson or Greenleaf for comment.
Last year, state taxpayers footed most of the $16.8 million cost for medical and supplemental health benefits for roughly 900 Senate employees, according to the Chief Clerk's Office. The indemnity plan alone cost $6.1 million last year.
In July, the Senate's employee medical and drug premium costs jumped 14 percent after the plans were renewed without changes. The indemnity plans were responsible for almost all of the cost increase.
This year, premiums, including drug coverage, for the Senate indemnity plans range from $12,566 for individual coverage to $35,453 for a family, while the costs for the Preferred Provider Organization plan with drug coverage are from $6,969 for individual coverage to $19,311 for a family.
Indemnity plans are virtually nonexistent in the private sector today. Their popularity declined dramatically in the 1990s as businesses converted to managed-care plans with cost-saving features such as provider networks, pre-certifications and referrals.
Last year, only 1 percent of U.S. employees in private industry were covered under traditional indemnity plans, according to health care consultant Mercer's National Survey of Employer Sponsored Health Plans. Only 5 percent of active state employees were enrolled in indemnity plans as of 2009, according to the National Conference of State Legislatures.
Generally, with indemnity plan coverage, the insured pays 100 percent of medical bills until an annual deductible is met. Indemnity plans don't use provider networks so members can see any doctor who accepts the insurance. The plan pays a portion of the medical costs and the insured picks up the rest. Plans often have an out-of-pocket maximum, after which the plan pays 100 percent of medical bills.
This fiscal year, the annual deductible for the Senate's indemnity plan is $100 for individual coverage and $300 for family coverage; the annual out-of-pocket maximum is $380 for each person covered.
In the last three fiscal years, the Senate's indemnity premiums have jumped 42 percent while PPO premiums have increased by less than 1 percent, according to contract information.
The Senate's health benefits are more expensive than the House's, where employees have four medical plan choices (including an indemnity plan) with premiums ranging from $4,543 to $20,420 this year for medical and drug coverage alone. Premiums for three of the plans have not changed since they were renewed in July 2009.
Among the 203 House lawmakers, 27 percent are enrolled in indemnity plans compared to 15 percent of the 1,673 active House employees. Three of the five bipartisan Management Committee members responsible for choosing the health benefits are enrolled in family indemnity plans, the most expensive option.
On Monday, House Chief Clerk Tony Barbush said the House's five-member benefits management committee will give "consideration" to similar changes for its plan renewals, which are expected to take place before the July expiration.
State Rep. Frank Farry, R-142, has introduced a bill seeking to raise lawmaker contributions to 20 percent of plan premiums, phased in over 10 years. The 10 Bucks County representatives and two of the three eastern Montgomery county representatives have signed on as cosponsors.
Only eastern Montgomery County Rep. Kate Harper, R-61, is enrolled in an indemnity plan. She also is the only local state representative who has not signed on as a cosponsor for Farry's bill.
As of Tuesday, Farry's bill had 28 cosponsors; generally 50 to 70 co-sponsors are considered good numbers to increase increases the chances of the House leadership moving a bill to the floor for a vote.
Jo Ciavaglia: 215-949-4181; email: jciavaglia@phillyBurbs.com; Twitter: @jociavaglia
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