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Tuesday, November 6, 2012
Legislature's health plans could save $5.5 million this year
Posted: Monday, October 29, 2012
The Pennsylvania Senate anticipates saving a little more than $2.5 million this fiscal year under its new health benefit plans, while the House anticipates $3 million in savings. The House’s expected savings come even though the new three-year medical benefits contract includes a rare and expensive health plan option that was eliminated by the Senate earlier this year.
The new medical and health benefit contracts for lawmakers and legislative staff approved by both branches of the state Legislature took effect July 1, when the state fiscal year started. So far, the Senate only has released information about the new medical benefits plans that cover the majority of its workers.
Neither the Senate nor the House will know the exact costs of the coverage until after the fiscal year ends on June 30. The Senate’s savings estimate is based on the elimination of the high-cost indemnity plan and other copay changes.
Indemnity plans are virtually nonexistent in the private sector today. With indemnity plans, the insurer generally pays 100 percent of medical bills after the insured meets an annual deductible. Plus, the insured can see any health care provider who accepts the insurance. There is no provider network of medical professionals.
The popularity of indemnity plans declined dramatically in the 1990s, as businesses converted to managed-care plans with cost-saving features, such as provider networks, pre-certifications and referrals. Only 5 percent of active state employees in the U.S. were enrolled in indemnity plans as of 2009, according to the National Conference of State Legislatures.
Pennsylvania taxpayers cover most of the cost of health benefits for employees of the Legislature. Employees contribute 1 percent of their salaries toward medical insurance premiums. For the average lawmaker, that’s about $800 a year.
Calculating the total legislative staffer contribution isn’t so easy. Neither the House nor Senate could provide an average employee salary.
But a 2011 Associated Press analysis showed the average House GOP staffer earned $36,000 and contributed $360 a year for the medical coverage, and the average Senate Democratic Caucus staffer earned $52,000, and contributed $520 a year.
The holdup with details of the House’s medical benefits information is blamed on its new insurer, Highmark Blue Shield, which also insures Senate employees, House Chief Clerk Anthony Barbush said. Highmark replaced Capital Blue Cross, which had insured most House employees.
The Highmark contract, which covers the majority of House employees, has yet to be finalized. When it is, it can be posted on the state Treasury website, Barbush said.
“According to our benefits office, because this change in benefits plans took place for such a large number of employees in such a short time frame, the contract has been held up in the Highmark legal office,” said Brooke Wheeler, the House’s Right-to-Know law administrator.
A total of 1,816 House employees and 869 Senate employees received health benefits as of June.
The Highmark medical plans include the choice of an indemnity plan or a Preferred Provider Organization plan, Barbush said. The House also eliminated one of the two HMO options available last fiscal year.
The House renewed an HMO plan through the University of Pittsburgh Medical Center that enrolled 18 employees last year. Those premiums increased 14 percent this year over the 2011-12 fiscal year to $5,181.24 for individual coverage and $14,533.20 for family coverage.
The House last year spent $44.2 million on medical, vision, prescription and dental benefits for active and retired members. Barbush was unable to provide a cost breakdown for current House employees only.
House employee medical and drug plan premiums ranged from $4,543 to $20,420 last fiscal year, depending on the plan and the number of people covered.
In a joint statement, spokesmen for the Democratic and Republic House leadership said that the House has worked quickly to “head off skyrocketing healthcare costs with the primary goal of ensuring the most efficient use of tax dollars.”
The House has also slashed health care and operating costs more than $15 million over the past few years, added spokesmen Bill Patton for the Democratic leadership and Steven Miskin for the Republican leaders.
“The new contract essentially offers identical coverage for less cost — including significantly lower rates for the indemnity plan — altogether saving the taxpayers about $3 million (this year),” the statement said. “We will continue working towards further health care savings.”
Meanwhile, the Senate attributes the largest part of its projected savings to the elimination of indemnity medical plans as of April 1 for active and retired employees. The Senate also: increased copays for doctor visits (from $5 to $10 for regular visits; from $10 to $20 for specialists; and from $25 to $50 for emergency room visits without hospital admission); and increased copays for brand-name prescription drugs for which no generic is available (from $12 to $25) and for brand name drugs for which a generic is available (from $25 to $40).
The Senate had projected “at least” a 15.4 percent increase in indemnity plan costs this year had the option been continued, according to Chief Clerk Russell Faber.
“We have recently been told that the preliminary projection for our PPO cost increase this year will be in the neighborhood of 5 percent,” Faber said.
The combined Senate plan changes are “conservatively” estimated to save $10.3 million over four years, with most of the savings the result of dropping indemnity plans, Faber said. The Senate’s new medical, vision and prescription drug contracts expire June 30. The dental contracts for both the House and Senate expire June 30, 2014.
In the current fiscal year, annual premiums for Senate drug and medical coverage combined range from $9,322 for an individual to $26,183 for a family, according to the Highmark contract. Under the previous indemnity plans, the premiums (including drug coverage) last year ranged from $12,566 for individual coverage to $35,453 for a family.
The total cost of providing medical and supplemental health benefits for active and retired Senate employees for the previous fiscal year was roughly $24 million. Of that, a little more than $17 million reflected costs for active employees, with $12.2 million spent on medical and hospital benefits. About half of the $12.2 million was attributed solely to indemnity plan premiums.
Forty-seven percent of current employees were enrolled in the indemnity plan option before it was eliminated, compared to 53 percent in the PPO, Faber said.
“Even though the active (employee) PPO plan had 15 percent more people enrolled than the indemnity plan, the total cost of the PPO plan was 42 percent less than the total cost of the indemnity plan,” he added.
For instance, prior to the change, the individual premium for an indemnity plan was $859.57 a month — more than double the $393.17 monthly cost of the individual PPO premium, Faber said. The reason for the difference is the PPO plan had a healthier population, Faber said.
To merge into a single PPO plan for all Senate employees, Highmark had to account for the less-healthy population of indemnity plan members, Faber said. As a result, individual PPO premium rates jumped to $583, but the rates for former indemnity plan members dropped to $599.39 a month.
“While the PPO costs have increased, the overall plan costs will decrease due to the old indemnity plan trending at a higher rate than the PPO plan — 15.4 percent increase versus 9.5 percent increase,” Faber said.
Faber declined to release information about the type of health plans in which individual senators are enrolled, though it did release that information in 2011. Faber said the information on the senators is exempt under the Right-to-Know law, and was mistakenly released previously.
Following the release of that information last year, three Bucks County lawmakers — Sen. Tommy Tomlinson, R-6, Sen. Stewart Greenleaf, R-12, and Rep. Katharine Watson, R-144 — switched from indemnity plans to the cheaper PPO option during the 2012 open enrollment period.
As of last year, all Bucks County and eastern Montgomery County representatives were enrolled in PPO health plans, except Rep. Kate Harper, R-61, who was enrolled in an indemnity plan.
Jo Ciavaglia: 215-949-4181; email: jciavaglia@phillyBurbs.com; Twitter: @jociavaglia
Did You Know?
To read the entire "State of Health" series and ongoing coverage visit this link.
Only one of the 50 Pennsylvania senators is not receiving state health benefits this year: Sen. Mike Folmer (R-Lancaster, Dauphin, Chester, Berks and Lebanon).
Only two of the state's 203 state representatives are not receiving state health benefits this year: Sheryl Delozier, R-Cumberland, and Rep. Martin Schmotzer D-Allegheny.