Board puts off cut in pharmacy benefits until 2022

Implementation of the State and Public School Life and Health Insurance Board decision to kill the state’s pharmacy coverage for retirees eligible for Medicare Part D may be delayed a year, a joint legislative committee was told this morning.

However, Amy Fecher, secretary of the Department of Transformation and Shared Services, said the proposal to delay the change until Jan. 1, 2022, will deplete Employee Benefits Divison reserves for retirees and would require $3 million from the state to cover the shortfall.

The legislative hearing was the second about the board move.

Fecher said the new proposal would increase premiums by 5 percent for those who decide to keep the state plan until 2022. Those who decide to move to a Medicare drug plan will receive a $25 discount from their premiums in 2021. In 2022, those who move from the state plan to Medicare will get the discount. Fecher said the plan was reached as a compromise with a small focus group of retirees. “It’s a compromise we can all live with,” Fecher said.

Courtney White, of the Milliman actuarial firm, said reinstating the pharmacy coverage would cost $38.5 million, but reserves are only $31.4 million. That $7 million shortfall would be decreased by certain savings to $3.65 million. The EBD proposal would also ask the state to raise its contribution per employee from $420 to its legal cap, $450.

Legislators at the Insurance and Commerce joint committee raked representatives of the department and the EBD over the coals for the August decision to end the benefit, saying the board should have let them know of the insurance program’s financial difficulties well before to the decision and should have considered other ways to keep from exhausting its surplus.

Sen. Jason Rapert (R-Conway) said the EBD had broken a promise to 13,000 retirees that their drug costs would be covered. He also said he’d learned at an out-of-state meeting that the state could have saved millions with a different drug contract and was angry that had not been mentioned to him by EBD administrator Chris Howlett.

Legislators questioned why the pharmacy benefit was removed when its costs were not at the root of the problem in covering insurance costs, suggesting it was only offered as a solution because it was an easy way to save $48 million, the projected amount the state will pay for prescription drugs in 2020.

A visibly angry Sen. Missy Irvin (R-Mountain View) complained about learning of the decision to end the drug benefit from the newspaper “in the middle of a pandemic.” She said people, most over 65, “are dying of COVID. … That’s real.”

Irvin said her emails had “blown up” with complaints from unhappy retirees, and that a decision to kill a benefit should not have been up to the EBD director without input from lawmakers. “We were denied our ability to do our job,” she said.

Lawmakers are considering adding representatives from the House and Senate to the EBD board, and Sen. Keith Ingram (R-West Memphis) asked for an audit of the overhead of the EBD board and administration so the division could “look inward to see if we are operating efficiently.”

The legislature will continue to look into the decision to end the benefit and how to increase legislative oversight of the division.

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