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House | March 6, 2013 | Committee Room | Personnel

Full MP3 Audio File

[Speaker changes.] ....so I'm gonna turn this thing over now to Mona?????????? [Speaker changes.] Good afternoon, again I'm Mona Moon???? I'm the interim executive administrator for the state health plan. We appreciate the opportunity to be with you today and talk about some wonderful things that are goin' on within the state health plan. I'm gonna kick us off and talk about statutory authority governance and oversight as kind of a review...some recent history there. And talk about some strategic planning efforts and benefit development efforts that our board has been undertaking...and really over the last year. And then, if it's okay with you, I'm gonna turn it over to Tom and let him talk about our funding requirements and benefit changes for the upcoming biennium. Mister Chairman, I would be happy to take questions as we go...I find that lot of times that make sure we address the things that you're interested in. So I'll be happy to do that as we go. [Speaker changes.] Mister Chair? [Speaker changes.] Have a question already? Yes sir, Representative Floyd? [Speaker changes.] On page one, front page...you have under state health plan for teachers and state employees? [Speaker changes.] That's correct. [Speaker changes.] OK..what's the difference between teachers and state employees? [Speaker changes.] Teachers are local employees of the local education agencies, whereas state employees are those who are employed by state agencies such as Department of State Treasurer, the General Assembly..universities are also state employees so that's the difference. [Speaker changes.] Follow up, Mister Chair? [Speaker changes.] It just bothers me when I see these things come forward, ya'know,with a separation and both are to the same system. [Speaker changes.] Well, I appreciate that...the reference for teachers as state employees has been fairly traditional, that is our statutory name so, to the extent that you would like to call us something else, our name has changed in the last few years. OK..talking about statutory authority and governance and oversight, really the planned statutory authority is set out in Article 3D of Chapter 135 of the General Statutes. Some recent history on our governance structure, really you have to go back to 2011. The General Assembly enacted legislation that transferred the state health plan to the Department of State Treasurer, effective by January 1 of 2012. Before that, the plan actually reported directly to the General Assembly via a legislative oversight committee. That was really our only sort of source of oversight at that time. The executive administrator of the plan would meet with the chairs of that committee, develop legislative changes for our benefit structure and move those forward. As I mentioned, I am the executive administrator...I have been appointed by the Treasurer to oversee the plan's day-to-day operations. The legislation that transferred the plan to the department provided the Treasurer with very broad authority to administer the plan. The Treasurer may delegate many of those powers and duties...to the executive administrator, to our Board of Trustees or to the plan's staff but ultimately, the Treasurer maintains responsibility for the performance of those powers and duties as well as the performance of the plan. Now, as a part of this legislation, it was essentially a complete statutory rewrite for the state health plan. There were a lot of details around our benefit structure that used to be set out in the statute. Those no longer exist in that manner. The authority resides with the Treasurer relative to setting benefits and the Treasurer does that in consultation with our Board of Trustees. [Speaker changes.] ??????? Representative Brawley? [Speaker changes.] Has that transfer made it easier to administer the plan? And I ask that, because when it was statute, one of the statutes said that if you don't notify the plan within 36 hours of going in the hospital, you don't get benefits....and guy goes in a coma, spends three days in the hospital before he gets out of the coma and tells them he's got insurance so obviously, he didn't notify them within 36 hours and by law...by law...so does that give some flexibility and freedom there? [Speaker changes.] I'm not as familiar with that specific law. What I will say is that I do think that this change has made the plan much more flexible to deal with issues. We, and as we get into some of the other pieces of Tom's portion of the presentation, the Board is able to make some changes around benefits during the year as a ....

...as opposed to having to wait for the legislative session to do that and so from that standpoint I think certainly we are much more flexible than a minimal organization. The situation that you spoke of, certainly if there is a law that sort of set that time frame. If we had that in place today that would be that if we had issues around that that we could try to address particularly around some of the medical necessity pieces and prior authorization pieces that we do still have some of those things in place within the plan. [SPEAKER CHANGES] OK. So as I was saying the board of trustees for the plan is a fiduciary board. This is in contrast to our former board which really was in the statute referenced as fiduciaries but they didn't really have a lot of fiduciary responsibility. the main one they had was relative to administrative reviews and appeals. Otherwise the former board acted pretty much in a consultation type of situation, advising the plan's executive administrator as well as the general assembly with respect to things. Now our board is required to approve benefit programs, so any of our ebenefit offerings, our premium rates, our co-payments, deductibles, other out-of-pocket costs that members pay. The board is required to approve any changes in those. As I mentioned they do continue to oversee administrative reviews and appeals. They also approve all of our contracts in excess of $500,000. There have been some changes in the review of contracts in recent years and that is one of the things this board is doing and has done with several contracts. Otherwise in general this board also consults with and advises the State Treasurer and one duty that is pretty much solely theirs is to develop and maintain a strategic plan. The benefits pieces and the premium pieces, the cautionary pieces, the board really does in consultation with the Treasurer. She has the responsibility to set those but she has to have approval from the board for changes. Our board does have ten members. Two ex-officio and eight that are appointed. Two of those appointed. Two of the members each by the Governor, the State Treasurer, the House of Representatives, and the Senate. Couple of quick slides here to put some faces with some names for our Board of Trustees. Obviously I'm sure everyone knows the State Treasurer as well as the Director of the Office of State Budget and Management. We also have our Governor appointees: Kim Hargett and Genell Moore. And our Senate appointees: Noah Huffstetler, Michele Shaw. House appointees are: Bill Medlin and Warren Newton and the Treasurer's appointees are: Paul Cunningham and David Rubin. We do have a really well balanced board. By statute it is made up of not only teachers, active employees, retired teachers, retired state employees, but in addition to that we have a number of experts sort of seats that have to be filled. So a good well-rounded board that works very well together. The Treasurer only votes in the event of a tie. So it is a board that is designed to really build consensus and they've been very successful in doing that over the last year. In terms of overarching themes and goals, as I mentioned the board has been engaging, for really a year now, in a fairly massive strategic planning effort, and through those discussions we have sort of settled on a number of overarching themes and goals that the board is trying to keep in the forefront of their decisions and their evaluation of different options. Certainly one of the big goals is to improve the health and wellness of plan members. They also understand the implications of cost containment and the need to bend the health care cost curve to promote long term financial stability as well as affordability for our plan members. So access, quality, affordability, those are important things for us. They also seek to increase our member engagement and accountability. We really need members to engage in their health and to participate in their healthcare decisions. We believe that that will result in healthier members as well as help us with our cost containment efforts. And, then, of course, we want to begin incenting and rewarding healthy behaviors so that we provide members with opportunities to reduce their out-of-pocket expenses as they are actually seeking services as well. And, then, finally, one of the things that came out of alot of the...the Treasurer went out on some listening tours as she began to oversee the plan. We've done some focus groups. We do an annual survey, and one of the things that came out of that is that our members would really like to see it...

Speaker: Additional choice with respect to choosing benefit options one of the things we thought good to share with you today lie to the fact that it has been over years that general assembly moves to department state treasurer in that legislation the general assembly left us with no of directives as well as some guidance we are asked to examine the issue cost and mechanics of moving to the issue to calender year we are asked to make savings to awareness programs medicare advantage plan alternative plan design and other resources and then more of the suggestions from any those ?? to be used offer premier free plan to active employees in 2011 the general assembly of ?? premium employee for the first time for active ?? P P O plan design at that time 730 plan was ideas the premium free plan ?? but there was a premium free charge ?? active employees and teachers dis legislation gave that authority to way that three years for physical years 12 and 14 there was a directive to establish a premium free plan by July 1st 2013 as well and finally we keep put to keep our premiums low particularly through some of the savings initiatives on the right hand side ?? all of these we are converting to calender year 2014 that conversion process will start this July we were really operate December on a short plan year which means that all of the ?? and the co insurance plan that we have in existence today plans will be cut in half ?? they will have some cause savings come in that first six months during that conversion year is tom is gonna talk about ?? the approved benefit design that have board passed on February 4th it does include on this programs pf the senate medicare advantage ?? and over the next few years all of the initiatives are expected to save over 400 million dollars is i mention premium free option are maintaining the basic 1713 P P O option premium free basis this July is well as count to calender years 14 or 15 then the board approved ?? change were also lower than premium ?? over the next four years so that a little bit about things that we have been doing one of the things that we do continue to look to general assembly from leadership stand point is always we ?? that is something that tom is ?? details on that we recognize that funding for the state can be very difficult and we are doing things that we can do to keep that employer contribution down not by any upcoming but in the long term general assembly still says the eligibility requirements for the plan that is not something that board of trustees ?? authority to do i think from time to time we have issue to do there were technical statures to bring those to the general assembly but otherwise the boards not gonna make eligibility decisions Mr.Chairman that concludes my portion i will be happy to answer any questions alternative over the time to talk about funding, Speaker Changes: ?? before we let her leave the stand there if not thank you very much ?? will hear from you next, Speaker Changes: i fit the fund part of the money in the benefit sir what you gonna see here is our initial forecast prior to nay of the benefit changes that we like to put in place we would be asking about 1.7 percent premium increase ?? in the coming one but then it was Freddy substantial 14.8 percent ?? but that includes and the improvements to the prudential ?? health plans what we put together is something little like bit attractive to members it's gonna have some ?? in the short term but as we can see it's gonna lower that increase in the out years to ,

4% which would be a pretty significant savings for a general funds to ask going forward. So we are asking for a little bit of an investment in the short-term to save you all money going forward. Before we get into what those changes really entail. We wanted to show you that below is kind of what we foresaw the general funding appropriation increase going forward in the current scenario and see some pretty big numbers out in FY 17 and if you look at what the board approved. Still some pretty big numbers but some more manageable big numbers. If you go to the next slide. What were looking at is how were currently funded right now. Right now the general fund kicks in about $1.9 billion dollars. The highway funds kicks in close to $100 million. Other state receipts put in a good amount and members put in about 17% of our costs. So that's what were looking at in those the numbers. In the previous slides are incremental to what were going to be looking for going forward. So im ganna pause if any of y'all have any questions on the .....

I do have one question. Just kinda like to know is the drivers for those large increases coming from 2015 to 2017 the incremental realization of the requirements of the affordable care act or are there other drivers for that as well.

There are other drivers for that. The main driver right now is the plan is in a pretty good cash position. We've had a pretty favorable experience the past couple years. So what were doing in the shorter term is using cash that we have on hand for more favorable experience, to kind of cut some of this premium increases. Because we are in a grandfathered plan were not currently subjected to a lot of those changes under the affordable care act. The financial costs. We are subject to the reinsurance program that's very small. We think it's about 40 $45 million dollars in the first year and it goes down each year. So it's not really the affordable care act thats driving this is just we have a good cash position based on good experience a bad economy and some good plan management stuff we've done. So were using that cash to kind of hold down the increases in the short-term and that kind of makes the increases in the out years seem a bit bigger

representative Lambeth

Thank you Mr. Chairman. Just a quick question for you. Do you compare both your benefit design in your funding levels to other southeastern states? I know you mentioned 17% provided by the participants through their premium. How does that compare to other states around us for example?

speaker changes> Mona's ganna take that and I can probably piggyback on her comment

I guess this is when you have to hold down. We have looked from time to time at the other states. I think generally what you find is that in more recent years are benefit design in terms of deductibles out-of-pocket cost for plan members it's been a little bit higher than what you might see in other states, as well as the private sector. Which is one reason why were trying to hold those, hold the line on those. Were not proposing increases on those cost shares. In terms of your questions about the employee costs. What you see in other states is really that as a percentage of the total I would expect the employee payments to be higher than what you see here and the reason for that is for really sort of twofold. One traditionally in North Carolina, the state has fully funded the employer contribution for the employee and the retiree coverage. In other states you'll see some fairly significant cost-sharing requirements for employees and retirees. So our 80/20 plan that has a 20 almost a $23 premium is fairly nominal to what you might see in some other states. Contrast that with other states coverage for dependents in North Carolina. We had traditionally required that dependents pay or that employees members pay 100% of the premium costs for their dependents. You usually see some subsidization in other states in the private sectors of the dependents rate. So a little bit different way or approach in policy I guess of funding the employee share in the dependents share

I have a follow-up question to that Ms. ?????. If you would and I'm not on the state health plan, so I don't know you mentioned the current deductible and out-of-pocket could you tell me what those figures are currently?

The deductible in the 80/20 plan is $700 dollars. The deductible in the 70/30 plan $933 and I have to say I don't have the out-of-pocket on the top of my head. I think it's about $3200 In 80/20 plan. I can't remember what it is in the 70/30 plan. we'll be happy to get that to you.

Thank you

Representative ?????

This slide shows the [INAUDIBLE] revenue, but I don't see anything that shows the expense [INAUDIBLE]. I don't see anything that shows the expenses or revenue or balances. All of this is each year everything being paid out. You must have a nominal - you said you have a good cash position, could you elaborate on what your cash position is and what your expenses and projected expenses are? [SPEAKER CHANGES] Yes sir. The goal when we do this is to make it so the revenues equal our expenses except for our cash reserve that we need to have on hand in case the dollars keep coming in, kind of our reserve total. Right now we've accrued almost $700 million dollars in cash, so we are going to use that cash instead of asking you all for more money, it's going to kind of fill this pie. So if we looked at the 2013, 2014 puzzle, we'd be using [??] part of that cash instead of a general fund [??]. But the goal is to make the revenues and the expenses line up pretty tightly. We're increasing our reserve to 9% so revenues would be about 9% in a perfect scenario higher than our expenses. [SPEAKER CHANGES] Mr. Chairman if I could follow up on that. [SPEAKER CHANGES] Sure. [SPEAKER CHANGES] Representative Blust our funding model is set such that we are trying to develop a revenue where our - set our premium so that our total revenues cover our claims cost and the reserve, the target stabilization reserve that Tom was talking about. So these revenues that you see here you're absolutely right and we can get you some details on the expenditure side of it, but because we have built so much cash over the last couple of years what we would expect is that these revenues in and of themselves will not cover the anticipated cost over the next couple of years because we'd bring that balance down, we want to get that reserve balance down to match our 9% target stabilization reserve. In contrast to other years where we may have a higher premium because we're trying to build the reserve back up, but our funding model is a little bit of break even. [SPEAKER CHANGES] Mr. Chair. [SPEAKER CHANGES] Representative Floyd. [SPEAKER CHANGES] We have $700 million dollars in reserve and 9% is your goal that you set? [SPEAKER CHANGES] Our goal, and that's going to be our new goal. Right now the goal is 7.5% but you're correct, we're about $700 million dollars in our cash reserve. [SPEAKER CHANGES] I thought it was here, and you said at 7.5%? [SPEAKER CHANGES] Right now. The board has approved an incremental increase to get to 9%. [SPEAKER CHANGES] What's wrong with 10? [SPEAKER CHANGES] We love it. [SPEAKER CHANGES] Yeah. Nothing on our end. [SPEAKER CHANGES] I mean the reason why I'm asking you about statute in the state [??], your municipality must have between 8 and 10% of its budget in reserve. So if you use the same format then that could be, well just... [SPEAKER CHANGES] You might want to ask that question to the appropriations Chairman Representative Floyd [SPEAKER CHANGES] If I could follow up on that as well. So we have increased the target stabilization reserve form 7.5% of claims to 9% of claims in an increase to increase our reserves given that moving to a calendar year puts our forecasting period out six months further. But the other things is that we have looked at our year in claims liability so at the end of each fiscal year we have to report to the state controller for financial reporting purposes for the state how much our unpaid claims liability is as of June 30th of each year. And we did an analysis of those estimates that our actuary prepares with our actual cash balance and we found that our target stabilization reserve traditionally under estimates really what our year in liability would be, 9% is much closer to that range. It's 10% number is not out of the realm of kind of the range that we would be looking at but one of the things about building up the reserves is that in order to do that it requires a higher percentage increase in the premium and so we were trying to balance a gradual increase in those reserves over time. [SPEAKER CHANGES] [??], 9.5 is good instead of increasing a percent. [SPEAKER CHANGES] Well thank you, you may continue Mr. Friedman. [SPEAKER CHANGES] So now I wanted to talk about the kind of cost case we always talk about with health care, and this is how we feel like we've bent the cost care going forward. If you follow that doted green line, that's when we'd be coming back and asking y'all for if we don't make these plans on changes that the board approved. A big part of what the board did was to increase wellness and health and make healthier members and give members an opportunity to use higher efficiency, lower cost centers of care. And by doing that we can save the general fund about $152 million dollars in appropriation acts over the next four years. So we feel like this is a good step in the right direction to bedding that cost curve and making other plans sustainable and more affordable.

Going forward. So that investment were asking for does have a pretty substantial payoff, and this is also expected to save our employees and retirees about $40 million in premium contributions over the same period of time. Now kind of into the meat of what we want to do. There's some initial things that are going to happen July 1. We're going to reduce behavior health co-payments. Right now they're at the mid-tier or speciality tier. For mental health and substance abuse visits we're going to reduce those to the primary care level, which is-- as you can see they're pretty substantial reductions. But again, it's trying to get folks to seek the appropriate care. The big piece, the big first piece I should say, is changing the benefit year from a fiscal year to a calendar year. So we are going to have a short plan year. It's going to be six months from July to January. Whether it's not going to be a re-enrollment of members, we're just going to half the deductible, half the out of pocket maximum, with no premium increase. So some folks are going to have an opportunity for savings, they're not going to see that short-term spike in their premiums. [And to the] conversation we just had, we are increasing our target stabilization reserve from 7 1/2% of claims to 9% of claims by 2015. And we're going to do that, our goal is to do that by about a 1/2 a point each year. Now kinda the big fun stuff: this is what's effective January 1st, 2014. We are maintaining a premium-free 70/30 plan for both actives and retirees. This is no hassles. All the wellness stuff we're going to talking about does not apply to this 70/30 plan. We are leaving that as is. We heard from folks, we kinda internally ?? that hassle free option are just gonna be what it's gonna be. We're going to enhance or 80/20 plan to include a wellness design that we're going to get into, but high level, includes 100% preventative care, and it's going to have some wellness surcharges and credits that folks can earn. We are going to offer a consumer directed health care plan, high-deductible health plant. It's something, you might have heard of it, and we're going to couple that with a health reimbursement account that pays part of that deductible. It will roll over from year to year so folks can start building some savings - some health care savings - for when events do happen. And - to not forget the retirees - we're going to offer a new fully insured Medicare Advantage option with a prescription drug plan. It's going to be one card. We hear a lot about folks with two cards, it's not always the most popular thing. So this will be a fully insured product that's going to be. It's going to be pretty exciting for members that's going to give them a lot of options. It's going to give them a buy up option. Going some of the specifics: we're going to continue with our basic 70/30 plan premium free to retirees. This is actually a statutory requirement that we have to have a non contributory coverage for eligible retirees. We're going to continue the traditional 70/30 option on a premium-free basis for active retirees through ?? 2015. After that, going forward in the next biennium, I think it's important to know we're going to apply the same wellness premium surcharges in 2016 at the same level as the standard 80/20 plan and consumer directed plan. This is going to be the default option for folks. We're not going to stick some of these surcharges that we're talking about on folks. If they don't enroll, and don't engage in the enrollment process, they're going to be put in the 70/30 plan and they're not going to be subject to any of the surcharges. But they're also not going to have some of the advantages that come with the 80/20 plan or our consumer directed health plan. And for the Medicare retirees, the Medicare Advantage prescription drug plan will be the default option. Just so we're clear on the default option, that's just so folks take no options we're not going to kick them out of health coverage. This is just the plan we're going to put folks in. [SPEAKER CHANGES] Yes, sir. Representative Bell. [SPEAKER CHANGES] Yes, I'm one of those Medicare eligible retirees that you're talking about. And I was just wondering if we're going to have to-- the state health plan is going to add this health activities thing to us, or? [SPEAKER CHANGES] No, sir. That is not going to be for the Medicare retirees. That is for the active and the pre-65 retirees exclusively. So you, you're good. [SPEAKER CHANGES] Representative Blust. [SPEAKER CHANGES] [I seem] to remember when we were passing these changes a few years ago there was opposition. There was threats of lawsuits. Has that, have those threats developed? Are we being sued over the changes we made a few years ago? [SPEAKER CHANGES] [crosstalk] you wanna answer that? [SPEAKER CHANGES] Yeah. There is a law suit relative to the plan designed specifically, relative to charging a premium.

[SPEAKER CHANGES]: Refreshing a premium for the 8020 plan, and a few years ago as we had some financial difficulties we also ?? the 9010 plan that was available to members as a ?? option. There is a lawsuit relative to those plans, we have not had a lawsuit related to any and sort of the wellness things that we had in place a couple of years ago. [SPEAKER CHANGES]: Mr. ?? you may continue. [SPEAKER CHANGES]: Sir, so going into what these subscriber premiums are going to be, it's a $40 per month subscriber wellness premium surcharge. For folks they are going to need to attest that they are either a non-smoker or in a smoking cessation program or there will be a $20 surcharge per month added to their premium in the 8020 plan or the consumer ?? health plan. Then there is going to be a $20 of wellness surcharges that were going to get into ??. What those wellness surcharges are, are very simply if folks need ?? primary care physician what I have seen they exclusively go to this primary care physician, but they need to select a primary care physician to go on their member card. If they do not do that, there will be a $10 premium surcharge tacked, and they will need to complete a health assessment prior to enrollment which is a series of questions about their family history and some medical information they would like to know about folks. If they do not do that step there will be a $10 monthly surcharge tacked on as well. On the flip side if the folks do participate in these activities, for example if you do select a primary care physician, we will take that $10 surcharge off your premium, and we will take an additional $5 off your premium. So, it's a $15 credit in a $10 surcharge. Same with the health assessment, if you do not complete it, it will be a $10 surcharge but if you do complete it there will be a $15 credit to your account. So, for folks in the 8020 option it is very likely if you complete these 3 steps your premium will be lower in 2014 that it is in 2013. If you complete these health activity steps, and you enroll in the consumer directed health plan then your plan will be premium free for individuals. I ?? as clear, if anyone had any questions on that it's kind of mechanical. We plan for these premium surcharges ?? to increase every 2 years, ans like I mentioned in the next biennium. This will also apply to the 7030 plan. So, they will not have a option for a traditional just ?? active in place for a basic free option. They are going to has to do some of these steps as well. The next chart page is a chart, kind of what these premium credits and surcharges look like, what we plan them to be going forward. As you can see in 2016 we plan in doubling the surcharge from $40 to $80, and there will be some new healthy activities put in place to and also ?? your premium credit. So, we do want a reward folks for conducting healthy behaviors ?? health and make it a benefit for them, so they actually will have a reduced premiums. So, from our perspective we are asking you to do something, but we are also ?? to do them by reducing premiums currently, then again this is not applied to medical products. Some additional wellness benefit designs that are not related to premiums but are based on ?? members some other activities and reduce some of the financial barriers to the care ??. I think for the past few years we have raised copays and coinsurance into that ??. This is an opportunity for folks that they do some healthy behaviors ??. Like I said folks in the 8020 plan, the consumer directive plan will have a 100 percent coverage on preventive services, that means no co-pays, no ?? and no co-insurance applies. This is pretty universally seen as a good step to ?? members to be healthy, and see the doctor and get in front of folks and get to know their health. Some other ?? I do is achieved network, achieved specialty network, and ?? in patient visit network. So, there is a blue cross provide this with a list of blue selected hospitals which are more cost higher efficiency, better outcome hospitals. We would like our members to be healthy and use some of these facilities. So, if folks in the 8020 plan use these facilities, we are going to ?? their inpatient ?? which right now is $233 when I drop that down to $0 to try to get members using some of these facilities that have better outcomes and better cost structures. Additionally, for the blue select providers, we are going to reduce the specialist copay from $70 to $60, and ?? go on the blue cross website and see who these providers are and who these facilities are.

not trying to make them a secret, we want folks to use these options. Another benefit we're gonna use is, if you do seek the PCP that you elected on your card, you're a member the PCP practice, in order to reduce your PCP copay by 15 dollars each visit, so it's gonna be reduced from 30 dollars to 15. [SPEAKER CHANGES] Representative Hurley, you have a question? [SPEAKER CHANGES] Thank you, Mr. Chair, I wanna go back to the one before this. Do you have any idea how many, number and percentage of state health plan members and/or dependents who are projected to pay premium surcharges in excess of premium surcharges credits by category? Do you have a projection? [SPEAKER CHANGES] I'm not sure I understand your question. The number of employees that would pay the surcharge, we do have that information, we have it and provide it to you. [SPEAKER CHANGES] And dependents? Do you have an idea of that? [SPEAKER CHANGES] The dependents are not-- It is a subscriber-only surcharge, so it will apply to the subscriber, the healthy activities apply to the subscriber, with a couple of exceptions, so the smoker attestation would be the subscriber and spouse. The primary care physician, we would like for everyone in the family unit to pick a primary care physician, everyone will receive the co-pay reduction if they do that, and on the health assessment, that is a subscriber-only completion. So those are the different pieces and the actuaries have worked out estimates in order to develop the overall projection of how many people will complete the health assessment, how many people will pick the PCP, what our smoker population is, how many of those folks will engage in a cessation program and therefore still be eligible for the plan, how many will opt out of some of those things and pay either some or all of the surcharges. [SPEAKER CHANGES] Yeah. Follow-up? [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] None, okay. Yes, Representative Floyd? [SPEAKER CHANGES] One question for clarity. You have now here, that's two... Blue Cross and Blue Shield, when does that contract expire? Was it supposed to be 2013, or was it renewed, or what? [SPEAKER CHANGES] Our current contract with Blue Cross Blue Shield expires June 30th of 2013. We do go through a competitive bidding process, and they did win the contract for third party administrator services for medical claims processing related services, that will begin July 1 of 2013. We also have two other vendors that will be assuming administrative responsibilities formerly provided or currently provided by Blue Cross, in terms of our enrollment eligibility as well as co-run individual billing. [SPEAKER CHANGES] Sir. [SPEAKER CHANGES] A question. Will we have better communication with Blue Cross and Blue Shield than we had in the past? [SPEAKER CHANGES] I'm not sure what you're specifically referring to, but I'm going to say yes, I think that we are very committed to continuing to improve the Blue Cross relationship, I think that we've increased the value in that contract in the past four years. I think we had a very good procurement process, and we continue to push them to provide the best services to our plan members that we can. [SPEAKER CHANGES] From Blue Cross's perspective, I would certainly think, as far as communication goes, from their point of view, I would think, as a business person, it would be much easier to communicate with someone in the treasurer's office than a committee of people in the legislature, so we may solve that problem by what we did last year. Representative Hurley? [SPEAKER CHANGES] I'm sorry, but another thing. Can we see copies of those contracts? [SPEAKER CHANGES] We will be happy to provide that information to you. They're very, very large, and we would need to provide you with information that protects the proprietary nature of some of that, but we can make arrangements to do that. I'd be happy to work with the committee staff to get you what you need. [SPEAKER CHANGES] Yes, sir. Representative Elmore. [SPEAKER CHANGES] Thank you, Mr. Chairman. Do you have information about how many, or can you give me information about how many of the state employees do have dependents on their plan? Because in pools, it's better to have younger people, and I would like to know how many folks are actually using this as an option for their families. [SPEAKER CHANGES] Our family size is fairly low, it's like, 1.3, so most of our members are enrolled in employee-only or retiree-only coverage. I'll have to get you the number, in terms of the number of dependents. Let me look for that, and we'll... [SPEAKER CHANGES] All right. Mr. Friedman, we've got, what, seven minutes? So, if you would go ahead and proceed. [SPEAKER CHANGES] All right.

We're about there. Finally, on this side, we are still considering additional funding for the Health Reimbursement Account for the consumer directed health plan for some of these incentive programs, because they don't get co-pays. They're subject to deductibles and co-insurance only. So we're still vetting out options for those members. [SPEAKER CHANGES] Representative Wilkins, did you have a question? [SPEAKER CHANGES] Yes sir, Mr. Chairman, thank you. I can't recall ever having seen a list of the Blue Select hospitals. How many are there? [SPEAKER CHANGES] There are- That's a good question. We just- The list changes fairly often. We can definitely potentially share that with you. I think there's like forty two. [SPEAKER CHANGES] It looks like there's about forty of them. We can provide you with a list. There are a number of them. There are more Blue Select hospitals than what were, we will show you. There are two tiers of them. The tier one are the ones that have been designated as being the higher quality, more efficient providers and those would be the ones, that if members visit those providers, they would receive the co-pay waiver. But we would be happy to get you a list. [SPEAKER CHANGES] May I follow up, please? [SPEAKER CHANGES] Sure [SPEAKER CHANGES] Thank you. Mona, is there a distinction between urban and rural Blue Selects? [SPEAKER CHANGES] In terms of the coverage, it looks to me like there's a mix. But again, I think we'll be, we'll get you a map so you can really see those. They are spread out throughout the state. One of the things that we do recognize with this, is that everybody may not have a tier one Blue Select in their backyard. And so we want members to still have the freedom of choice, but to the extent that they are willing to travel, or have one close by, then we want to incent that. [SPEAKER CHANGES] Okay. Mr. ?? [SPEAKER CHANGES] For the last big note, is the Medicare Advantage Plan option. It's a fully insured option that's gonna be, we have contracts in place with Humana and United Healthcare. This is only for Medicare eligible members. It reduces the plan's medical and pharmacy costs, as it's a fully insured product, and it's federally approved for purchase. There's some savings opportunities there. It's gonna be enhanced benefits relative to the current coverage we offer members. And there will be premium reductions for the spouses and dependents based on how Medicare Advantage works. We can't charge folks more than the value of the product. Right now we cross subsidize our Medicare retirees, our pre-65 retirees, and our active employees. So there's gonna be a savings for the Medicare retirees there. There's also gonna be a buy-up option for those folks to have even better coverage than what's offered under the Medicare Advantage product. So there's gonna be the base product and a buy-up product available. That is it. I want to share with you a couple more advantages of the Medicare Advantage product. It really does harmonize the experience for the Medicare retiree, which was a big drawing point for us. There's gonna be reduced cost sharing. It replaces traditional Medicare. Everything's kind of together under one umbrella, which we thought made it nice and convenient for Medicare retirees. And the last slide is a grid. Don't be intimidated by the colors and all the different points where things are. I was, when I first read it. This basically shows the current offering, who gets offered what, whether you're an active employee, a non-Medicare retiree, or a Medicare retiree. Who is subject to what premiums, and what plans are offered now. [SPEAKER CHANGES] Representative ?? [SPEAKER CHANGES] ?? I think you just did. [SPEAKER CHANGES] Yeah he did. [SPEAKER CHANGES] My question deals with, the data shows that the state health plan could actually save some money by using the 150% of Medicare rates and linking hospital payments on Medicare Medicaid rates. And we haven't necessarily done that, have we? [SPEAKER CHANGES] No, we have not. The contract that we have with Blue Cross Blue Shield, as well as United and Humana for the Medicare Advantage products, does include their network pricing. So you're right. From the standpoint of Blue Cross Blue Shield, one of the things that we're contracting with them for, is their network. Whether or not the state wants to get into setting prices around payments for services for state employees, we're happy to have a conversation about that. Those things could- That'd be a fairly difficult conversation for a lot of reasons, but obviously one of the things that we want to do is make sure that we continue to have a broad based provider network, and that is one of the strengths of Blue Cross Blue Shield. So we'd be happy to have some discussions with you about that.

Representative Blust. [SPEAKER CHANGES]: Thank you. One of my former colleagues, Representative Folwell used to talk a lot about the unfunded liability and he had, I think some study, that showed it over thirty billion over so many years. Is there any updated information of about what the unfunded liability is and are we bringing that down over time? [SPEAKER CHANGES]: Yes. We do have updated information on that and it was over thirty billion. We've reduced that by about five billion dollars in the past year or so. I'm happy to send you all the information on the steps we've done to reduce that but, yes, that is front and center and we are working on reducing that liability right now. [SPEAKER CHANGES]: Perhaps that was another benefit of turning it over to the state's treasures department. All right. Seeing no other questions then, the Committee, it looks like next week we will be meeting to at least briefly to hear at least one Bill. I did hear our name called one time yesterday. I don't know if it will be called between now and then, but plan on meeting again next week to hear at least one Bill and this meeting is adjourned.