Committee on Employee Hospital and Medical Benefits Summary

February 16, 2010

Senator Dan Blue, Co-Chair

Representative Hugh Holliman, Co-Chair

State Health Plan for Teachers and State Employees

Financial Update, Mona Moon, Chief financial Officer The 2009-2011 Biennium forecast for the fiscal year 2009-2010 indicated a beginning cash balance of $146.8 million and a balance of $189.9 million as of January 20, 2010.  As of January, net claim payments amounted to $2.371 billion, administrative expenses $176.9 million with a net plan expense of $2,548 billion, negative net income amount ($49.2 million) resulting in an ending cash balance of $140.7 million or a $20.9 million shortfall for 2009-2010.  The Plan’s cash balance is projected to be $40.2 million less than budgeted by the end of the biennium and the $152 million ending balance equates to slightly less than three weeks of operating expenses. However, the Plan does not anticipate seeking additional State funding in the upcoming short session, beyond the planned, legislatively approved (SB 287) 8.9 percent increase effective July 1, 2010. The projected annual increase for the 2011-2013 Biennium is 9.3 percent and for 2013-2015 the annual increase is anticipated to be 8.4 percent. Co-Chair Holliman told committee members he was very concerned about how the Plan could continue with the 9 percent increases and still maintain its membership. The State covers individuals (the State will have to budget accordingly), but the 9 percent increases directly impact the family coverage costs and the members will have to consider these major annual increases as they might impact the membership.

Administrative Cost Audit, Mona Moon, Chief Financial Officer An overview of the Independent Accountants’ Report on the evaluation of the administrative expenses charged by Blue Cross Blue Shield of North Carolina for procedures performed for the North Carolina State Health Plan for Teachers and State Employees for the period July 1, 2008 to June 30, 2009 was presented.  The audit reviewed procedures and made recommendations aimed at clarifying and providing transparency to the types of overhead expenses that will be charged to the Group Health Plan. The accountants found Blue Cross sought payment for overhead costs such as Blue Cross trustee board retreats, food and retainers for board members, travel, “fringe benefits,” company marketing, data networking hardware, and the salary of the chief executive officer. The issue of overheard costs arose last year when the Legislature approved premium increases and reduced benefits as part of the $675 million plus bailout of the plan.  The health plan covers 661,000 state workers, teachers, retirees and their dependents.  A copy of the report is available upon request from this office.

Pharmacy Benefit Manager RFP, Tracy Stephenson, Director of Pharmacy Benefits shared a few point with members about the pharmacy benefits. She told the members they have determined 50 percent of members are not taking medication for their chronic illnesses due to cost issues. This has the potential to create long-term health problems which will cost the plan more in the long run.  Members can get a 90-day supply and decrease their co-pay with several retailers. They are working on an agreement with a major chain to participate in providing prescriptions at reduced costs to State employees. Thirty percent of prescriptions filled do not cost the plan anything. They are trying to provide updated information to members about changes to prescription access.

Medication Adherence Pilot Program Update, Tracy Stephenson, Director of Pharmacy

Benefits AON Consulting will provide an update and review of the pilot. The outcome of the study report is due soon.  

Utilization Management Update, Anne Rogers, Director of Integrated Health Management

Anne told the committee they are working to identify members (less than 100) with multiple scripts to determine support. They are also working with individuals to find out who can benefit from more medical support.

Comprehensive Audits of Major Vendors, Lacey Barnes, Deputy Executive Administrator

RFP Navigant Consulting is conducting the audit and the final report will be completed April 30, 2010.

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