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State Health Insurance Premiums Increasing
Sunday, 07 November 2010

November 6--  State Senator Jack Hill of Reidsville reports in his "Notes From The Senate" that health insurance premiums for state employees are expected to go up about ten percent.

"Health benefits for state employees are self insured by the state.  Open enrollment is currently going on for the State Health Benefit Plan (SHBP), Georgia’s health insurance program for state employees, school employees, retirees, and their dependents.   SHBP, like most state programs, has been impacted by the economic downturn, as well as changes in federal law due to the Patient Protection and Affordable Care Act (PPACA).  

From Fiscal Year (FY) 2008 to FY2009, SHBP saw a 10.5% increase in expenses and a 4.6% increase from FY2009 to FY2010.  According to DCH, two factors primarily drove the increases in Plan Year 2009 (the program is actually run on the calendar year not the fiscal year).  First, the program has seen an increase in inpatient and outpatient hospital price payments.    Inpatient payments per admission increased by 16.2%, while payments per outpatient visit increased by 13.5%.   Second, the plan saw a 31% increase in claimants with claims over $100,000 and 34% increase in payments for these claimants. 

To remain financially viable, SHBP has been encouraging members to shift to consumer driven health plans, which offers health care choices but is 16% less expensive than the Open Access Plan (commonly known as PPO).   The state’s main consumer driven plan is the Health Reimbursement Arrangement (HRA) plan.  The HRA plan allows members to decide how to spend their health funds (for example members are not required to be preauthorized to see a specialist).  From July 2009 to July 2010, the number of members enrolled in the HRA increased by 76%.  At the same time, enrollment on the state’s HMO decreased by 17% and the Open Access Plan has declined 47%.  While only 28.5% of all SHBP members are on the HRA, the state expects that members will continue to shift to that plan.

Plan Changes

Due to the current financial position of the plan, DCH has implemented several changes for Plan Year 2011 to avoid a $155.3 million deficit in FY2011.  The Department expects these changes will curb expenditure growth in FY2011 to just 0.7% or $20.6 million.  And that is based on the assumption that the number of active state employees, teachers, and school employees will continue to decline, while the number of retirees will increase.   In terms of revenue, the plan tries to maintain the employee’s contribution to 25% of total expense.  In Plan Year 2010, the employees share was 22.8% of expenses and in Plan Year 2011, the employee’s share is only expected to increase to 25.1% of total expense.   A few of the major plan changes are detailed below:

·        The Open Access Plan (OAP) (the PPO plan), which covered 131,411 employees in Plan Year 2010, will be eliminated.  Employees will have to choose one of the other three plans offered.

·        Each of the state employee plans will see, on average, a 10% premium increase.

·        Also slated for increases are spouse and tobacco surcharges, deductibles, out of pocket maximums, and copayments.

SHBP was also required to make plan changes to come into compliance with PPACA.   The plan must now cover children up to the age of 26.  While overall this will be an expense to the plan, much of the cost will be covered as employees shift to different plan tiers and pay add on fees for each child.  The plan must also now cover 100% of the cost for preventive services, which is expected to cost $4.9 million. 

Other Funds Required

PPACA did include funds to help the state pay for the Early Retiree Reinsurance Program.  DCH has projected the state will receive approximately $50 million in FY2011 and $110 million in FY2012.  This program will be used to cover costs for medical claims for retirees age 55 and older who are not eligible for Medicare, and their spouses, surviving spouses, and dependents.

Even with these changes, SHBP administrators are basing their projections on the assumption that the General Assembly will appropriate $50 million in FY2011 to help cover the shortfall. 


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