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Status of the Statewide Status of the Statewide Healthcare InitiativeHealthcare Initiative

“ The Public School Employees Benefit

Trust Fund”

Hon. Steven R. Nickol

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BackgroundBackground

•HR 159 of 2003 (Diven, Perzel et al.) directed the Legislative Budget & Finance Committee (LB&FC) to study the feasibility of placing public school employee health benefits under the Commonwealth’s jurisdiction.

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•LB&FC contracted “The Hay Group” to conduct the study, which LB&FC contracted “The Hay Group” to conduct the study, which recommended establishing a separate trust administered by the recommended establishing a separate trust administered by the PA Employee Benefit Trust Fund (PEBTF).PA Employee Benefit Trust Fund (PEBTF).

•Predicted Savings Based on Utilizing ExistingPredicted Savings Based on Utilizing Existing

PEBTF Operations and StructurePEBTF Operations and Structure

SOURCE: HayGroup Study, 2004

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SOURCE: Bucks County Courier Times 2/23/04, 2/24/04, www.capitolwire.com 2/04/04, Harrisburg Patriot News 2/10/04, Allentown Morning Call 2/13/04, 2/12/04,

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Small Working GroupSmall Working Group

• “School Employee Health Benefits Pooling Small Working Group” Established in April of 2004.

• Stakeholders Invited: PSBA, PSERS, PFT, PASBO & PSEA:– Assess the Hay Group’s Recommendations.– See if Consensus Could Be Reached to Move

Forward with Legislation.

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PASBO StudyPASBO Study

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Data CollectionData Collection

SOURCE: PASBO Survey, 2005 SOURCE: HayGroup Study, 2004

Cost Disparities

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Data Collection Data Collection (cont.)(cont.)

SOURCE: PASBO Survey, 2005 SOURCE: HayGroup Study, 2004

Number of Survey Response Disparities

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Interest in Proceeding with Interest in Proceeding with Statewide Healthcare InitiativeStatewide Healthcare Initiative

• Take Health Care Off the Bargaining Table

• Act 1 Back-end Referendum Exemptions

• State Contributions

• Controlling Health Care Benefit Costs

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Taking Health Care Off the Bargaining TableTaking Health Care Off the Bargaining Table

SOURCE: Scranton Times-Tribune 8/14/06, Harrisburg Patriot News 8/10/06, Harrisburg Patriot News 8/24/06, Philadelphia Inquirer 1/10/06, www.capitolwire.com 1/10/06, Harrisburg Patriot News 8/14/06, Philadelphia Inquirer 8/27/06, Scranton Times-Tribune 8/14/06, Pittsburg Tribune-Review 8/30/06, Pittsburg Tribune-Review 9/21/06

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Act 1 Backend Referendum Act 1 Backend Referendum ExemptionsExemptions

• School Boards can’t control the cost of healthcare. They shouldn’t be subject to these costs under Act 1. • Pooling provides greater predictability in health care costs for school districts during budget deliberations.

SOURCE: Act 1 of 2006

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Hurdles to State Health Care Hurdles to State Health Care Contributions:Contributions:

• Paying for Different Levels of Benefits in Each School District

• Variable Member Cost-Sharing

• Disparity in Efforts by School Districts to Control Costs

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Employer Healthcare CostsEmployer Healthcare Costs

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006, KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America, 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1988-2006; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April), 1988-2006

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Success in Controlling Costs- Success in Controlling Costs- ConsortiaConsortia

Source: Pennsylvania Association of School Business Officials

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Growth in PEBTF Expenditures per Employee vs.Growth in Private Health Insurance Premiums per Enrollee

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Sources: PEBTF; Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics.

Ch

an

ge

fro

m P

rev

iou

s Y

ea

r

PEBTF 0.8% 4.8% 8.4% 7.3% 8.1% 10.0% 10.1% 9.1% 4.6% 5.5% 3.1%

Private 3.3% 5.2% 4.1% 4.6% 5.4% 6.4% 7.4% 10.1% 11.5% 10.4% 8.4%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Success in Controlling CostSuccess in Controlling Cost• PEBTF Health Insurance Expenditures

• Economy of scale would yield greater bargaining power with insurers.

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Success in Controlling CostSuccess in Controlling Cost• PSERS Health Options Program (HOP)• 65 Special Program for retirees eligible for Medicare

HOP Rate History - 65 Special Program

$-

$50

$100

$150

$200

$250

$300

$350

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Sin

gle

Ra

te

High Option (NC) / HOP Medical Plan + Enhanced Medicare Rx High Option (SW) / HOP Medical Plan + Enhanced Medicare Rx

High Option (SE) / HOP Medical Plan + Enhanced Medicare Rx Std. Option (NC) / HOP Medical Plan

Std. Option (SW) / HOP Medical Plan Std. Option (SE) / HOP Medical Plan

HMO Option Premium Assistance

Source: Public Schools’ Employee Benefit System

• Larger pools help contain the cost of health care benefits and slow down realized cost increases.

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Highlights of the Working DraftHighlights of the Working Draft

• First Trigger-First Trigger- Passage by the General Assembly

• Data Collection, the Study, and Formulating a Plan.

• Second Trigger-Second Trigger- Passage by Board and Review by the General Assembly

• ImplementationImplementation of the Statewide Healthcare Plan

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First Trigger and Phase IFirst Trigger and Phase I

Governor

Governor House

Board

•Collect Data• Conduct a study

Senate

Board

Plan of Implementation

Approval

11stst Trigger Trigger

Super Majorityof 9 Trustees

Veto Power

Data Collection with TeethNeeds to be a Fact Based Process

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The Public School Employees’ The Public School Employees’ Benefit Trust Fund Benefit Trust Fund Board of TrusteesBoard of Trustees

• Composition of the Board:– Governor,– Budget Secretary,– Secretary of Administration,– Insurance Commissioner,– Four members representing school employee

unions,– Four members representing PSBA,

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Plan to be Determined by the Plan to be Determined by the BoardBoard

Payments

Provider

CostContainment

Cost-Sharing

Eligibility

Regions

Benefit Package

BoardBoard

Super Majorityof 9 Trustees

Veto Power

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Concepts of PoolingConcepts of Pooling

• Separate employers• No Shared Risk• Different Plans• Autonomy• Local Control- Bargaining Table• Flexibility• Unlimited vendors• Separate Data

Fragmented Today Regional Pools Single Pool

• One Pool• Shared Risk• Limited Plans• Limited Flexibility• No Local Control- No

Bargaining Table• Shared Data

Modeled after Mercer Health & Benefits Report

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Governor

Board

•Collect Data• Conduct a study

Second TriggerSecond Trigger

Board

• Plan of Implementation

•Approval

Super Majorityof 9 Trustees

Veto Power

22ndnd Trigger Trigger

Governor HouseSenate

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Governance by the BoardGovernance by the Board

• PSBAPSBA

Super Majorityof 9 Trustees

Veto Power

•CommonwealthCommonwealth

•PSEAPSEA

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Health Care Benefits Health Care Benefits vs. vs.

Pension BenefitsPension Benefits• Health Care BenefitsHealth Care Benefits

– EvolvingEvolving rapidly– ChangesChanges in administration

of HC– DynamicDynamic– What works today is

guaranteed not to work guaranteed not to work tomorrowtomorrow

• Pension BenefitsPension Benefits– 54 unconsolidated statutes– Long TermLong Term Obligation– FixedFixed– Can be locked into lawlocked into law

Establish a mechanism to deal with the cost Establish a mechanism to deal with the cost and details of health care benefitsand details of health care benefits

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Time TableTime Table

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QuestionsQuestions