Advocating for Active and Retired State Employees and Educators
State Health Benefit Plan (SHBP)-February 18, 2014
2014 Plan Design Changes-Frequently Asked Questions
SHBP January Changes Q&A
A question and answer article for the State Health Benefit Plan has been released by the Department of Community Health. The paper may answer some of your questions about how the changes that were approved on January 27th may be applied to the SHBP decision you made during the Open Enrollment/Retiree Option Change period. You can view the Q&A by clicking here.
SHBP Running On "Empty"
The State Health Benefit Plan is BROKE. As noted in previous GSRA Newsletters, funding for the SHBP since FY 2008 has been reduced to such an extent that all reserves have been used to pay current claims and the SHBP has been placed on a “cash” rather than an accrual payment basis. The Plan is technically insolvent. As shown in the chart below it does not have sufficient funds in reserve to pay claims for medical care already provided to members and for which claims have not yet been filed for payment—referred to as “IBNR” (Incurred But Not Reported) reserves. Commissioner Clyde Reese reported to the Board of Community Health that the Department of Community Health is preparing a grant request under the Affordable Healthcare Act to pay a portion of the health care costs for early retirees—between the ages 55-64. DCH staff presented to and the Board approved a resolution to “front-load” employer receipts to help restore SHBP reserves.
GSRA asked for financial information from the Department of Community Health. The specific information requested was a “Balance Sheet”, a “Revenue and Expense Statement”, and the cost for providing each of the options. The most telling financial information is the Balance Sheet which can be compared to DCH website Balance Sheet information for FY 2008 and FY 2009.
The following facts can be gleaned from the above chart:
· In less than 2 years, the SHBP cash basis trust funds have gone from a well-funded $884,846,177 (including partial funding for OPEB) to a negative $(195,986,701) (without any OPEB funding);
· The SHBP accrual basis trust funds (considering IBNR claims) reserves have decreased from $661,957,177 in 2008 to a negative $(1,095,54,878) in April 2010;
· The cash basis trust fund declined $93,110,924 ($-102,875,777 to $-195,986,701) in one month (March to April, 2010);
· $1.1 billion has been cut from the SHBP funding during FY 2008, FY 2009 and 10 months of FY 1010 while member premiums have increased 10% and benefits reduced by increasing deductibles, coinsurance (copays) and out-of-pocket maxims.
The bottom line: The SHBP is insolvent and if the Plan continues to decline at a monthly rate close to $93 million—as it did in April—the plan will have a negative cash net worth of approximately $382 to $400 million at the close of FY 2010. In addition to the cash net worth, IBNR liabilities increase the negative accrual net work to $619 to $637 million. At the Board of Community Health Meeting on June 10, 2010, the Chief Financial Officer, Scott Frederking, stated that the FY 2011 projected cost of the SHBP was $200 million more than the FY 2011 funds appropriated. He further stated that the DCH was working through the issues to present the member rates required for medical options with reduced benefits beginning January 2011.
DCH Commissioner Clyde Reese stated that the department was preparing a $100 million—about one-half of the currently projected shortage for FY 2011—grant request to the federal government to reimburse the SHBP for a portion of the cost for retirees age 55-64. In the national Affordable Health Care Act, Congress appropriated $5 billion to help employers until 2014 pay for retirees from age 55-64. Under the act, health plans can be reimbursed at 80% of the claim costs between $15,000 and $90,000 for a retiree age 55-64.
Commissioner Reese stated that there was no assurance that the grant request would be approved, but that it would be very helpful to “fill-in” the shortage. Recent news articles have reported on the race by big employers to request retiree funds. Companies are concerned that the early-retiree fund will be exhausted quickly. General Electric Company, the state of California and retired union auto workers are among those preparing to apply.
In addition to the grant request, the Board approved resolutions to “front-load” the employer contributions to meet the funding needs during the FY 2011 1st quarter. The Appropriation Act provided for a state department rate of 22.165% of salaries, the teacher rate of 18.534% of state-based salaries, and $30,261,983 for school service employees. However, by “front loading” receipt of employer contributions, the Board approved the state employees’ rate at 25.586% and the teachers’ rate at 21.55% for the first calendar quarter of FY 2011. The resolution also included transmittal during the first calendar quarter of the entire $30,261,983 that was appropriated for school service employees’ health insurance during FY 2011.
SHBP Questions & Answers - October 2009
GSRA developed two sets of questions from members' questions about the State Health Benefit Plan. Some of the questions were general "in nature" and could be answered by GSRA officials and other questions were submitted to the Department of Community Health (DCH) for response. Two documents have been prepared for your information. The Q&As developed by GSRA were distributed to all attendees at the Annual Meeting of October 21st and can be reviewed by clicking on this link (GSRA Q&As). Other questions were asked and responses verbally given by DCH staff at the Annual Meeting. However, DCH also provided written responses to those verbally asked and others that could not be asked because of time. You can view these Q&As by clicking on this link (DCH Q&As).
New Retiree Policies Announced for July 2009 and January 2010
In October 2008, the Department of Community Health announced major changes for retirees age 65+ to become effective in July 2009 and January 2010. Briefly stated the policies (1) require retirees age 65+ to enroll for Medicare Part B or pay an additional $300 per month as of July 1, 2009
(2) require retirees age 65+ to transfer to the Medicare Advantage Plan (MAP) on January 1, 2010 in order to receive any State employer subsidy to the premium.
GSRA has addressed the retiree issues in several newsletters. Specific GSRA newsletters having articles related to the policies are dated March 18, 2009, February 28, 2009, February 11, 2009, December 2008, and October 2008 newsletters. A recent presentation providing a simplified view of the policies, Medicare Part B Premium for 2010 and limited information on Healthcare Reform may be of interest.
New Vendors for January 2009
The Department of Community Health announces the selection of two vendors to administer SHBP options beginning 2009. The two vendors are United Healthcare and CIGNA.
Transition, Premiums, and Other Updates
The Department of Community Health announces several updates to the State Health Benefit Plan (SHBP) that will take effect in late 2008 and early 2009. See the May 2008 Update for: