Interim Joint Committee on State Government


Minutes of the<MeetNo1> 3rd Meeting

of the 2012 Interim


<MeetMDY1> September 27, 2012


Call to Order and Roll Call

The<MeetNo2> third meeting of the Interim Joint Committee on State Government was held on<Day> Thursday,<MeetMDY2> September 27, 2012, at<MeetTime> 1:00 PM, in<Room> Room 154 of the Capitol Annex. Representative Mike Cherry, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Damon Thayer, Co-Chair; Representative Mike Cherry, Co-Chair; Senators Walter Blevins Jr., R. J. Palmer II, Dan "Malano" Seum, and Robert Stivers II; Representatives Linda Belcher, Dwight Butler, Leslie Combs, Tim Couch, Joseph Fischer, Danny Ford, Derrick Graham, Mike Harmon, Melvin Henley, Martha Jane King, Jimmie Lee, Mary Lou Marzian, Brad Montell, Lonnie Napier, Sannie Overly, Darryl Owens, Tanya Pullin, Tom Riner, Carl Rollins II, Bart Rowland, Steven Rudy, Sal Santoro, John Will Stacy, John Tilley, Tommy Turner, Jim Wayne, and Brent Yonts.


Guests: Fred Nelson and Joe Cowles, Personnel Cabinet.


LRC Staff: Kevin Devlin, Alisha Miller, Karen Powell, Greg Woosley, and Peggy Sciantarelli.


Approval of Minutes

The minutes of the August 22 meeting were approved without objection, upon motion by Representative Rudy.


Kentucky Employees’ Health Plan (KEHP) and Wellness Program – 2013 Plan Year

The guest speakers from the Personnel Cabinet were Fred Nelson, Commissioner, Department of Employee Insurance; and Joe Cowles, Deputy Executive Director, Office of Legal Services, and General Counsel for KEHP. They provided copies of their slide presentation; “KEHP Benefits Selection Guide”; and an informational sheet, “Getting Started with HumanaVitality.”


Responding to a question from Representative Henley, Mr. Cowles explained that the loss of grandfathered status would result in additional costs due to plan design mandates of the Affordable Care Act. KEHP has saved approximately $15 million by retaining grandfathered status.


Mr. Cowles discussed the impact of the Commonwealth budget crisis and other challenges confronting KEHP in the new plan year. He said that two percent increases in the employer contribution were budgeted for both plan years 2013 and 2014. Health care inflation continues to increase, and there is a continued need to improve member tools and education and increase participation in the wellness and disease management programs.


In keeping with federal healthcare reform mandates, W-2s for the 2012 tax year will report the health insurance contributions of both employer and employee. This is a federal reporting requirement and is for informational purposes only. The Cabinet is in the process of finalizing a Summary of Benefits and Coverage, a document required by healthcare reform to help consumers better understand their coverage and compare different coverage options. It will be available online and should be helpful to plan members. A new federal law has reduced the maximum that may be contributed annually to a flexible spending account (FSA) from $5,000 to $2,500 per participant. Permissible plan design and employee contribution changes for 2013 are limited in order to maintain grandfathered status.


Representative Cherry said a constituent told him that a Personnel Cabinet webinar mentioned that emergency room (ER) coverage would apply only to life-threatening events. Mr. Cowles said that is not correct. There was a small modification to ER coverage, but he does not believe there will be a material impact on the ER benefit. The criteria for emergency services will be based on a “reasonable layperson standard.” There is no attempt to reduce access. Persons who do not need ER care may still seek it, but it would not be a covered benefit. Responding to Representative Owens, the speakers explained that for minor injuries it is more cost efficient to seek care from urgent treatment centers. The Benefits Selection Guide states on page one that seeking care from a primary care doctor or urgent treatment center may be more appropriate than an ER.


When Representative Rudy asked whether the two percent employer contribution increases for 2013 and 2014 will apply also to cities and counties, Mr. Cowles said he is unable to answer because the Personnel Cabinet relies on the state budget office to provide that information.


Mr. Nelson recited the principles and goals for 2013: provide uniform coverage across the Commonwealth; encourage wellness and healthy lifestyles; provide preventive care at little or no cost; improve chronic disease care; educate members about plans that are more appropriate for their health needs; provide plan alternatives that are accessible for retirees; provide a quality PPO option; and strive to hold down costs for families and dependents. Goals are to maintain a low cost plan option, including a zero dollar plan for singles; offer the same four plans as 2012, consumer-driven healthcare options, and a benefits analyzer; keep premiums competitive with other states; provide preventative care at little or no cost; promote the HumanaVitality incentivized wellness program; maintain benefits comparable to 2012; and maintain medical benefits and contribution increases within grandfathered limits.


Mr. Nelson said that open enrollment for 2013 will be passive—that is, no action is required unless a member wants to change plans or coverage level, or renew or start a healthcare/dependent care FSA. Open enrollment will be held October 8-26, with eight benefit fairs being held throughout the state from October 8-18. Many of the fairs will offer biometric screenings, free flu shots, and computer kiosks for on-spot enrollment. The Benefits Analyzer tool will be provided in paper format and mailed to all KEHP members, with the exception of some members of Kentucky Retirement Systems and Kentucky Teachers’ Retirement System. Rate increases and benefit adjustments are relatively minor for the new plan year.


When asked by Representative Cherry, Mr. Cowles said that KEHP will probably lose grandfathered status in 2014, which means the plan will become subject to at least an additional $15 million in benefits. The Cabinet is already beginning to plan for 2014 and the changes that will be brought by federal healthcare reform


Representative Ford asked whether there has been an analysis relating to usage of the 90-day maintenance drug benefit at retail pharmacies versus mail order. Mr. Nelson said pharmacies that participate in the 90-day retail network are required to offer rates at least as good as mail order rates. There are no administrative fees associated with the 90-day benefit. Mr. Cowles said he is not aware of any analysis but that utilization of the 90-day benefit is approximately five percent for retail pharmacies and only two percent for mail order. The mail order program receives no favoritism over independent retail pharmacies.


When Representative Ford asked whether the Cabinet could provide legislators a side-by-side comparison of 2012 and 2013 plan year changes to share with their constituents, Mr. Nelson said they would. When asked whether retiree premiums have increased significantly, Mr. Cowles advised Representative Ford that under-65 retirees covered by KEHP do not pay higher premiums than other plan members.


When Representative Napier asked questions about Medicare Plan-B and health insurance for himself and other retiring legislators, Mr. Cowles explained to him that he would lose KEHP coverage upon retirement because he would no longer be an active employee and would be Medicare-eligible. He advised him to contact Donna Early [Executive Director, Judicial Form Retirement System] regarding eligibility for coverage through the legislator/judicial retirement plan. Representative Lee described elements of the Medicare program and offered to meet with Representative Napier later to discuss them.


Mr. Nelson gave a detailed review of 2013 premium rates and benefit copays, coinsurance, deductibles, and out-of-pocket limits for the Standard PPO, Maximum Choice, Capitol Choice, and Optimum PPO plans. He noted that employer contributions will increase by two percent. The average increase in employee contributions is five percent, but rates for single coverage will not change. The Standard PPO plan will continue to offer a zero dollar employee contribution (nonsmoker rate). Sixty-five percent of plan members are enrolled in the Optimum PPO plan. In order to comply with federal law and retain grandfathered status, coinsurance percentages will not change. Walgreens returned to the Express Scripts pharmacy network as of September 15.


Mr. Cowles said the single coverage annual premium for Optimum PPO is $753, compared to the national average of $1,002, according to the Kaiser Family Foundation. KEHP’s actuarial consulting firm Aon Hewitt reports a gradual shifting of costs from employer to employee in other state employee plans over the past year. Copays have increased in 30 percent of states, and deductibles have changed significantly in 10 percent of states. There were incentive-oriented design changes in 20 percent of states.


KEHP has received approximately $95.5 million from the Early Retiree Reinsurance Program (ERRP), established by federal healthcare reform to help employers with the cost of medical claims for early retirees (age 55-64). Kentucky ranks in the top 10 states relative to the amount of funds received and will use the funds to offset KEHP’s and member health benefit costs. ERRP reimbursement funds must be used no later than December 31, 2014. The program has ended because the funds have been exhausted.


Mr. Cowles discussed KEHP’s wellness program, now rebranded as LivingWell. He said 80 percent of KEHP costs are attributed to preventable or manageable chronic health conditions. According to Kaiser, life expectancy in Kentucky is 76.2 years versus 78.7 nationally. Kentucky exceeds the national average with respect to the percentage of overweight or obese adults and children ages 10-17, the percentage of adults who smoke or report poor mental health, and the number of deaths due to cancer. KEHP is dedicated to wellness and providing the tools and information to help members live healthier, longer lives. The worksite wellness program includes employee care clinics, a wellness coalition, a healthy meetings initiative, and employer-sponsored events. Programs targeted for children include Vitality Kids and the Alliance for a Healthier Generation. Prevention and healthy living programs are promoting tobacco cessation, nutrition, physical activity, mental health, preventative care at little or no cost, and disease management. Free flu shots will be available from September 15 to November 30. In 2011, 73,000 flu shots were provided.


Mr. Cowles gave a detailed overview of HumanaVitality, a fully incentivized, interactive wellness program that is the main tool of the wellness plan. This relatively new program utilizes behavioral economics to improve health with actuarially optimized incentives and provides seamless integration of a broad network of devices, health clubs, coaching services, and providers. The program has also been implemented at Georgetown’s Toyota Motor Corporation. Business First Louisville has recognized KEHP as one of Kentucky’s healthiest employers.


Thus far, 12,195 health assessments have been completed, 21,908 members have achieved bronze status, and over 2,300 members have taken advantage of biometric screenings. Rewards are redeemed based on Vitality points earned through completion of a health assessment, Vitality Check, and other goals and activities. Public health departments are providing Vitality Checks, and the wellness program is being promoted through the Kentucky Department of Education. HumanaVitality and Walmart are establishing a partnership to incentivize healthful eating by offering a five percent discount on purchase of healthy foods. Representative King said she would like grocers in areas without a Walmart to also have the opportunity to partner with HumanaVitality.


After applauding the wellness program, Representative Belcher said she was contacted by a parent who said her child was prescribed Adderall and that the required $600 urine test was not covered by insurance. Mr. Nelson and Mr. Cowles said they had not heard similar complaints but would investigate the matter for Representative Belcher.


When Representative Harmon asked whether HumanaVitality would have an app for smartphones, Mr. Cowles said he knows of a HumanaFit app and a pedometer app and will e-mail more information about available apps to Representative Harmon.


Representative Stacy referred to a resolution sponsored by Representatives Ford and Hoover in the 2012 Regular Session relating to mail-order policies and practices and retail pharmacy participation in the pharmacy benefits program. He asked whether KEHP has done an analysis of net cost to the plan for purchase of maintenance drugs by mail order compared to cost at retail pharmacies. Mr. Cowles said there has not been an analysis but he believes the cost should be the same for both. Representative Stacy asked for a cost comparison of the 20 most common maintenance drugs, based on the net cost billed to KEHP—and not based on NBC (National Drug Code) codes. Mr. Cowles said they would look into that.


Subcommittee Report – Task Force on Elections, Constitutional Amendments, and Intergovernmental Affairs

Representative Darryl Owens, Co-Chair of the Task Force, read a brief subcommittee report of the August 28 meeting.



With business concluded, the meeting adjourned at 2:44 p.m.