Committee advances bill to let state plan drop ‘grandfathered’ status, prompting questions about cost and design

The Industry, Business and Labor Committee voted to give Senate Bill 2160 a “do pass” recommendation and referred the measure to the Appropriations Committee after a two‑hour discussion about costs, plan design and the PERS board’s authority.

Rebecca Frikey, Executive Director of the Public Employees Retirement System, told the committee SB 2160 would change PERS’s ability to move its health plan from a grandfathered product to a non‑grandfathered large‑employer design and stressed that certain federal rules the committee may associate with “essential health benefits” apply to the individual and small‑group market, not to large‑employer plans such as PERS. “Essential health benefits is a term that applies to the individual and small employer group market,” Frikey said, adding that the bill’s requirements are specific to large employer groups and that the Affordable Care Act’s large‑employer requirements use different statutory language and the “minimum value” standard.

The bill’s fiscal impact and how to pay for added benefits were the central issues. Committee members and witnesses cited several figures during the hearing: PERS staff and bidders’ materials showed the system’s current biennial premium near $686.8 million, a prior award produced a slight premium increase to about $689.0 million, and a Blue Cross best‑and‑final offer in the last bid cycle was roughly $730.6 million. Committee members repeatedly cited a $26 million projected increase in benefits under a non‑grandfathered design, a $44 million reserve in PERS, and a $4.3 million amendment proposed to pay employer share for the final six months of the current biennium.

Derek Holbein, Chief Operating and Financial Officer for PERS, summarized the most relevant bid numbers and the board’s prior decision to award a contract to Sanford. Holbein said the PERS board had compared the bid offers on a like‑for‑like basis (pricing the current grandfathered product) and that carriers’ non‑grandfathered proposals included plan‑design options that could reduce premium if the board and the Legislature adopt different cost‑sharing mechanics. “When we went through the proposal last time … that was a 0.14% premium increase,” Holbein said, noting the board compared an increase of about $2.4 million versus Blue Cross’s roughly $41 million higher offer in that cycle.

Union testimony emphasized employee concerns about cost shifts. Nick Archuleta, president of North Dakota United, said members worry the change is irreversible, that many households already face higher living costs, and that workers have limited clear information about how any cost shifts would affect their paychecks. “This would be one more thing that they have to worry about,” Archuleta said, citing rising food and fuel prices and saying members want more detail before the Legislature changes coverage rules.

Committee members debated whether moving to non‑grandfathered status necessarily increases long‑term costs. Several lawmakers said bidders’ plan‑design options — higher deductibles or coinsurance, counting copayments toward out‑of‑pocket maximums, or different benefit mixes — could produce net premium savings (committee discussion referenced illustrative figures of roughly 1%, 3% and 5% premium reductions under alternative non‑grandfathered options). Other members emphasized actuarial uncertainty and the risk that a portion of members hitting high out‑of‑pocket limits in any given year would bear larger costs. Frikey cautioned that while plan design can shift how costs are paid, it does not eliminate medical inflation.

On process and authority, PERS staff said the legislative branch sets policy and appropriations and the PERS board implements plan design and carrier contracting. Frikey confirmed PERS can negotiate contract provisions such as gain‑share arrangements with carriers and that such contractual arrangements can exist whether the plan is grandfathered or not.

The committee action: Vice Chair Johnson moved a “do pass” recommendation and the committee voted to refer SB 2160 to Appropriations. The roll call, as called in committee, recorded 10 votes in favor, 3 opposed and 1 absent; the committee chair so announced the result and the bill was referred to Appropriations.