Committee hears debate on moving state employee health plan from ‘grandfathered’ status; third‑plan option proposed

The House Industry, Business and Labor Committee reopened the hearing on Senate Bill 2,160, concerning changes to the PERS state employee health plan and whether the plan should remain grandfathered under the Affordable Care Act or move to a non‑grandfathered (ACA‑compliant) design.

Rebecca Frikey, executive director of the Public Employees Retirement System, told the committee that PERS currently administers two plan options for active permanent state employees: a grandfathered PPO basic plan and a high‑deductible, non‑grandfathered plan paired with a health savings account. Frikey said the bill as introduced would move the entire state plan to a non‑grandfathered design and that doing so would have fiscal and operational implications. She described the high‑deductible plan as an existing non‑grandfathered option employees can elect and said the state has historically chosen to keep the grandfathered plan to avoid some ACA‑mandated coverage costs.

Committee members asked whether the state could offer a third plan option — keeping the grandfathered plan while making an optional ACA‑compliant plan available to employees who would pay the premium differential. Frikey said PERS already has a non‑grandfathered PPO basic plan in place for one employer group and that, administratively, PERS could offer a third option if the legislature instructed it to do so. She offered to resurrect comparative plan charts used in prior sessions to inform the committee about benefit differences and potential employee premium impacts.

Molly Harrington, chief people officer and director of human resources management services at the Office of Management and Budget, testified in opposition to replacing the grandfathered plan. Harrington said OMB and the governor’s office are concerned about burdening future legislatures with ongoing costs if the state adopted a mandatory ACA‑compliant plan without clear funding. She presented survey results showing fully paid health insurance is the most important benefit to state employees and recommended the committee consider a third plan option so employees who value ACA‑mandated benefits may elect that coverage and pay any premium differential.

John Arnold, deputy insurance commissioner, testified as an employer and supported offering a third option to aid recruitment and retention for state agencies. He told the committee the Insurance Department has lost prospective hires who preferred ACA‑compliant employer coverage and urged the committee to consider flexibility that lets employees select the coverage that best fits their family needs.

Committee members asked technical questions that produced additional clarifications: under grandfathered plan rules the state may increase employee premium share up to a cumulative 5% threshold measured from March 2010 levels; many political subdivisions (the majority of which have fewer than 51 employees) cannot join a non‑grandfathered plan applicable to large employers and could lose access to PERS coverage if grandfathered status were lost; and a third plan option previously proposed would have required employees to pay the premium difference and was modeled in prior session materials.

No committee vote was taken. Committee members asked PERS to provide side‑by‑side plan comparison charts and additional fiscal detail before the committee takes further action.

Key clarifying details from the hearing: PERS currently administers a grandfathered PPO basic plan and a high‑deductible non‑grandfathered plan; $0 to the state premium differential was modeled in a prior bill by having employees pay any additional premium for a non‑grandfathered option; political subdivisions with fewer than 51 employees generally cannot participate in the non‑grandfathered option available to larger employer groups; and the grandfathered plan carries a statutory premium‑sharing cap tied to March 2010 contributions (the 5% cap reference in testimony).