PEHP representatives told the Retirement and Independent Entities Committee that the health-plan administrator has begun transitioning members to a new core claims system and distributing new member cards that carry a July effective member number, while independent pharmacists and the Utah Pharmacy Association pressed lawmakers about pharmacy reimbursement and pharmacy-benefit-manager (PBM) contracting practices.

Chet Loftus, speaking for PEHP, described a multi-year effort to replace an aging internal IT platform with a configurable vendor-backed system intended to increase automation and reduce manual claims adjudication. PEHP has run pilot cohorts (including a January 2023 group) and completed phased work needed to issue new member cards. Loftus asked members and providers to use the existing PEHP card through June 30 and to present the new card (the number begins with an "M" and the card is marked "JUL") to providers on July 1 to ensure claims route to the correct system. "The old system is completely good, valid, 100%, and we want you to use that until June 30," Loftus said. He emphasized the operational risk of overlapping claims and said PEHP built website tools and provider communications to reduce mismatches during the switchover.

Loftus also previewed consumer tools to show price differences by site of care and drug options; PEHP plans to expand cost-transparency and co-pay tools that flag lower-cost outpatient and imaging alternatives and display drug-price comparisons for traditional-plan and HSA members.

After the PEHP briefing, the Utah Pharmacy Association and independent pharmacists told the committee that PBM contracting, spread pricing and low dispensing-fee reimbursements threaten small, community pharmacies. Adam Jones, executive director of the Utah Pharmacy Association, summarized federal and state trends and cited a state dispensing-fee study used in Medicaid that placed the average pharmacy cost to dispense at about $11.53 per prescription. "Currently that dispensing rate is a little over $11 per prescription," Jones said, and he warned many independent pharmacies receive reimbursements well below that level.

Independent owner Sheldon Birch described concrete examples from his pharmacies and said that, after accounting for product acquisition cost, his stores averaged roughly $4.63 gross profit per PEHP claim on 17,000 PEHP claims in the year-to-date data he reviewed—well below the state-estimated dispensing cost. Birch and the association also described so-called "spread pricing" in which a PBM reimburses a pharmacy at a rate below the PBM's reimbursed or reported price to the payer, producing a retained margin for the PBM.

PEHP and committee members discussed contracting approaches. Loftus said PEHP uses a PBM to obtain broad pharmacy networks, formulary negotiations, claims adjudication and rebate management; he said a 2019 legislative audit found PEHP’s non-transparent contracting produced lower net costs to the state and that PEHP receives its full rebates. Loftus also told the committee PEHP is open to exploring different contracting approaches and that PEHP negotiates on total value (network breadth, rebates, adjudication performance) when selecting PBM arrangements.

The committee authorized the chairs to open bill files if needed for legislative solutions, and members asked PEHP and stakeholders to report back with more detailed cost and contracting options if the group wants to pursue statutory change. Representative Thurston additionally asked that the chairs be informed at each meeting of any bill files PEHP opens going forward.

The PEHP transition will keep the old card active through June 30; members should present new "M"-number cards to providers beginning July 1 to route claims correctly. PEHP reported current administrative costs embedded in premiums (about 3.7 percent administrative expense noted in the presentation) and said it funded the system transition without a separate appropriation using premium revenue and plan growth.