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State officials propose one-year delay to cut in retirees’ pharmacy benefit as actuary warns of multi‑million shortfall
Summary
The state’s employee benefits board and its actuary told the Senate Insurance & Commerce Committee that reinstating pharmacy coverage for Medicare‑eligible retirees would cost about $38.5 million in 2021 and convert a projected surplus into a roughly $7 million deficit; the board proposed delaying the pharmacy change to Jan. 1, 2022 and offering a $25 monthly premium credit for retirees who opt into Medicare this year.
Chairman Lowery convened the Senate Insurance & Commerce Committee to hear an emergency briefing on changes to the state employee and public‑school retirees’ health plan after widespread public concern.
Amy Fletcher, secretary of the Department of Transformation and Shared Services and a witness for the Employee Benefits Division (EBD), told lawmakers the August 5 board vote that scaled back or removed pharmacy coverage for Medicare‑eligible retirees prompted a high volume of emails and phone calls. Fletcher offered the board’s alternative proposal: postpone loss of pharmacy benefits for 65‑plus retirees until Jan. 1, 2022, allow retirees to opt into Medicare Part D this year with a $25 monthly premium credit if they do, and apply a 5% premium increase in 2021 consistent with increases for active members.
Courtney White, principal and consulting actuary with Milliman, presented the firm’s projections and sensitivity testing. White said the August board action left the plan with a projected surplus of roughly $31.47 million under one scenario; reinstating Medicare pharmacy coverage for Medicare‑eligible retirees would add an estimated $38.53 million in 2021 pharmacy costs and change that surplus into a roughly $7.06 million deficit. White described five levers the board and legislature can use to manage the plan (state funding, employee/retiree contributions, plan design, cost‑management initiatives and reserves) and noted that reserves had already been drawn down from about $96.6 million at the end of 2019 to a projected ~$45.7 million by the end of 2021 if trends continue.
White also showed how retirees’ choices matter: if even 5% of Medicare retirees opt into Part D, the projected 2021 deficit falls materially; higher opt‑out rates flip the plan back into surplus in some sensitivity runs. He stressed the numbers are projections subject to assumptions and pandemic‑era utilization variability.
Lawmakers pressed EBD and Milliman on when the funding shortfall first surfaced and why the Legislature learned about the scale of the problem only in recent months. Milliman said the firm first presented projections showing a roughly $30 million‑plus loss at the March 2020 board meeting and again in April and May, and the firm modeled multiple scenarios for addressing the gap. Committee members raised concerns about communication with the chairs of the insurance committees and lamented that many legislators first learned of the issue from news coverage rather than direct briefings.
Several members urged the Legislature to restore its formal oversight role: the chair said restoring House and Senate insurance chairs to the Life and Public Health Board and requiring annual reports will be proposed by statute in the next session.
What’s next: EBD said the board will meet in a special session tomorrow to consider the revised proposal; lawmakers agreed to hold follow‑up hearings and requested additional materials (historical reserve use, contract and administrative cost line items, and sensitivity analyses) in advance of future meetings.
