Big changes coming to Group Benefits

About a third of the savings identified by a private analyst looking for ways to cut down costs in state government are tied to substantial changes to the health insurance used by about 230,000 state workers, retirees and their families.

Alvarez and Marsal, the New York City-based management firm that the Jindal administration hired for $5 million, zeroed in on the insurance for about $1 billion of the $2.7 billion in state in efficiencies.

Susan West, head of the state Office of Group Benefits, said the $1 billion savings figure over the next five years should not alarm members. Savings are achievable without harming their access to health care.

“It’s a delicate balancing act between plan design and rates,” West said.

The savings come from changes in the policy, such as preauthorization for hospital stays and MRIs and a priority on generic drugs. The savings are also keyed to pushing lower-cost health insurance options with higher deductible and medical savings accounts. Insurance premium increases are also figured into the projections to bridge the savings gap, but the specifics are not spelled out.

“It’s possible there will be some future premium increases,” West said. “It’s going to depend on our claims and actuarial projections.”

Retired State Employees Association Executive Director Frank Jobert said he is considering asking the retiree board for guidance on whether to seek legal advice over some of the changes going into effect this year.

“They are changing the rules in the middle of the game,” said Jobert. “I’m asking myself now if they can in fact change the rules and benefits in the middle of the plan year ... even the rate increase.”

The health plans run from Jan. 1 to Dec. 31 with enrollments in October of each year, Jobert said.

Jobert said Group Benefits would not need the rate increase or the benefit changes “if they had not depleted the reserve fund.”

Group Benefits had been dipping more and more into its reserves to pay claims. Just over two years ago, the agency had reserves in excess of $500 million. Without changes, the program’s reserve has been projected to hit $55 million by year’s end.

Initial changes start July 1 with a 5 percent premium rate increase expected to generate $57.9 million in the new fiscal year.

Group Benefits is projected to save another $149.8 million by June 30, 2015, largely by changes in medical and pharmacy benefits going into effect Aug. 1.

On the medical side, prior authorization will be required for such things as inpatient hospital admission, cardiac rehabilitation, CT scans, genetic testing, home health care, hospice, MRIs, orthotic devices, outpatient pain rehabilitation, physical and occupational therapy. In addition, policies will have limits on the number of days for care in a skilled nursing facility as well as receiving home health and hospice care.

Among the pharmacy program changes will be reduced copays for generic drugs and increased copays for preferred, specialty and other drugs.

On Jan. 1, Group Benefits will have new health plan options available, including partially funded medical savings accounts.

West said there will be two traditional insurance plans offered through Blue Cross Blue Shield of Louisiana.

The firm will also offer two “consumer-driven” health plans, which will have lower premiums in exchange for higher deductibles, West said. That’s where savings are expected to accrue.

West said Group Benefits currently offers a consumer driven plan, which began in July 2010. But it has not caught on with Group Benefits members. Fewer than 10 percent are enrolled, she said.

“I don’t think people understand the benefit of those (type) plans,” West said. “It’s not as popular as we think it will be.”

The current Vantage Medical Home plan will continue to be available. In addition, Medicare-eligible retirees can participate in One Exchange Medicare Advantage, which has several plan options that can provide low or no cost coverage, according to Group Benefits officials.

Follow Marsha Shuler on Twitter @MarshaShulerCNB. For more coverage of the state capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.