STATE HEALTH BENEFIT PLAN
Georgia's State Health Benefit Plan (SHBP) is the health insurance plan for public school teachers, school personnel, state employees, all State and TRS retirees, and dependents. This plan is managed by the Department of Community Health (DCH) and covers over 663,000 people. SHBP is currently in Open Enrollment for eligible individuals so this week seemed an appropriate time to examine the fiscal issues of the plan and what is in store for the future.
THE FACTORS IN THE SHBP SHORTFALL
As we begin to analyze SHBP, please remember that SHBP assumes all the risk of the plan. The State is self-insured. When I explain the plan, I usually say "last year's claims, become this year's premiums." Though companies like United HealthCare, Cigna and other groups coordinate care and interact with members, SHBP is responsible for paying the bills. Some insurance plans charge a flat fee and cover any unforeseen costs internally. SHBP is like many large company plans and assumes all the risk of insuring its members.
This time last year, SHBP had a projected 2-year shortfall of almost $815 million. There were several factors that led to this projected shortfall. The first involves non-certificated school personnel. Non-certificated school personnel is the category for school employees who are not certificated teachers. This group includes school bus drivers, cafeteria workers, school administrative staff, custodial staff, etc. and had grown rapidly as new schools were built and staffed. On a monthly basis, the average cost to the employer (in this case, State and local school systems) is around $900 per employee per month. School systems though were only contributing around $200 per employee per month for this group of local employees. When expenses were analyzed, this group was costing approximately $500 million more than the amount employee and employer revenues brought in. This gap was being covered by the premiums and employer contributions of the other SHBP covered groups: state employees and teachers. This phenomenon had been occurring for many years, but the amount being subsidized by other groups finally hit a tipping point. DCH proposed, and the Governor and Legislature agreed, to raise the amount charged to local school systems (not the actual employee) to cover the costs of providing coverage to this group. The amount charged will be phased in $150 per member per month annual increments over the next 3 years. This will still not fully cover the costs of providing coverage, but will bring it much closer.
The second factor in the shortfall was a decline in payroll contributions. For teachers and state employees, the State contributes a percent of the employee's salary to cover the employer share of health insurance. During the early parts of the recession, furloughs and employee reductions were a necessity in balancing the state budget. Retirements of state employees and teachers increased during this time as a result. A consequence of these events was that SHBP received less income because there were fewer active state employees to contribute to the plan.
A third factor revolves around federal government mandates and funding. Provisions of the Affordable Care Act mandate more preventative health, coverage for dependents under 26, etc. Without delving into the politics of these issues, there was a cost to cover these services that contributed to the deficit projection. In fiscal year 2012 (FY2012), the Plan saw increased utilization as more members took advantage of preventive care such as colon and breast cancer screenings. On the revenue side, the federal government's Early Retiree Reinsurance Program (ERRP) fund was supposed to cover some of the costs of retirees on the plan who were not yet Medicare eligible. This program, created under the Affordable Care Act, had been projected to bring about $120 million to the Plan over two years. Higher usage than expected nationwide depleted this fund so that only half the projected amount was received. By December 2011, the full $5 billion in the national ERRP fund had been depleted. So Georgia only received about $60 million, half of what was expected.
SHBP COSTS UNDER CONTROL
It is important to note that State Health Benefit Plan expenses are lower when compared with the national average. SHBP has maintained an average annual per capita expense trend of around 5% growth over a five-year period, while the national trend is about 8%.
THE FORECAST -FY013 and FY014
As mentioned in the previous section, SHBP faced a shortfall of $815 million over FY2012 and FY2013. Fortunately, the Plan ended fiscal year 2012 on a relatively good note, with a $16 million dollar cash balance. In comparison, the plan spends an average of $10 million a day to cover claims. Still, in order to cover its expenses for the remainder of FY2013, DCH must locate over $89 million. For FY2014, DCH projects that it will need about $418 million in additional revenue to cover the entire year's claims.
NEXT WEEK: Plan Year 2013 Changes