The State Board of Finance on Friday unanimously approved increasing the rate paid to cover the cost of Arkansas state employee health insurance premiums. Currently, the state provides coverage for about 160,000 state and public school employees along with retirees and their families.
Jake Bleed, director of the Employee Benefits Division, told board members during a hearing that the state paying 65% of the cost of health insurance premiums is not enough.
“Right now our rates don’t reflect best practices. Our rates have actually been held flat for a number of years,” Bleed said. “Those of you who work in insurance for any amount of time know that as plan costs go up, while the rates are held flat then those rates are not reflective of the actual cost of coverage being provided.”
Arkansas doesn’t have any way to raise rates without legislative approval and that is part of the reason the state’s contributions have stayed flat, Bleed explained.
According to a memo from the Employee Benefits Division, if Arkansas keeps the rate at 65%, the state’s health insurance plan for public school employees will begin deficit spending by 2025 and run out of its reserves by 2028.
Larry Walther, the state’s chief fiscal officer, said it was important to find a solution.
“Obviously, this is an important part of the strategy the state uses to recruit people seeking to be employed with the state,” Walther said. “It is needed to maintain [the state’s] workforce. It is an important part of our benefits package.”
Milliman, Inc, a risk management consulting firm based in Seattle, Washington, recommended the state needs to pay 80% of the cost of premiums for employee health insurance plans. Bleed told the board the 15% increase would still keep Arkansas’ contribution rate below surrounding states, with some of them paying up to 90%. Currently, Arkansas pays the lowest rate into employee health insurance plans among surrounding states, according to the memo.
Bleed said to implement the increase to 80%, it would have to be done over a few years.
In the memo, Bleed wrote employees are unlikely to see dramatic changes in their premium rates, under this proposal. The memo says many employees will see a decrease, while retirees under 65 are likely to see increases in their premiums.
The proposed rate increase still needs approval from the Arkansas Legislature and Gov. Asa Hutchinson to take effect.