Amid a ballooning deficit, policymakers in Delaware are scrapping a proposal to introduce more cost sharing for state employees, a decision that may come back to bite when the Cadillac Tax arrives.
Delaware legislators and policymakers are delaying a proposal by Governor Jack Markell to cover a $60-$100 million deficit in the state employee health plan with increased deductibles, co-pays and plan tiering.
The proposed changes to the state employee health plan were a part of Markell's $3.9 billion budget for the First State, population less than one million. The budget included an additional $21 million and a range of reforms for the health plan, which covers more than 90 percent of the costs of healthcare for 121,000 current and former workers and dependants.
Markell, a Democrat who's been in office since 2011, has called recent trends in the state employee health plan unsustainable. From fiscal year 2013 to 2014, claims increased 11 percent from $594 million to $664 million, and the cost is expected to rise to $714 for the fiscal year ending in June--hence the deficit.
And for the 2016 fiscal year, Delaware's Office of Management and Budget project that state employee health plan costs will reach $743 million.
To help bend that cost curve, the State Employee Benefits Committee was considering the Governor's proposal to increase deductibles, increase co-pays for prescription drugs, hospital stays or speciality visits, and reconsider coverage for erectile dysfunction medications (which consume $2.7 million annually). Aetna and Highmark Blue Cross Blue Shield Delaware administer the plans, which come in eight different varieties.
Under the proposal, state workers in the First State Basic Plan would see individual deductibles rise from $500 to $1,000; family deductibles would rise from $1,000 to $2,000. Employees and dependents in the
state's consumer-directed gold plan would see family deductibles rise from $3,000 to $4,000. Those in HMO and PPO plans would have new deductibles of $500 for an individual or $1,000 for a family.
Employees on the most popular plan, Highmark's Comprehensive PPO, would pay premiums of $91 per month, up from $83 currently. Co-pays for outpatient surgery would increase from $30 on both HMO and PPO plans to $50; inpatient hospital care copays would increase from $75 to $100. Lab and imaging co-pays would also increase, depending on the plan.
Specialist co-pays would increase from $20 to $30; prescription co-pays would increase from $8.50 to $10 for a 30-day generic drug, and form $45 to $50 for a non-formulary drug. Out-of-pocket maximum spending levels would be set at $4,500.
Altogether the state Office of Management and Budget estimated that more than $50 million could be saved for the state annually. The trouble is those proposals were met with opposition from government worker unions like AFSCME and the Correctional Officers Association of Delaware, as well as Republican and Democratic lawmakers.
Now, the State Employee Benefits Committee will not vote on the proposal, but state employees will likely still see some premium increases, while lawmakers scramble to move around or find new revenue.
Delaware has already introduced a number of initiatives aimed at bending the cost curve for the state employee health plan, including using "centers of excellence" providers and restricting compound medications. But it's still not enough, as Ann Visalli, director of the Office of Management and Budget, wrote
in an op-ed in the News Journal.
The reforms proposed by the Governor would "not only reduce costs, but will help the state minimize any 'Cadillac Tax' that its healthcare plans could face," she wrote. "In 2018, the Affordable Care Act will impose this added tax on high cost health plans. By taking action to reduce costs now, the state can help avoid or reduce this cost in the future."
In addition to employers with unions and commensurate rich health benefits, public employee health plans especially on track to collide with the Cadillac Tax if they don't make changes in benefits. A majority of local and state government health plans still have Cadillac-level benefits.