Legislative Report

Report 09-05
Feb. 27, 2009

First, A Correction

We summarized Senate Bill 233 (Equal Treatment of Government Retirement Benefits) in our Legislative Report 09-04 that was transmitted to you last Friday. Unfortunately, we left one word out of the explanation of the bill’s purpose. The first sentence of the explanation should have read as follows: “Senate Bill 233 would exempt North Carolina state and local government pension payments to retirees from the state individual income taxation regardless of when the retirees attained vested rights.”

As you probably know, only retired state and local government employees who had five years of creditable service prior to August 12, 1989 currently have their pensions exempted from the state personal income tax as a result of the N.C. Supreme Court decision in the case of Bailey vs. Patton. If passed, SB 233 would extend this exemption to all state and local governmental retirees now and in the future.

We apologize for the error in last week’s report. We will be more diligent regarding our proof reading.

More Details of Proposed State Health Plan Changes

This week, Senator Tony Rand introduced Senate Bill 287, which appropriates funding for the State Health Plan and also makes broad ranging changes to the Plan. We summarized some of the highlights of the draft version of this bill in last week’s Legislative Report. Following is a more detailed summary as well as commentary and feedback from our members.

PPO Structure and Coverage Changes

• Effective 7/1/09, the PPO Plus Plan (90/10) is eliminated. Members have the choice of enrollment in the PPO Standard (80/20) or the PPO Basic (70/30) Plans.
• Effective 1/1/10, routine eye exams will no longer be a covered benefit under either of the two PPO Plans.

In-Network Deductible and Co-Payment Changes

	PPO Standard		PPO Basic
	Current	7/1/09	Current	7/1/09
Member Annual Deductible	$300	$600	$600	$800
Annual Co-Insurance Maximum (out-of-pocket annual limit)	$1,750	$2,750	$2,500	$3,250
Urgent Care Co-Payment	$50	$75	$75	$75
Primary Care Co-Payment	$20	$25	$25	$30
Specialist Co-Payment	$40	$60	$50	$70
In-Patient Co-Payment	$100	$200	$200	$250

Prescription Drug Co-Payments

	Current	7/1/09
Generic Drugs	$10	$10
Preferred Brands w/o Generic Equivalent	$30	$35
Non Preferred Drugs	$50	$55
Preferred Drugs with Generic Equivalent	$30	$10 + Cost to Plan

Other Prescription Drug Changes

• The State Health Plan shall provide coverage of non-acute self-administered specialty drugs through a specialty pharmacy vendor under contract with the Plan. The co-payment for such specialty drugs will be 25% of the Plan’s cost, not to exceed $100 for a 30-day prescription.

• The Plan may exclude coverage of drugs that have therapeutic over-the-counter equivalents.

• The Plan shall implement a Maintenance Medication Retail Pharmacy Network initiative. The Plan may establish a network of local pharmacies that voluntarily choose to participate in the network. After a member has had two refills of a covered maintenance drug, the Plan may require the member to obtain maintenance refills through a pharmacy in the Network or by mail order. Members who use maintenance drugs and who choose not to participate in the Network would be required to pay 50% of the pharmacy allowable charges of the drug. Members who participate in the Network would be charged only two and one-half times the monthly co-payment when filling a 90-day maintenance drug prescription.

• Effective 7/1/09, the prescription period is reduced from 34 days to 30 days.

Increases in Dependent/Spouse Monthly Premiums

• Effective 7/1/09, the monthly premium for dependent, family and spouse coverage will increase by 7.3%.*

• Effective 7/1/10, monthly premiums will increase again by 7.3%.*

(*Note: These percentages may be increased during the course of debate on SB287 to as much as 7.9% as a result of more current information on the projected shortfall in the Plan for the next biennium.)

Wellness Initiatives

• The Plan must develop a Comprehensive Wellness Initiative that includes a focus on smoking cessation and weight management.

• Effective July 1, 2010, all members of the Plan who do not have Medicare as their primary coverage will be enrolled in the PPO Basic (70/30) option unless they can attest that they or any qualifying dependent does not smoke or use tobacco products. The Plan must develop a means to verify that a member does not smoke or use tobacco products. Members who do not smoke or who can show evidence of enrollment in a smoking cessation program will have the option of remaining in the PPO Basic Plan or enrolling in the PPO Standard (80/20) Plan.

• Effective July 1, 2011, all members who do not have Medicare as their primary coverage will be enrolled in the PPO Basic Plan (70/30) unless they can attest that their weight and height is within the range determined by the Plan using evidence based healthy weight guidelines. Members also can comply if their health care provider can certify that the individual has a medical condition preventing the attainment of the specified weight range and that the member is actively participating in a Plan-approved weight management program.

• By October 1, 2009, the Executive Administrator of the Plan must inform members of the healthy lifestyle initiatives, the requirements for compliance, and the consequences of non-compliance.

(Please Note: For more information on the weight guidelines, go the State Health Plan web page and see the February 20 Report to the Oversight Committee, specifically the BMI (Body Mass Index) Chart.)

Feedback From Members

Thus far, calls and e-mails from Association members have concentrated on three areas of concern. We understand the severity of the financial problems faced by the State Health Plan. However, we believe that the proposed solution should not put a disproportionate financial burden upon employees and retirees. Our main concerns are summarized below.

• Maximum Annual Co-Insurance: The bill raises the annual amount that a member might pay out-of-pocket by $1,000 in the PPO Standard Plan, from the current $1,750 to $2,750. This significant increase will be a burden on lower income retirees who suffer from chronic health problems.

• Annual Deductible: The annual amount is doubled in the PPO Standard Plan to $600 and by $200 (to $800) in the PPO Basic Plan.

• Elimination of the PPO Plus (90/10) Plan: Increase in the premium paid by the member might be an alternative to elimination of the PPO Plus Plan that only would save the state roughly $5.0 million annually.

Fast Track – Talk to Your Senators

It appears that Senate Bill 287 will be considered on a priority basis in the Senate in order that the proposed State Health Plan changes can be put in place by July 1. We urge you to contact your State Senators in the next several days to bring the member concerns noted above and any others that you might have to their attention.

Other Bills Introduced This Week

House Bill 229: Retired Teachers Return to Work
(Primary Sponsors: Reps. McLawhorn, Jeffus, Yongue, and Tolson)

This bill extends until October 1, 2011 the provision that allows retired classroom teachers to return to work full time without loss of pension benefits and shortens the period for separation from service from 6 months to 4 months. The bill also allows all retired state employees to return to work as contractors.

House Bill 229 has been assigned to the House Committee on Pensions and Retirement.