by Michael R. Wickline, Arkansas Democrat-Gazette

September 17, 2021

A consultant Thursday recommended annual increases in funding for health insurance plans for public school and state employees and retirees, with the state shouldering more of the future increased costs than the employees contribute.

The rise in state funding needs to outpace future increases in employee premiums to keep the financial contributions in line with what is made to plans in comparable states, according to The Segal Group’s report.

In May, the Legislative Council approved a consulting contract worth up to $575,000 with The Segal Group to review the health insurance plans for the public school and state employees and retirees and recommend changes to ensure their long-term solvency. The contract runs through Dec. 31 with an option to renew for six months.

Without changes in either plan, state officials had projected that the two plans would collectively have a $103.3 million deficit at the end of 2022. Changes approved this summer eliminated the potential deficits.

The Segal report stated: “Historical financial issues stem from stagnant State funding and short term planning causing reactionary decision making.”

An official representing the consultant said the annual funding increases for the plans should be tied to an index, such as the medical consumer price index of 3% or 4%.

The consultant also recommended setting an amount equal to a range of 12% to 16% of a plan’s claims for a reserve fund, with a target of 14%.

If the reserve fund is projected to be 12% of a plan’s claims target, that could institute a trigger that could require more funding for the plan and allow the plan to build its reserve fund back up to between 12% and 16% of the claims, a representative for The Segal Group told the Legislative Council’s executive subcommittee.

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