Officials say state employees seem to be upbeat about a new health care package.

Arizona Benefit Options, which begins Oct. 1, gives state employees and retirees a choice of health insurance plans. It’s the cornerstone of the state’s self-insured medical plan that will cover approximately 70,000 state workers and retirees.

Arizona joins more than 35 other states that self-insure or partially self-insure their health coverage. Under self-insurance, state government, rather than a commercial company, assumes the risk of health claims, which are paid from employee premiums.

The Department of Administration on June 4 finalized contracts with eight companies that will provide medical, pharmaceutical, life insurance, disability, administrative and other services in six regions.

The agency has overall responsibility for administering the program, which it says will save more than $200 million in administrative costs alone in its first five years.

Betsey Bayless, director of the Department of Administration (DOA), says benefits in general offered by state government compare well to the private sector. “A number of years ago I wouldn’t have been able to say that, but in today’s world the whole package that we have in state government is very favorable.”

Benefits account for approximately 40 per cent of the total pay package, Ms. Bayless says, which means that a state employee making the average annual salary of $31,859 receives benefits worth $12,442. “That’s pretty significant,” she says.

She notes that in recent years private sector employers have cut certain benefits, such as increasing deductibles and co-pays for health insurance or in some cases eliminating health insurance altogether. Others have reduced pension benefits, she says.

8,000 E-mails

Ms. Bayless recognizes that launching the new health care program “creates a lot of tension for people.” To lessen the stress, the state communicated early and often with employees. During the open enrollment period ending Sept. 10, the DOA Web site had 200,000 hits, plus 8,000 e-mails, Ms. Bayless says.

One of the problems, she says, was that not all of the doctors who are in the network of the outgoing provider, Cigna Healthcare, are in the new networks, but the new companies are working to sign up many of those physicians.

In addition, the new plan represents a substantial improvement in coverage for state employees in rural communities, Ms. Bayless says.

An added benefit in recent years, she says, was the offer of free flu shots for state employees, retirees and their families. The state also boosted the maximum life insurance employees may purchase to $300,000 from $200,000, and increased the basic life insurance the state pays to $15,000 from $12,000.

Lawmakers, Union Respond

Sen. Jay Tibshraeny, R-21, says of the health insurance package: “We have to make sure that we continue to give employees a good insurance product that doesn’t cost them more. It was sold as a cost-saver for the state. It should save costs for employees as well.”

Rep. John Huppenthal, R-20, chairman House Government and Retirement Committee, says the state is quite competitive with private employers in providing health insurance, vision care and vacations. However, it’s not easy. “The price of goods goes up 2 per cent and health care goes up 12 per cent,” Mr. Huppenthal says. “Health care costs are spinning out of control. We feel a lot of pressure as well, but overall our benefits are competitive.”

Regarding the move to self-insurance, Mr. Huppenthal says he hopes it will be as seamless as possible and at least equal to the coverage provided by Cigna. “In the long term it should be pretty good,” he says, “but I’m always apprehensive about a move from the private sector to the public sector.”

Rep. Steve Gallardo, D-13, ranking Democrat on the House Government and Retirement Committee, says state employees tell him they finally have a choice for health insurance and “that suits them.” He adds, “Once we go through the first year we’ll see where we need to make changes for the state and the employees. So far the response has been very positive.”

Flo Walker, administrator of the American Federation of State, County and Municipal Employees (AFSCME), Council No. 97, sees Arizona Benefit Options as an improvement over the previous plan. “As with any new plan, while it may be confusing initially, employees had lots of help from the DOA in enrolling and choosing the right plan. The previous plan was limited in the choices and benefits it provided particularly in the rural areas. State employees generally have been very positive and glad that they have more options to choose from.”

One Example

Schaller Anderson Healthcare, one of the four medical networks participating in the state’s self-insurance plan, provides an example of the benefits available to state employees beginning Oct. 1. (The others include Rural Arizona/Arizona Medical Network; Arizona Foundation Network; and United Healthcare. All four serve the Maricopa and Pima county areas, while Rural Arizona/Arizona Medical Network and Arizona Foundation Network, also cover the western, northern and southeastern regions of the state.)

Dr. Clyde Wright, senior vice president of medical affairs for Schaller Anderson, says its network consists of 8,000 physicians in 10,000 locations. Among the benefits, he says, are: no referral is needed to see a specialist and a 24-hour nurse assistance line is maintained.

“That’s a significant benefit,” Dr. Wright says of the phone line, “when things come up in the middle of the night or on a weekend.”

Although Schaller Anderson has 8,000 physicians, Dr. Wright says, “We will be very flexible. If there are requests from state employees to add a physician, we will make every effort to make that happen. One request would start an action plan to get that doctor into the network.”

Another significant factor, he says, is medical management. “That means we are responsible for medical management for networks in central and southern Arizona, including concurrent review by nurses,” Dr. Wright says. “They go into hospitals, make the rounds and review the charts of state employees.”

Some History

The self-funded insurance program was delayed by legislative actions for nearly two years. It replaces Cigna Healthcare.

Self-insurance programs are not regulated by the Department of Insurance. Under a bill (S1366) sponsored last spring by Sen. Dean Martin, R-6, and signed June 3 by Governor Napolitano, Arizona Benefit Options must provide all health coverage that is mandated by existing law, as well as grievance procedures for those dissatisfied with their care or access to care. The new law also permits political subdivisions to join state health plans at cost.

Mr. Martin, nevertheless, expressed some reservations about the self-insurance program.

“The issue is: Will the Legislature have the political strength to increase premiums when claims go up?” he asked. “We’ll need to watch the implementation very carefully. We want to know if we’re really saving money,” he told the Arizona Capitol Times in June.

Mr. Martin said legislation is still needed to protect the program’s reserve fund against being raided by the Legislature.

In March, the House defeated H2451, which would have prohibited DOA from self-insuring health coverage. House Appropriations Committee Chairman Russell Pearce, R-18, who sponsored the bill, said he was concerned the state might not have an adequate reserve fund to pay claims.—

Reporter Phil Riske contributed to this story.