ALC-State Insurance Programs Oversight Subcommittee
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- October 2, 2026
Representative Robin Lundstrum
Unverified
1:45
Let's go ahead and get started Mr Wallace come on up If you
could state your name for the record and then I'd like to hear that update on Unitedare and their rebid. good morning Grant Wallace,
Speaker 10
2:16
director of the employee benefits division and office of Property Risk so the quicker update for where we are on the rebid and kind of the whole conversation around the medicare advantage group plan is we since you all asked that we go and look at the RfP and explore the concept of decoupling and again decoupling is the notion that we would split the medical and pharmacy
benefits for our post65 retirees. we started down that path and at the same time started engaging Unitedhealthcare who is our incumbent vendor with what would this decoupling look like for their program and for our relationship and our plan so kind of to step back a little bit in the process every year the medicare advantage plans have to go and negotiate
with Cms on what their annual rates are going to be so that process usually kicks off in late December early January. we are towards the final end of that process there's this rate negotiation that goes on and final rates are usually set sometime in april so we're nearing the end of when those final rates are going to be set up the initial kind of response that we were getting and I'm not holding anybody to these numbers because there
is a lot that can happen between the conversation of what we think it's going to be to the reality of what it is. we were seeing a significant change savings by decoupling our plan for our members to the tune of $100,200 per participant per month so we continue to look at that we have asked Unitedhealthcare to go and start moving down the
path of decoupling our plan and and look at what that would contractually do for our plan and our members and we are now just awaiting the final responses through the final rate setting exercise that Unitedealthcare is doing with CmS so I I think that probably is a good kind of catch you up to date of where we are. I'll pause there and see where the conversation y'all would like to go from here can you give us a little bit of a time frame just a ballpark
so what I've got is that the final rate announcements april 2026 the bidding process is in June and kind of the national release is like July early August we would know for our plan in April what that would do between us Unitedhealthcare and our plan so you all would see that revised amendment to that
contract sometime May June cause I still have to go to the Ebd advisory commission's state board of finance before it comes to you all so there's kind of the time frame and kind of the next steps Representative Collins right well we're just gonna pass over that and go topresentative Tosh.
Representative Dwight Tosh
Unverified
6:02
thank you madam chairir. Grant and you keep saying our members who's included in that what aggencies is when you say our members who does that cover? So
Speaker 15
6:17
state employee retirees would be eligible for the medicare advantageroup plan. so that would include any
Representative Dwight Tosh
Unverified
6:26
agency that's got their own insurance plan or whatever so you're talking about anyone
post65 or any retiree from any state agency is that
Speaker 10
6:37
correct? Any state agency, any public school K through 1el yes ok thank you anyone
Representative Robin Lundstrum
Unverified
6:44
else right well I think that gives us an update. is there anything else we need to know at this time? all right thank you all right moving on we have a presentation today by the medicare advantage prescriptionugtactstracts and related marketing trends. Patrick andristen, could you introduce yourselves for the record?
Speaker 21
7:10
Good morning. I'm Kirstenchatton from Seegal Consulting. I'm a senior vice president and Patrick I'll let you introduce yourself.'mpatricklein
Speaker 23
7:17
with Sequel Consulting and I'm a vice president so thanks for having us today we've had some back and forth and we've been invited to to talk today and I think our focus is really going to be on the market dynamics in two key areas that grant already touched on so really what what's the current state of the Medicare
advantage market and what we're hearing from what we're seeing with other plans in other states and then we're gonna touch on the strategy that that Grant talked about with the decoupling the medical and the pharmacy contract s and we'll give you some background on how that works and some of the savings we've seen but before we get into those discussions just to back up a little bit want to talk about the history of the medicare advantage plan with you guys here at Arkansas so Seegal was hired by theblR to
review EBd's program from front to back. this was in 2021. we are presenting monthly to a legislative committee and then we we provided a detailed report at the end of the year with all our recommendations and one of the key recommendations we made that really was going to generate the most savings was for Ebd to offer a medicare advantage prescription drug plan and at the time other states had most our other states have already already implemented
this plan so the recommendation was adopted by the committee and then the next step was Seegal and EBD working together on an RfP that was effective in 2023. so there's two options we could have done a full replacement where the medicare advantage replaced the current the current meds sub option administered by Health advantage ultimately we decided to have those options side by side and structure the benefits to be the same or even better on the medicare advantage
plan. and the rates we got back in the RfP if if we're just looking at AC for example the medicare advantage rate was 165 per month and that's significantly lower than the current health advantage met separate of483 so a huge savings per per retiree that joined the medicare advantage plan for the same rates and
the enrollment was just over50% to start and that generated around40 million dollars in savings in addition for the psE group they didn't have a pharmacy plan before and so the medicare advantage prescription drug plan allowed them to reinstate that pharmacy benefit so in addition to those savings the teachers got the pharmacy benefit as well. and since then we know there's there's been some challenging renewals the markets
move there's been a lot of movement in the market but still the MAPD rates are are significantly lower than than the other option side by side. so that was a little background and
Speaker 27
10:25
and now I'm gonna turn it over to Kirsten to talk more about what's going
Speaker 19
10:33
on in the market currently. thank you Patrick. and and you know you heard Grant talk about what's coming up this year so so the difference
Speaker 21
10:40
when you're working with a medsup plan
medicare traditional medicare is paying a claim and then it comes in and you are paying something left over from that claim that would be member's cost sharing when you're talking about medicare advantage it works a different way. so medicare advantage instead of paying fee for service they're paying a capitated rate upfront to the carrier Unitedhealthcare in this case and then whatever's leftover that needs to be
revenue to cover the claims is what the premium is to your plan as just just a little bit more technical on some of the things that Grant was talking about so the way that this works is the Medicare advantage plans each year wait for some key information that comes out from CmS so they released two notices regarding the payment policy so in January they released what's
called the advance notice and this tells what they anticipate the MA rate funding will be which is payments for every single county in the country and any updates to the risk models because the way they get paid is also based on the risk of each of your members and then they kind of give a preliminary look at what the partd the pharmacy side benefits will be between that January notice
and the first Monday in april and the first Monday in april there will be a final rate notice during that time period after they have put out what they think what they are proposing for methodological changes they get a lot of of feedback We lost you. I don't know if you
Representative Robin Lundstrum
Unverified
12:49
can hear us or not but we can definitely not
Speaker 21
12:58
hear you. on m person oh sorry just a second yeah ok so the advance notice this year had a lot of changes to the risk score methodology and that is really bringing down the rates and at this point saying that they're gonna be flat obviously flat doesn't keep up with trends. my understanding is they've received more feedback this year than they have in any other
previous year so we are awaiting that final rate notice that comes out first Monday in april so that they will know what the final payment rules will be a lot of times when they propose changes and receive feedback they may decide to implement over a two or three year time period hopefully that would be the decision this year also they'll get another quarter of data in for those funding rates
so as Grant stated they will receive that in april and then Unitedhealthcare will be able to put together their renewal rate. individual bids go in in June but from an employer group perspective they'll know what's happening on the medical side once that april notice comes in it'll it it's a pretty lengthy document so it may take them a few a few weeks to sort of digest all that information and make sure they run the risk models that will be
necessary to give the final renewal document but then in August we will receive final information on the Part D plan. some of that some of the major funding there will come out national average bid national average premium that if if the renewal document is to grant in in that time frame some of that information will be
unknown but hopefully you could have that adjusted oncece that comes out. and you know the other piece is there was a big change in 2025 on theartd side due to the inflation reduction actct they changed the benefit designs and so there's some different components of of the funding that comes in the significantly different from what happened in
all of the previous years that started in 2025 and because of that change risk scores are much more important than they were before and so when we think about these changes to risk models it it's a big deal because because of the inflation reduction actct there have been some changes over the last couple of years in how they are adjusting for those risk model differences and that's where the
decoupling comes into play and I'm gonna hand it back to Patrick to go through some of the specifics on that piece but I'll pause there for
Speaker 29
16:03
a moment to see if there are any questions on what we've talked about so
Speaker 23
16:17
far. so far no questions thanks right so I wanna talk about the mechanics of the decoupling for most group medicare advantage plans it's an all in one package you've got your medical care and prescription
drugs under the same contract with a single insurance carrier and that's that's EBd's current arrangement with Unitedhealthcare and this bundled structure made sense for years it was simpler to administer, got everything under one roof but as Kirsten said the the IRA really made some significant changes and there's there's an opportunity now so before the inflation reduction actc, federal government subsidized the medicare drug coverage through a bunch of
different levers but the biggest was a reimbursement on large claims in the catastrophic phase and that came after the fact it was based on your actual claims IRA changed that so now instead of paying carriers on the back end for high claims the federal government sends an upfront payment directly to the carrier based for each enrolled member and this subsidy is known as the direct subsidy and it's risk adjusted unlike the the catastrophic claims reimbursement.
so the sicker the population, the more federal money the plan gets and risk scores are the tool used to determine what that perceived health of the population is and how much money you get from the federal government. So risk scores are much more important from the changes that the IRA made. and just to get a feel for the size of the direct subsidy before and after so 2023 we're looking at a $2 direct subsidy and now it's over $200 and again
those risk scores at $200 is like an average and depending on the risk score being higher or lower that's gonna manipulate what that that actual amount is that goes to the plan Patrick could you could you say that
Representative Robin Lundstrum
Unverified
18:17
one more time because my I'm I'm still my mind is still tripping on the fact that we used to pay $2 now we're paying
$2 and the sicker you are the higher the it's it's it's
Speaker 23
18:33
it's really yeah it's really the federal government how they're subsidizing the theart D plan so before most of it was coming in reimbursements on catastrophic claims that was the bulk of their their subsidy and now they've scaled way back so instead of paying 80% of those large claims they're paying around 20% of those large claims so they're paying much less on the back end they're they've
just kind of shifted and moved a lot of money into this direct subsidy and because of that risk scores are are now important and before when the drugx the drag x subsidy was so low if your risk scores were higher or lower maybe the money that came into the plan changed from $2 to3 dollars it was it was nothing but now when you're talking about a $200 starting point there's much more magnitude there and Kirsten feel free to add if I missed anything there.
Speaker 21
19:38
think you're on mute thank you it's a lot of information but essentially what Patrick is saying is there are three different types of of reimbursements that come in to cover claims. One is a direct subsidy one is covered what used to be called coverage gap from manufacturers now called discount for manufacturers and the other pieces from Cms so
when they changed the benefit design and the inflation reduction actct they just changed the percent that's coming from each one of those components and the piece that is the used to be the small component that was $2 is now a large component putting more risk on the average population of the plant so because that piece is set up to be funded based on risk scores. Now that now the risk scores are much more important
so that part went from $2 to200 dollars but other parts went from a lot more money down to a smaller piece but that one wasn't based on averages. so it's all the it it has nothing to do with well it's the money coming in to cover the claims Senator Petty thank you madam chairir. So Kirsten, I I was just trying to or or
Senator Jim Petty
Unverified
21:16
either one of you Patrick, the the risk is more important. The risk score is more important is it still being funded is it more important because you're being funded more the higher your risk is or is it being funded more because it's less what what what makes the risk score now more important so so if you go
Speaker 21
21:40
back to the way the theart D program was
initially set up. it was set up in 2006 it began and the they had a direct subsidy but after you got over a certain out of pocket maximum medicare was paying 80% of the claims over there that that would have been called catastrophic in the originally there was what was called the d donut hole and so there was a portion where a member would pay a
deductible and then they would pay 25% up until they hit the doughutt hole and then they paid 100% until they hit the out of pocket max and then Cms would pick it up and what happened over and Cms was picking up 80% of it and what happened over time was the uhccountable Care Act came in and said we're going to close the doughut hole. we're gonna have manufacturers pay50% of brand drugs and then we are gonna have Cms pick up over a
different portion over 10 years to to ultimately close the doughnut hole and as the manufacturers were picking up50% more and more drugs were being or being utilized because you didn't have that big donut hole and in 2019 they actually changed that50% to70% and so as as manufacturers picked up more of the cost of the drugs and people were utilizing more drugs
more cost got catapulted out into what was known as catastrophic and eventually the catastrophic became so large that that's why the inflation reduction that's part of why the inflation reduction actct changed the benefit design. it just wasn't really covering catastrophic anymore it was covering a large portion of the claims so they redesigned the whole program. there's some there are also some other reasons that there were incentives from who are the
manufacturers in the doughnut hole what used to be the d donut hole that were covering drugs to go ahead raise the cost of the drugs pay it catapult them out out into catastrophic and let medicare pick up the other 80%. so there was some incentives to continue to raise prices so the redesign of the program was to get rid of some of those incentives and to restructure the program so that catastrophic wasn't the majority of the claims it was really a
catastrophic portion of the claims that a smaller percentage of the population in doing that you know if you think about how theart D program set up is not set up like the medical side where abortions funded through taxes and apportions funded through general revenues it's actually set up to work on a private market so the entireart D program is based on all these carriers coming in
that and so that gets into this bid that goes in in June they're they are bidding on the individual market how much they expect they're gonna need to cover those claims and since they're just the carriers they're they don't have any funding going in it's all funded through CmS either through a direct subsidy and catastrophic the manufacturer's portion of it and then member premiums so those
are the four revenue components that come into the program so they've restructured the program that they have since since the catastrophic's gone down there has to be another portion that picks up the remainder of it and that is the direct subsidy so now when the plans are bidding they're not bidding so low because all those claims that were going into catastrophic are now coming into the plan and that's why it's so much higher
and by definition the nat when when the plan's bid in June and so we the information will get released in august what's the national average bid was the national average premium and the way that the direct subsidy is funded is the national average bid times the risks scoreless the national average premium. So just because they restructured the whole program and it's a zero sum game in the individual market that portion that was getting paid
per claim has come into come back to be
Speaker 36
26:33
funded by the plans and their bidding what that's gonna cost them and it's
Senator Jim Petty
Unverified
26:43
much much higher Senator Petty yes thank youkirsten one more follow up question I think it's probably the the the meat of what everybody is is interested in obviouslyviously some significant changes in in the structure through the the investment or the inflation reduction actct
are you seeing in in in trending is this going to translate into more costs for our members because of the way they are shuffled or more cost to the state or what what are you seeing in terms of because of this more globally not necessarily specific to Arkansas but what are you seeing the trend or what are they expecting the trend to do in terms of cost to the member or cost to the state with this change
Speaker 42
27:33
it's significantly reduced the cost to the member. so it used to
Speaker 21
27:38
be so so when they set it up in 2025 they are limiting the amount that a member pays to $2000 so that's the out of pocket maximum but there is a standard plan design and because your members are in a richer plan design meaning they're not a standard plan design has a deductible and then they're paying 25% until
they hit the out of my the out of pocket maximum but in your plan design that has copays and it's much richer plan their copays count toward their out of pocket max but anything your plan's paying in addition to their copays that would get them up to that standard plan design also counts. so we're generally speaking where we saw before members paying much more what we see now in our employer group
waiver plans is that 2000 out of pocket maxx has a greatly reduced what your members are paying because they're hitting it so quickly when it includes the planned payments they're probably paying anywhere on average between6 and $800 to get to the max so definitely the the members are seeing less cost sharing but that cost sharing is being picked up through the plan so it it does increase a little bit
of the cost there but the market is bidding right the this is happening across the country and so far what we see is them keeping up with you know they're going to bid it every year and so they're gonna have to have enough money to cover the cost of their plans you know the big difference is this is all set up for the individual market so there this is a little bit gets into a little bit more technical but the risk models that we're talking about are based on
physician diagnoses coding. so if you have a medicare advantage plan that's covering medical they can set up contracts with providers they can do you know they have armies of people out there making sure that the coding is correct from the physicians from the providers but so if you're in an MAPd like you currently are that's great cause you have all the coding there the risk score's gonna be correct. if you
are in a standaloneart D plan and you have no entry into any of the providers on the medical side you your risk score is based on whatever's coded and so Cms recognizes there's a big difference between those. So when they put this in 2025 when they looked at all this and they studied what do our risk scores look like on the MAPd side
versus the partd side and specifically what we project they were going to be versus what were they actually and how close are we and they see a divergence in those two populations because of that phenomenon. So in2025 they said we're gonna have different adjustment factors on theartd risk models based on whether you're having a medical portion in your plan and MAPD or whether you're a standaloneart D plan.
and the first year 2025 the divergence was about 12%. Last year for this when when it came out last year for 2026 this year there was even more divergence which was about34.5% this year and and those were just adjustment factors to the same model this year when they put the advance notice out they said we we're gonna continue to see this divergence now we're actually pulling the
models apart so we weegegal don't have a Cms risk model to run where you know and it will vary depending on different clients states geographies etc. but what we're hearing from the market so far is the divergence that they are looking at when they're running their risk models is even more than it was last year which was the34.5% and that's why we get back to what Brant was talking about with the
decoupling then let's have two separate plans instead of having an MAPD we need an MA only and aartd plan so that we can take advantage of that differential on the partd side so that we get more payment that from the risk model that exists on that side and what it means for the members is you'll simply have two different ID cards but that's no different than we have on the commercial side where you know we have a medical card, we have a a pbm
card so that'll be the big difference
Speaker 44
32:50
there but it takes advantage of that differential in funding for a standalonear D plan. thank
Representative Robin Lundstrum
Unverified
32:57
you. This will give us a lot of information going into when we hear back from you and you'll be back in this committee probably April or June we'll be hear all this information will be coming back and we'll have the reports
Speaker 19
33:14
yes the the final notice will be out first
Speaker 42
33:20
first Monday and in april and then like I said that they'll probably need a little bit of time to digest everything there and get the
Representative Robin Lundstrum
Unverified
33:29
get the renewal offer together so the word of the day is stay tuned all right any questions from the committee OK everybodydy knows everything and they feel comfortable with this I'm seeing heads nod oh sure oh sure. OK. I'm sure there'll be questions later we'll let them digest
OKer thank you all right any other business to come and thank you so much for being here any other business to come before this committee? all right seeing no other business we will be back May13th. we are adjourned
Agenda
A. Call to Order
B. Update on UnitedHealthcare Rebid
C. Presentation on Medicare Advantage Prescription Drug Contracts and Related Market Trends
D. Other Business
E. Adjournment
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — ALC - STATE INSURANCE PROGRAMS OVERSIGHT SUBCOMMITTEE, Mar 18, 2026 | Agenda | 1 | Official source ↗ |
Speakers
Representative Robin Lundstrum
Unverified
Speaker 10
Representative Dwight Tosh
Unverified
Speaker 15
Speaker 21
Speaker 23
Speaker 27
Speaker 19
Speaker 29
Senator Jim Petty
Unverified
Speaker 36
Speaker 42
Speaker 44