ALC-Employee Benefits Division Oversight Subcommittee

All right we'll call the A. L. C. employee benefits division oversight subcommittee to order. First item on the agenda is to consider suspending the subcommittee rules take up the agenda item D. that is listed came in Oceans are second. Second second. A discussion. In favor say aye. And if Jake lead if you would come forward please and members without objection we're gonna we're gonna turn the order around just a little bit it'll help things flow with the adding of item D. so we're gonna go to C. two will be the first item that Jake will be speaking about that right Jake which referred. And it should be exhibit C. two says A. R. benefits at the top formular recommendation report that it Jake. Thank you Mr chair and so just for everyone's awareness this is what we're looking at here this is part of our regular routine business as part of our management of the drugs that EBT covers this is the formular report all right Jake if you would name and title for the record please recognize you to proceed Jake lead director of the employee benefits division okay go ahead with the C. two changes to the beauty Drug formular so like I said this is part of our routine business we have a clinical consultant over you M. S. E. B. R. acts that helps us manage the drugs that we will we are willing to cover as you can imagine healthcare is very complicated there are all kinds of brand new pharmaceutical drugs that are coming on the market there's always new studies and information on existing drugs so all major group employer plans like ours have to manage which drugs we cover in which ones we don't that is several light years outside of my expertise so the EBT has traditionally contracted with the college of pharmacy we have two folks with us from ET our acts who are in the back here who can answer the questions far better than I can. On the first page you can see that there's a code that we use to identify why we might not cover which is to say exclude a drug. If you flip to the back you can see a series of drugs that were reviewed in the last few months by E. B. R. acts. There's the date considered there's image descriptions about the drug in the middle you'll see a column that says recommendation if we say we are excluding that for a code that means that we are all right we are recommending that we do not cover the drug for the code and in in question so for example the first drug there tablet we are recommended do we exclude that as of thirteen if you look up at the front. Code thirteen insufficient clinical benefit or alternative agents available. If you look on the right side the medication cost is twenty seven thousand dollars a year. We already have in some cases the content area changing where you add on that I don't what page are you all age to Page two. Which strawberry talking about as an example the very top drug. One second. E. eighty L. like you yes Sir okay all right go ahead if you would so that drug treats some things that we don't cover. It also covers some three something's pulmonary whole terrier hypertension which we do cover but there are other drugs on the market that are cheaper and just as effective so we're recommended do we exclude that. If you go through here and A lot of these are exclusions you will see you if you follow on the right hand side particularly when you get to page four the specialty drugs. And just for your reference a specialty drug is a drug with adopt a comma in its price tag that's what I've been told. There are some pretty big numbers. if I can draw your attention to page five of the report. Eggs that are coming on the If. And as you can see on the right hand side they're very expensive and I only bring that to the committee's attention just underscore the difficulties that we face in making these decisions because that's a three point six million dollar drug for one year. And with that I'll ask if there any questions. Members have any questions. Okay recognized a culture Ladyman. Thank you Mr chairman so that right hand column Jake forces three point six million yes Sir that's the annual costs that the twelve month cost of based on what you think we would use or what I'm House based on pricing from the manufacturer so I mean that one person or how many people reason so that would be one round of treatment for one individual for twelve months okay. Thank you. Any other questions for me all members. My interpreter right that all these drugs are the ones that shall declined to add will it so if you look in the middle column if we're declining it will say exclude but if you for example Page six. The. And I apologize I can't pronounce these drug names very well third from the top sid being co. Is a drug for atopic dermatitis we are recommending coverage of that with the prior authorization. So what that means is if the doctor prescribes this they can call EBR acts ERS can review the charts and confirm that it's being used for this the the conditions that we recommend to be used for and we do recommend it be covered that's a good medicine we want people that. If any push back from doctors that want to have maybe a particular drug prescribed for patients particular needs and it's not covered or do they have a voice in the process we hear from them regularly I'm sorry we hear from them regularly okay so or plan for example covers a lot of generics we have a very high generic utilization rate the reason being it's cheap a lot of times doctors will want the name brand for that drug what we don't cover the name brand we cover the generic. we are a lot of times if contiguous specialist as a specialty hospital will want to prescribe the most latest greatest experimental drug. If we're pretty conservative about what we recommended not in we really need to see that the drug works before we're going to cover it and it. That opens up though the door to a process that we use a lot in the drug companies use a lot sometimes is called patient assistance where if the drug company or the provider ask this to cover the drug and we say no we will not cover it then all of a sudden the manufacturer will begin offering that drug on a cheaper basis the law for the member a coupon so there's a lot of hands on work on our end to hopefully get our folks covered but also shield the plan from costs. Okay Senator Bledsoe. Thank you Mr chair. Jake under our stepped therapy law. If a physician prescribes a drug that is expensive. And. I don't I guess may be the benefit plan. Sturch soft accepting a generic but the generic doesn't work what then. So then we would move up and I'm not super familiar with the stepped therapy law but stepped therapy for those members who are familiar is a process that we used to make sure that if you know somebody is diagnosed with the condition they are immediately put on the most expensive highest impact medicine a lot of times there are much cheaper much lower dosage medicines that are available and we use step therapy to to both help the member and also maintain costs but we do as part of stepped therapy allow that we can I'm not again I'm not super familiar with the law itself though well it's just that you may start with a generic but if the patient does not respond to the to near it then there is that chance that they not be allowed in and that was what I was trying to get to set okay well thank you. We do try to have flexibility in the process and and we really do try to work with our members we have appeals all the time where and it's very very very hard to make those decisions a lot of times. Okay thank you very much Senator Irvin. I do want to follow up Senator Bledsoe had excellent legislation on stepped therapy that she passed and it's very important to understand. And and not just repeat kind of a a line from the market. So to speak because sometimes those step therapies and that process for that patient ends up in more cost to the system and more pain and suffering for the patient and so we really need to think about tracking those costs because if you have a child for instance who has asthma and who is put on a generic that does not work and then that child ends up in a hospital situation where they have a hospital overnight stay. Then it's going to be cheaper in the long run to the plan to avoid a hospitalization and if we had just put the medicate put the child on the medication that it needed from the very beginning according to the physician that saw that patient then you're actually gonna save money that way not the other way so really want you to dig down into that and make sure that you have that flexibility built in because again. Hospitalization is a lot more costly sometimes then the other replacement drug that's not the generic absolute and we do not do a good job of tracking that cost and that also in a you're not accounting for the time loss out of school you're not accounting for you know the the suffering that that child has gone through because of their asthma. I mean that's just a scenario but it happens over and over and over again so just understand that that's a very very important issue that policy decision that this legislature mate I understand thank you. Representative Rick. Richardson. Thank you Mr chair I just have a quick question there are several that are excluded because of thirteen co thirteen and I don't know if you can answer this or not but what when you say it's insufficient clinical benefit what's the timeline for that that makes it sufficient. Well doctor Johnson is here from ET our acts she actually does the hands on research for us and is actively involved in these recommendations so she can help answer that question. Not thank you I think you have to come up to the table to yes. More if you would please name and title for the record please. My name is Jill Johnson and I'm a professor at the university of Arkansas for medical sciences college of pharmacy The answer to your question is the co thirteen is that how we have used in this all of them were because of alternative therapies are available other other alternates are available an insufficient clinical as far as the insufficient clinical benefit typically has to do when a drug shows a benefit over another drug but by such a narrow margin it's not clinically apparent so perhaps maybe the measurement in the drug trials showed people answered the questionnaire a little bit different a little bit better on the new drug and non drug. But the margin of benefit was so minuscule that the patient could appreciate any better health benefits because of that. Okay thank you Mr are any other questions or any other members. Last one I have on this Jake is the prices are listed on the right hand column do they reflect any rebates or are rebates even applicable at the point of this discussion no they do not and actually that that's a great question one of the areas that we work on improving the financial performance and the pharmacies on the rebates side we're actually in the process now trying to procure new of pharmacy benefit manager my hope is that the new PBM we put in place in the relationship we build with them will allow us to use this report will really with kind of a whole new variable or side to it that allows us to balance our decision against the available rebates that might the PBM might have so if a PBM comes along and says Hey there's a new drug on the market and here's a very very very powerful rebate or there's an existing drug on the market we don't cover but because of our relationship with that PBM we have a access to a large rebate that might affect our decision making process. One of the questions of compounding is when you when you have a drug like this is compounding introduced into the conversation to see if compounding the drug would be cheaper than purchasing it from of the PPM if the compounding of the drug is actually an Avenue to exercise. I have not dealt with that but I my guess is that would probably be a case by case situation that we would look at. So my look at that I've had a couple pharmacy should have said that was from new federal regulation coming down where the BM to trying to choke down the ability to compound certain drugs that could be done cheaper then what might be purchased from the PBM would you look into that and get back to me please absolutely all right center. Thank you just quickly and when you say excluded from prior authorization and could you explain that a little bit better for me. Six okay so what that means is we're removing the PA on it okay what that means is tiring it yet we no longer feel like it's necessary. Due to retire the prior authorization yes we were still covering the drug coverage not for everyone okay okay okay okay and then and then there's some that you're moving to You're you're moving to just exclude. Based on your code Davis okay I was just checking to see. All right thank you that's all. All right let's call any other questions from committee other members. Without objection this item be approved or reviewed thank you let's move on to see one I think it's next one thank you doctor C. one be the first yeah I'll be the next one on the list. And so this is the quarterly report this is the third such report we submitted this is the result of the legislation that was adopted last year it is a quarterly report on the performance of the plan it's for the months and the the three months ending September thirtieth. The the first page there is a letter that really does not provide a whole lot of detail but it does no one of the major changes that we adopted during the quarter which was of course or bariatric surgery process and coverage policy that is something that we anticipate will be a pretty big list for us starting January when it becomes effective with some legislation adopted the that require coverage of it. And then on the back in remarkably small print. Is our financial performance we can walk through that if you'd like just a high level overview if you don't mind sure. So. One of the things I want to talk to all about today is the need for transparency our numbers and to make sure that we're all aware of the financial benefit or financial performance of the plan. War operating on projections okay we're trying to predict the future so in order to make sure that our projections are correct we had our actuaries at Milliman put together this budget tractor and so every quarter we have three sets of columns the first one is your projected amounts second one is actuals and the third one is the differences okay so the column on the right that said the group of columns on the right is how accurate our projections where do we get it right and we get it wrong going down the left you can see we're trying to project things like how many members were gonna have how many retirees what kind of funding we're going to get from the state the employees what kind of expenses we're going to have. And then going on down to gross assets and finally that net assets line at the bottom. There are two plans of course there's a Essie and PSE AS sees the first one. If you flip to the second one which is the PSC I'd like to draw your attention to the numbers at the bottom. Ninety eight on the BSE yes Sir okay. So If you look on that middle column. Excuse me the first column the first set of Collins of the projected we thought July and August we would lose our pilots really. In actuality we did pretty good. If you look and that's because we had some transfers from the Public School Fund. If you look at that difference in the year to date total all the way on the right. We're still very strong for the year on the public school plan meaning thirty eight million. What that is is the transfer from the restricted reserves that we received at the beginning of the year from the Legislative Council. If you go to the bottom you can see our net assets are very strong. And nine if we flip to the next page you can see that ten year projections that we have. Again we have to tenure projects of one for Essien PSE I'm gonna flip to the last page of the second to last page of the report which is our ten year projections for public school I'm sorry from moving too quickly I hope I'm not moving too fast. But if you can see our surplus for the year for twenty twenty two is sixty three million or twenty twenty three were tracking at a twenty five million dollars surplus that's very very positive on the public school plan. However from there the numbers become you can see we start running a deficit in twenty four and twenty five and twenty six they do me a favor you just give me a reference to what paid because the way our pages are to either me or maybe it's not what what I'm grants on the pager I'm looking at the piece of paper with the yellow bar at the top. About this one what we know so that is a color again that no that the page before that. And it should set the top Arkansas public school employees and then in parentheses P. S. C.. Estimated twenty twenty two to twenty thirty two financials. Okay got it. Okay so this is a tool that we use for our funding you can see at the top it has. The announcmenet the Department educations giving us that two hundred twelve million includes the funding we got from the are provided to reimburse us for COVID expenses and you can see if you go down there are surplus or deficit for the years very strong sixty three million. We're projecting again another surplus or deficit for twenty three that's because of the decision by the General Assembly to increase the minimum district funding from one sixty eight three hundred. So in the short term were very good. No long term however if you keep going out you can see deficits forming and that's the point that I want to make you only get into this power point on the make you sit through. Is the importance of not taking our eye off the ball so to speak as far as this plan goes. What what year is it you projecting out that just make sure once a page where you're you're talking about that so if you go down to that surplus last deficit line on the PSC Page okay. Thank you you can see online under the the numbers are black for twenty two and twenty three. Twenty fourth where we twenty four is when we start sliding. Now let me let me make something clear these are based on projections these projections are very conservative. These projections do not reflect necessarily so for example this is based on fairly low enrollment in our Medicare advantage plans they don't reflect any changes that we might that might see from our new pharmacy benefit manager contract. These are going to change every quarter. What won't change and I think is the reality of American healthcare is the costs are always going to go up and we're always going to have that challenge of looking three or four years down the road and making some hard decisions now so that we don't avoid bigger problems later. Okay couple questions of culture Ladyman so Jake if I'm reading this correctly at in twenty thirty two that deficit's going to rise to three hundred thirty four million sure so and I just wanna make something clear if you go up to the top when we put this together we really based it on what we know now okay and obviously when you project out ten years there's no telling what's going to happen. This is part of a calculator and and I don't know if I can show you how we how we put this together but those yellow cells we can adjust and if you look the number that we have in there on the minimum district funding is at three hundred and because the three eleven to twelve twenty twenty five and it doesn't increase okay. So what that's saying is if we never give public schools anymore money than they're currently getting. And we still continue to have a six percent increase in the number of retirees we have we still have two percent increase in headcount we still have six percent increase in overall costs than ten years from now will be in a heck of a place. What you're saying is if we monitor the quarterly we may have to make adjustments yes Sir we still see what that number's going to be in yours out yep and I and I the previous when I took this job when we took over the sport. This kind of reporting wasn't done and I can say that because I was the budget guys the governor's office when a lot of this happened and it's been a priority for us a DVD to make sure that we have transparency on the numbers and even if they're not numbers we want to look at we we've got to make sure that they are front and center. Well I think this is a good report because it gives time to make adjustments civil if we need to yes Sir. All right let me ask a question someone deferred to couple members that that three eleven at the top yes Sir do you have a way in managing the numbers to show what it would have to be as it progresses toward twenty thirty two so we would have an idea of known what it would have to go up to so this if you look that up on the screen no no it's not okay well. If there's a way to get it up the show this on the screen what we're looking at with this piece of paper is one tab on a spreadsheet that was created for me by it's a it's a nerdy energy financial spreadsheet is nothing I could even dream of printing off and presenting to you. But what it really is is a dashboard that our actuaries came up with to help us manage all these things and everything that's yellow there we can plug in any number we want the three eleven was a conservative number based when we did this report on what I thought the educational adequacy committee might recommend. But but but of course all of this is dependent on whatever decisions we ultimately reach during the session all right one of the questions are going members the. You did the number of people that have chosen to opt out. what's the current number and how does that play into these numbers that we have in front of us because that would if they come back again that's going to be a game changer for some numbers based on those that opt out I would have absolutely so right now We have are getting hammered by forms we are getting them through faxes reading through emails were getting them walked in I manually keyed a hundred and fifty of them last night myself we are kind of all hands on deck we have about five thousand that we have sent letters to to confirm that we have received their opt out or that we are going to send a letter to. The challenges a lot of people have sent and multiple opt out forms for themselves. In addition we have multiple people who have opted out and are now calling and saying I don't want to opt out. So were were made using the process it will be a little while yet probably mid December before we have a good handle on exactly how many people have opted out so just for perspective we have about twenty seven twenty eight thirty thousand post sixty five retirees who are covered so right now I think it's about twenty twenty five percent that are are opting as of right now yes Sir all right I'll come back to them and we give members a chance a representative Dotson. Thank you Mr chair So if I understand this correctly the three eleven number was just a number that you conservatively. Plugged in there. But one of the reasons the death deficit is showing so large in out years is because that number remains static throughout the entire decade correct so if we increase that amount. By so much annually like a certain age sure and the law that was adopted in this is one of the arguments we had internally about drafting this report yet the law that was adopted requires that number to go up for CPI right and so do we build that in that's a great law but we're still a balanced budget state. So We had some challenges there I'll just warn you now this report always going to show that in for five years we face the challenge and that's just because our projections are that healthcare costs are going to continue to go up right. But. Is there any other variable in there besides that three eleven that static well so that whatever the state kicks in so up at the top there there's the Department education funding there's no mechanism currently to increase that but that's something they grew up over time because the one sixty eight that we previously or giving wasn't sufficient. Also if you go down to that income line. There's in other income right there in that is the kind of a catch all but it includes our pharmacy rebate. If we can get a new PBM contract in place like I think we're hoping to that number will go up. and that course the expenses they're pretty conservative if you go back to that budget tracker section you can see that some of our expenses are in in actuality or our our better than projected what what percentage utilization is on the new. Are you anticipate in this. Is projected for the The New. These numbers are based on indicated percent enrollment in MA PD fifty percent okay thank you. So just just for clarification if you look down on the pharmacy expense line. As I said actually on the ASC site on the pharmacies expense line you'll see a decrease as people move over to that an APD. Senator. Thank you thanks take it does this line up with what Siegel have presented and then the recommendations that they made in order to ensure that we don't get upside down in the future. Yes the law requires and it the quarterly report the law creating a court okay requires a ten year projection okay the what we've done here is really following best practices that the our actuary right commended. and it jibes with the rate changes to the structure that we changed with our rates. Right but it of course also reflects the in a PT that was adopted pursuant to the single recommendations okay and but we also increased and adjusted the the contribution at the at the school district level as well correct code does that take yes Is reflect in that so if you go to the top there in those yellow boxes you can see that in twenty twenty to the minimum district contribution is a hundred sixty eight dollars. If you go to the right that jumps up to three hundred rights and also these are calendar years so just to confirm we don't do anything simple or straightforward okay these are calendar years not fiscal years which as we get into this power point in a moment. it hurts my head whenever I think about it okay makes things kind of almost needlessly complicated yeah but that's what that that that's kind of how we have always done it so to speak okay. I mean what it. Tell us to change it we actually looked at that a year ago one of the first things I wanted to do it's still something I think we need to do but it will require a lot of work particularly with the school districts who because if you think about moving the fiscal year that's going to happen right in the middle of their summer when you have a lot of people moving around them so it's it's something we want to work on but I think it would just make a lot of sense to do now I think it would help a lot okay. I just wanted to make sure that those recommendations reflected but we do know that there's some propose legislation things that will maybe affect us in the future to with some of the changes that we've made absolutely so okay thanks. A representative. Ladyman and then we'll come out of eighty. Thank you Mr Jack talk about the opt out percentage you mention up on about other legislators but I've got a number of calls from retirees asking about the it was it showed it like a Medicaid Medicare advantage plan. Some and I tell them that is not your typical advantage plan you see out there on TV but the people I have talked to the there seems to be confusion they don't understand they think it's just the same thing they talk to their insurance company about and I tell may know this is much better. Based on the committee meetings we've had the discussions that we've had so how is the communication education I mean how's that going with the people it's it's going of course United our vendor who's overseen the planned came in and did a hundred and fifty meetings all over the state we we for allowed radio advertisements we have tried to avoid too much advertising because of course we don't want to be confused with what a lot of our people are seeing on TV it's hard to distinguish our plan it's been a challenge to distinguish our plan for member all the other ones and you know what I tell people is I really really do believe the Medicare advantage plan is a better product. However. If you opt out for the discretion is the better side of valor I understand completely and that's why we offer that opt out provision this is a marathon not a sprint for us we want this program to be successful so it's not going to be a one or two or three year thing we really wanted to be successful we on our folks always have that option but we also want our folks to alternate we have of a plan that works for them but then also can allow us to afford to give give equally rich benefits to future teachers and generations. You know I know they had won the meetings there in Jonesborough I want to go because the do you know it has the attendance been good at these means you have any idea very strong I we have the numbers United provides it to us they've done this in twenty five states and they said that the participations been very strong and there are a number of people who are very vocal in saying that they don't want the plan they don't like it but they're also a lot of people who are very excited about it. Thanks. On the opt out number you said you have five thousand summer coming back into the given the reason why they're coming back in a I'm sure they will nobody seems to cut we have we had two hundred retirees a day coming into our office at the beginning this week none of them wanted to just give us a piece of paper they all wanted to tell us why but we're not recording that at this time so my hope is that they realize it's a very good program well that's what I'm wondering is that as time goes on and people get a grasp on this the perhaps we'll see and as far as the number of opt out and opt in time should clarify that if you will because just for the record there is some confusion out there in January if any member wakes up a nice they realize that they something's happened and they've been enrolled in the MA plan they just don't want to be we will allow them to opt out that one time. After that they will be in whatever plan they are enrolled in until next November when we will do this all over again so that if somebody wants to try the Medicare advantage plan but that turns out they don't like it they will have an opportunity to re enroll in our existing coverage whatever coverage that is at that time in November. Right so they they got the one opt out the one out in is that right basically I basically when and I'd be open enrollment next a next fall when that comes around all right going to go to representatives Beatty. Thank you Mr chairman I guess I have one question that many may have covered this prior to me coming in looking at you're looking at your spreadsheet the components and I'd like to talk a little bit on your enrollment subscribers how you have it those projections and those numbers as that would be and how many directly direct and input into this model to show the deficit that would create Because it looks like in ten years we're going to grow public school employees by a little over ten thousand jobs in the public school secretary and state so is that just a a percentage that you apply those numbers are some hard science and and statistics behind and that information on that input that's all based on the history of the plan and of course one of the reasons we went through that budget tracker earlier than age also through that is to show this to make sure that we know if those projections are accurate and based on that experience we're going back to our actuaries and saying I don't think for example on the A. S. seaside the public school or this state employee I have. We're losing positions yeah I know I noted that there but then on the public school sector where we're having difficulty finding employees now. In these projects so you're gonna grow ten thousand jobs in that sector in a in a ten year in house a thousand jobs a year more or less yeah out of active employees so I I just want a little more discussion on that because we had a recession and a realist two percent increase annually but like I said that's something that we can adjust as we move forward if we think that's unrealistic the area of growth and I'm more concerned with is on the retirees side that's a six percent right which is. Difficult right so. The representative rush. I'm sorry Senator rest for about that thank you Mr Davis for my hearing loss understand and I knew it heard it before last couple members maybe they wouldn't be sure you're saying they can opt out in January and some of them that were telling me they they didn't know all the facts of the they did more often can they opt in in January is that what you said to they got up to and now you can opt out we would prefer they make their decision now okay the deadline to enroll in so there's Medicare the federal Medicare program has a deadline to get people signed up and that's the deadline we're working against that said United healthcare is a great partner and we're helping people however we can so if an individual gets to next year and they decide they want to be in the Medicare advantage plan there might be options for them where we can get the mineral okay and I think some of the issues just gonna change we talked about it now you know I'm I'm trying to keep from talking people into it because I I'm not in the business and I can't do that but I had a lady come up to me and to store Saturday and said save an hour or five hundred dollars a month for her and her husband. That that was about a bill because figures that are so I've I've passed that loans and I realize it's not everybody that does that and it's not form you know I'll opt out to I just think there's some closed minds are going to wish they were had been open thank you. Representative back. Thank you Mr all. I was me with a group of retired teachers and one of the issues that came up and you might verify this first and then not proper second question is that you can only be in one health care advantage plan. All right so that's correct correct now so the other question I have is in. If you were enrolled in another health care advantage plan somewhere else well I guess. How would that if you're trying to opt in in January or something like that how does that work that you would so does not act to be kicked out the other one or how how's that work so you can only be enrolled in one Medicare plan okay and the concern that that a lot of retired teachers have of course we don't provide pharmacy benefits for retirees are retiree coverage is only medical so those of retirees are all have gotten used to going out and getting of pharmacy coverage through the open market a part D. plan a Medicare part D. plan okay. If they enroll if they don't opt out right but then they go out and buy that part D. plan Medicare isn't exactly know which bucket to put them in so on one hand they'll be enrolled in Medicare advantage over here which has a part D. plan part of it and on the other hand they're also going to be trying to enroll in a separate part D. plan the rule that they use is that Medicare will put you in whatever you enroll in last. And so with that in mind we're really going to delay our arm Roman of our folks until the last moment and we're really trying to communicate with people if they want the Medicare advantage plan please do not sign up for a separate part D. plan. If you opt out you still need to go get that part D. plans. But we're really trying to help people. Thank you. The reality is you're giving us a projection based on what we know right now but to all the shakes out with everybody opting in opting out probably in the next twelve to eighteen months were that's when we'll get a real feel for things plus getting of PBM contract in place at least for right now based on what we know here now and I guess my one question is these projections that you've given us are they real time considering five thousand have opted out. No so these only like I said well let me back up these are based on fifty percent enrollment so these are based on fifteen thousand opting out thank you so. And the next time you come back to force with this is I came member you come before this committee every with me this is a quarterly report all right so and it's required thirty days at the end of the calendar quarter so in February or so will be the next time I bring this report to you okay at that point we'll know more about the enrollment. and then we'll be in the middle of the session trying to figure out how that works sure okay any other questions for me other members. All right then without objection this will be approved and reviewed and we're moving on to now. The item that was added on which is going to be D. and I think you have a power point presentation on this one right. Yes. I'm not sure how to work the big screen. So building off of what we just talked about on a quarterly report one of the big things that we wanted to take care of when we. Came on EBT is making sure that we had transparency on the numbers that we knew the state of the the plan that we were working in real time and that we were. We were Making sure there was communication with all involved on the needs of the plan and so we worked up this process I presented it to the board of finance just to kind of get them ready for what we're doing to the extent that you all. Want to skip over this stuff it's probably a little detailed and technical but I want to get what I'd like to do is get everybody approaching this the some of the thornier problems with the same mindset really want to do is develop a process. Okay so This is one of my favorite. Charts I show this to a lot of people and it's it's the public school plan this is what we're looking at when we came on a couple years ago okay so if you remember the first time we put the we had a problem with the public school plan it was about twenty eleven twenty twelve and back then state government did with state government does which is Russia the problem invest resources develop solutions and fix it right. That top line is revenues that dark green lines revenues means that light Green Line is expenses and the bottom line is the reserves Hey Jake just for the benefit of knowing the members only have black like copies of funds we can see that that's good but if maybe I reference line one two or three years please thanks sure so if you look. We came in thirteen we were focused on the problem we address the problem and four years later we were in a great place had a hundred thirty three million dollars in reserves. The line on top there that three hundred one million was revenues it was well in advance the two seventy seven we were in a good place. The problem was we didn't act at that point. To address what we knew or should have known was coming and so as a result those expenses grew over time revenues did not keep up and you can see the bottom what happened to our reserves. Now that twenty twenty two line is incorrect because of course we've acted to fix this problem. But the the lesson I dropped on the slide and I hope you will draw as well is the importance of not losing focus on the challenge that we have is a plan in making sure that were regularly checking in on this and making decisions not for whatever is coming down the pipe today what's coming five four five six years ago from now. That means actually projector funding needs implementing the solutions getting all this within the process of both D. B. D. in this state and having flexibility in the process. We are helped because the decision by the board of finance To adjust rates and these rates went through they went into day of going into effect in twenty twenty three I'm very proud of the work we did on that because it will significantly change our ability to change and respond to problems in the plan just to remind everybody what we're doing is annually adjusting for actual basis we're gonna uniformed employer contribution of five year rollout across those five years okay. What that means is Farrer. Funding everybody's employer contributions going to be the same currently it is not. All this means that when when we need to come up with more money we've in effect come up with an agreement that says how much your share is how much my share is how much the state share is that gets us out of one of the thornier problems of the old board had which is when it came time to raise revenue when we needed to find more money. They got into a political fight of who's going to pay more and we've we've gotten past that we have an agreement now in place. And we also because of that have much much more accurate. Projections. What this means for us though is basically. We can boil it down to a very basic formula which is the cost of benefits has to equal the state's contribution and the employees contribution so that the real challenges if we want to give our people rich benefits we have to be willing to pay for the real challenges okay if the actuaries come in and say this is how much money we need we have to have a process to raise that amount of money either from state contributions employee contributions or by drawing from reserves. Just this is primarily background for the board of finance but just to clarify ASC is different from PSE in that it is funded per budgeted position. It is it's revenue is not dependent on a specific piece of legislation instead it's kind of in the background right it's it whenever we talk about positions or something called salary and match or part of the match. the funded amounts have to go to board of finance and get approval the chief fiscal officer this state. One of the reasons I think that there is far more stability in the funding of the state employee's side is because of this process meaning it's not dependent on a PC to your bill is not a target this out there is is kind of in the background. If you can play that to PSC. PSC's funding it depend on the educational adequacy process. It's in the education Appropriations Act. And pursuant to legislation adopted by the General Assembly recently it will go up annually okay. But there's there's some big differences in how we fund those two plans. And apart from going to this too quickly or not fast enough you're good just keep pace. State budget process is on a fiscal year right. So we have annual sessions this begins in the winter the spring usually the we we tend as a state to operate with really tight budgets on the front end and then one time surplus payments on the back and that's good but it also creates some headaches. If we have the session starts in January that means you usually have budget hearings in the fall before that the agencies obviously have to get their budgets ready to go well before that so as a result. department education agencies need to know what we need. Usually Blake may or June right. So if we want to submit a budget request for the fiscal year beginning July one of twenty twenty four we have to prepare our request no later than April one of twenty twenty three okay. The. Complicating factor one of them is that the plan of course doesn't run on a fiscal year runs on a calendar year basis we've got open enrollment we've got changes that have to be adopted in the system if anything if we need to change anything or if the law changes. And as a result if we want to submit a budget press for the fiscal year beginning July one no later than April one twenty twenty three then the funding provided by that request will not be available until counted plan year beginning January one twenty twenty five. So that means were eighteen to twenty months out as far as projections. I put this together because when I try to explain it to my staff in words. People got confused I don't think I succeeded in clarifying it because I think this just makes it more intimidating basically this is my way of saying that every legislative session is going to end with every fiscal ones regular session is going to end with us needing to make two decisions. The first is that. one we come out of the session we will know how much money the legislature can give us for the calendar year beginning for that next upcoming calendar year so if you look at green boxes calendar year twenty twenty four right. When we come out of this legislative session here in twenty twenty three we'll know how much funding we're going to get on a per budget position will know how much funding we're going to get through the Public School Fund. We can then go back to our members and say okay here's the state's peace. If the state gives us the amount of money we want and we can make the employees pay their fair share we can provide the level of benefits we want to provide and that's our plan for the coming year. However if a recession hits if the Joint Budget Committee is just in a bad mood that day if something happens where the state has to say Hey guys we cannot provide you the level of funding you ask for. Then we're going to have to go back and say okay we're either going to have to reduce the level of benefits. Or we're gonna have to increase the employee cost share or we're gonna have to pull from reserves. So when that that's a big piece of the the kind of equation that will need coming out of that session. At the same time we're gonna have to start the whole process again for the next fiscal year. Twenty twenty five. So those two pieces of information that we're gonna have to or to decisions we're gonna bring to you all at the end of every session one is the plan year coming up the other is the fiscal year coming up and that's really the. Basically what this whole presentation is is about I can. I can walk through all these different slides but at the end of the day that's the plan that we put into place one thing I'll also add on this and I'll say this because the bill filing deadline was just started yesterday we're gonna have a new fiscal impact process. One of things I'd like to do is incorporate fiscal impact into this process so. E. if during the session the legislature chooses to adopt a variety of bills that have an impact on the plan we will incorporate that and that will be part of our recommendations coming out of the session for the next plan year as appropriate. So that alas there any questions so let me ask you going back to the handout that we just finished covering before and showing the projection up to twenty thirty two. And my interpreting it right that you're projecting go from one sixty eight three hundred. I'm I miss that is that that's in law so that will happen. the the challenge for us is. And this deals with so keep in mind this is calendar year that you're looking at the recommendations for adequacy one fiscal but the recommendations for the adequacy committee I think we have two different. Well I don't know that we have final recommendations yet. Do we. All right I will recognize Senator Irvin. Go ahead Senator in the the the law or the states that they have to be turned in by number one and those were turned in by November one and you have a sentence recommendation and you have a house recommendation. But I believe the contribution are the same I think the recommendation was to follow the sequel recommendation. For the member contributions okay. Thank you can look at those yes there submitted to the president pro tem and the Speaker of the house most of the governor my client yeah my understanding was there was a difference between the house and the Senate but if there's not then we can certainly activities well as far as this portion of it I think is is the same that it are supposed to track the increase the gradual the Senate one was to track the gradual increases that were not so flat three hundred but to continue to increase that from the district level as well as the state level excellent because we felt like that was the stronger recommendation from Segal group in order to prevent us from being upside down in the future yeah and I agree yeah you don't want to create a cliff where all of a sudden it's a huge amount to contribute well if you gradually incrementally increased that year to year then you avoid that cliff and avoid the precedent that that number never goes up right exactly. The end of the day will know some by the middle of February sometime they'll be of more with the next quarterly reports based on all the pieces that are floating around out there that are getting us closer in time yes Sir okay all right any questions from committee members. All right okay thanks for the presentation here anything else you've got no Sir all right that we're joined. We are right.