1. 1 Status of the Statewide Healthcare Initiative “ The Public School Employees Benefit Trust Fund” Hon. Steven R. Nickol

2. 2 Background HR 159 of 2003 (Diven, Perzel et al.) directed the Legislative Budget & Finance Committee (LB&FC) to study the feasibility of placing public school employee health benefits under the Commonwealth’s jurisdiction.

3. 3 LB&FC contracted “The Hay Group” to conduct the study, which recommended establishing a separate trust administered by the PA Employee Benefit Trust Fund (PEBTF).LB&FC contracted “The Hay Group” to conduct the study, which recommended establishing a separate trust administered by the PA Employee Benefit Trust Fund (PEBTF). Predicted Savings Based on Utilizing ExistingPredicted Savings Based on Utilizing Existing PEBTF Operations and Structure PEBTF Operations and Structure SOURCE: HayGroup Study, 2004

4. 4 SOURCE: Bucks County Courier Times 2/23/04, 2/24/04, www.capitolwire.com 2/04/04, Harrisburg Patriot News 2/10/04, Allentown Morning Call 2/13/04, 2/12/04,www.capitolwire.com

5. 5 Small Working Group “School Employee Health Benefits Pooling Small Working Group” Established in April of 2004. Stakeholders Invited: PSBA, PSERS, PFT, PASBO & PSEA: –Assess the Hay Group’s Recommendations. –See if Consensus Could Be Reached to Move Forward with Legislation.

6. 6 PASBO Study

7. 7 Data Collection SOURCE: PASBO Survey, 2005SOURCE: HayGroup Study, 2004 Cost Disparities

8. 8 Data Collection (cont.) SOURCE: PASBO Survey, 2005SOURCE: HayGroup Study, 2004 Number of Survey Response Disparities

9. 9 Interest in Proceeding with Statewide Healthcare Initiative Take Health Care Off the Bargaining Table Act 1 Back-end Referendum Exemptions State Contributions Controlling Health Care Benefit Costs

10. 10 Taking Health Care Off the Bargaining Table SOURCE: Scranton Times-Tribune 8/14/06, Harrisburg Patriot News 8/10/06, Harrisburg Patriot News 8/24/06, Philadelphia Inquirer 1/10/06, www.capitolwire.com 1/10/06, Harrisburg Patriot News 8/14/06, Philadelphia Inquirer 8/27/06, Scranton Times-Tribune 8/14/06, Pittsburg Tribune-Review 8/30/06, Pittsburg Tribune-Review 9/21/06www.capitolwire.com

11. 11 Act 1 Backend Referendum Exemptions School Boards can’t control the cost of healthcare. They shouldn’t be subject to these costs under Act 1. Pooling provides greater predictability in health care costs for school districts during budget deliberations. SOURCE: Act 1 of 2006

12. 12 Hurdles to State Health Care Contributions: Paying for Different Levels of Benefits in Each School District Variable Member Cost-Sharing Disparity in Efforts by School Districts to Control Costs

13. 13 Employer Healthcare Costs Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006, KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America, 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1988-2006; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April), 1988-2006

14. 14 Success in Controlling Costs- Consortia Source: Pennsylvania Association of School Business Officials

15. 15 Success in Controlling Cost PEBTF Health Insurance Expenditures Economy of scale would yield greater bargaining power with insurers.

16. 16 Success in Controlling Cost PSERS Health Options Program (HOP) 65 Special Program for retirees eligible for Medicare Source: Public Schools’ Employee Benefit System Larger pools help contain the cost of health care benefits and slow down realized cost increases.

17. 17 Highlights of the Working Draft First Trigger-First Trigger- Passage by the General Assembly Data Collection, the Study, and Formulating a Plan. Second Trigger-Second Trigger- Passage by Board and Review by the General Assembly ImplementationImplementation of the Statewide Healthcare Plan

18. 18 First Trigger and Phase I Governor House Board Collect Data Conduct a study Senate Board Plan of Implementation Approval 1 st Trigger Super Majority of 9 Trustees Veto Power Data Collection with Teeth Needs to be a Fact Based Process

19. 19 The Public School Employees’ Benefit Trust Fund Board of Trustees Composition of the Board: –Governor, –Budget Secretary, –Secretary of Administration, –Insurance Commissioner, –Four members representing school employee unions, –Four members representing PSBA,

20. 20 Plan to be Determined by the Board Board Benefit Package RegionsEligibility Cost-Sharing Cost Containment ProviderPayments Super Majority of 9 Trustees Veto Power

21. 21 Concepts of Pooling Separate employers No Shared Risk Different Plans Autonomy Local Control- Bargaining Table Flexibility Unlimited vendors Separate Data FragmentedTodayRegional PoolsSingle Pool One Pool Shared Risk Limited Plans Limited Flexibility No Local Control- No Bargaining Table Shared Data Modeled after Mercer Health & Benefits Report

22. 22 Governor Board Collect Data Conduct a study Second Trigger Board Plan of Implementation Approval Super Majority of 9 Trustees Veto Power 2 nd Trigger Governor HouseSenate

23. 23 Governance by the Board PSBAPSBA Super Majority of 9 Trustees Veto Power CommonwealthCommonwealth PSEAPSEA

24. 24 Health Care Benefits vs. Pension Benefits Health Care BenefitsHealth Care Benefits –Evolving –Evolving rapidly –Changes –Changes in administration of HC –Dynamic guaranteed not to work tomorrow –What works today is guaranteed not to work tomorrow Pension BenefitsPension Benefits –54 unconsolidated statutes –Long Term –Long Term Obligation –Fixed locked into law –Can be locked into law Establish a mechanism to deal with the cost and details of health care benefits

25. 25 Time Table

26. 26 Questions