Actuarial review shows large 2022 funding gaps for state and school employee health plans; board plots fast-track steps

Actuarial consultants from Milliman briefed the Board on updated projections for Arkansas' state and public-school employee health plans and presented a set of budget levers the Employee Benefits Division and the board could use to close funding gaps for 2022.

Milliman's presentation explained the firm's methodology — using pre-pandemic medical claims for medical trend projections and more recent pharmacy data for drug costs — and emphasized projections will change as new data arrives. For the state employee plan (ASC), Milliman presented a projected $6,000,000 deficit for 2021 (after prior surplus allocations) and showed a status-quo 2022 pathway that would produce a much larger funding gap. The consultants said reserves have been drawn down in recent years: net available assets fell from about $73.2 million in 2019 (roughly 24% of expenses, or ~90 days) toward significantly lower levels projected by 2022.

To close projected gaps, Milliman modeled a package of levers: increases in employee and retiree contributions (examples modeled include 5% for active employees, larger percentage increases for retirees), a $50 per budgeted-headcount increase in state funding (the presentation cited the scale of this component), reductions in wellness-credit amounts (e.g., reducing a $50 credit to $25 and raising penalties for nonparticipation), elimination of some screening requirements and potential retiree coordination with Medicare or Medicare Part D. Under one modeled package of initiatives the consultants said could be implemented for 2022, a projected $33.3 million deficit was modeled to shift to a roughly $6.2 million projected surplus for ASC and create roughly a 10% balance-of-year reserve (approximately $35 million) if all modeled steps were adopted.

For the public-school employees plan (PSE), consultants projected a baseline 2022 deficit of roughly $70,000,000 under status-quo assumptions; the PSE plan had received additional one-time funding for 2021 that reduced that year's shortfall, but that funding was not ongoing in the baseline model. Milliman and board members discussed the limits of the board's authority over school-district contributions and the need to coordinate with the Department of Education and the Legislature for funding changes affecting the school side.

Board members debated priorities: setting rates for Jan. 1, 2022 and publicizing options for open enrollment; addressing immediate deficits and rebuilding reserves for 2022; and creating guiding principles for longer-term policy. The Chair proposed weekly follow-up meetings and scheduled the next session for May 18 to continue action planning and modeling adjustments. Several board members urged quick action to finalize rates and prepare outreach materials for affected employees and retirees.