Consultant urges Medicare Advantage for retirees and governance overhaul; bills expected

Jake Lee, administrator of the Employee Benefits Division (EBD), told the State Board of Finance that the Segal group’s final report includes a set of recommendations aimed at stabilizing the employee and public school health plans long term. Three main recommendations Lee highlighted were: (1) move retirees to a Medicare Advantage plan on an opt‑out basis; (2) issue an RFP for a new pharmacy benefit manager to increase rebates and reduce plan funding needs; and (3) consider combining the ASC and PSC plans.

"One is to move all the retirees to a Medicare Advantage Plan," Lee said, adding that Segal recommended an opt‑out approach. Lee said Segal’s recommendations also included creating a stronger governance structure to replace some of the board’s rate‑setting duties, proposing an 11‑member body with stakeholder representation across state and public school sides and appointments by legislative leadership and executive branch designees.

Lee said the Arkansas Legislative Council executive committee has voted to draft bills based on the consultant’s recommendations; Milliman (another consultant cited by staff) provided alternate reserve estimates. When board members asked about reserve triggers, Lee said Segal recommended a roughly 14% reserve (minus IBNR, about an 8% year‑to‑year figure) while Milliman’s estimate was nearer 18%; staff said the mechanics of any trigger and budget contingencies remain to be worked out.

Board members pressed on timing and on how the board’s role would change. Lee said the administration and Legislature would determine the final structure, and that the fiscal session in February or a special session could be venues for legislation.

What this means: The recommendations, if enacted, would shift certain plan design and rate‑setting decisions away from the board and toward a new governance body and could change retiree coverage to a Medicare Advantage model absent legislative changes. The board asked staff for copies of the consultant report and for follow-up briefings as legislation moves forward.