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Public Employees' Benefit Board Meeting Minutes, April 15, 2008
Public Employees’ Benefit Board
Tuesday, April 15, 2008, 10:30 a.m. 1:00 p.m. – Minutes
DAS General Services Building/PEBB-OEBB Board Room
1225 Ferry St SE, Salem OR
Approved May 20, 2008

Board Members Present
Diane Lovell, Chair
Sue Nelson, Vice Chair
Peter Callero
Rocky King
Paul McKenna
Rich Peppers
Jeanene Smith
Bret West
PEBB Staff Present
Bobbie Barott
Adrienne Binam
Dena Comer
Wendy Edwards
Chelsea Hollingsworth
Isabel Joslen
Joan Kapowich
Lydia Lissman
Ingrid Norberg
Brian Olson
Margaret Smith-Isa
Guests Present
Dave Bolton, OR Public Employees Union
Tamara Brickman, Dept. of Admin. Services
Thandi Clements, Vision Service Plan
Kristina Herron, Providence Health Plans
Sally Hill, Providence Health Plans
Gordon Hoberg, ODS
Diana Jones, Regence BCBSO
Renee McDonald, Regence BCBSO
Megan Myrick, Willamette Dental
Jean Poling, Kaiser Permanente
David Scearce, The Standard Insurance Co.
Diane Skutack, BenefitHelp Solutions
Tamara Strauss, Samaritan Health Systems
Paul Sundermier, Department of Justice
Deborah Tremblay, Oregon Judicial Department
Don Wiggins, The Standard Insurance Co.
Consultants Present
Sheree Swanson, Mercer
Welcome and Approval of Minutes
Overview of Meeting
Mercer Update
Other Board Business
Standard Demutualization Fund
Operations Subcommittee Report
Other Reports
Welcome and Approval of Minutes
Diane Lovell called the meeting to order.
Rocky King moved to approve the March 18 and March 27, 2008 meeting minutes, with the correction to page 6 of the March 18 minutes. The correct motion is as follows:
“Rocky King amended his motion to approve up to $5.2 million to combine supporting statewide primary care reform efforts and the planning and implementation of medical home.”
Rich Peppers seconded the motion.
  • Hearing no further discussion, the motion passed unanimously.
Overview of Meeting
Lydia Lissman provided an overview of the meeting agenda items and explained two additional items addressing PEBB’s consultant and other Board business.  
Mercer Update
Lydia Lissman reported that since the beginning of 2008, two of three initial principals listed in Mercer’s contract with PEBB have left Mercer. PEBB and Mercer have discussed Board priorities, and Mercer has agreed to provide a work plan for PEBB products by April 17. Mercer has assured PEBB that they will provide additional staff to the account.
Rocky King asked if Board leadership would have the opportunity to interview the additional staff from Mercer.
Lydia Lissman replied yes, the contract states that Board leadership has the right to review possible Mercer staff who might be assigned to the PEBB account.
Other Board Business
Paul McKenna nominated Rich Peppers as Board Vice-Chair, effective July 1, 2008.
Peter Callero seconded the motion.
  • Hearing no further discussion, the motion passed unanimously.
The Board discussed the need for additional Board meeting time, and decided to extend the duration of the Board meetings as needed in lieu of scheduling an additional meeting day.
Standard Demutualization Fund
Lydia Lissman referred to Bdattach.3 and explained that during 2007 the Board began to explore options for use of reserves held at The Standard Insurance Company. At the April 17, 2007, Board meeting, Aon Consulting outlined seven options for consideration. In summary, the options are:
  1. Do nothing at this time
  2. Provide a subsidy to decrease rates for voluntary life insurance
  3. Provide a “rate holiday” for some or all Standard Insurance lines
  4. Increase the amount of employer-paid life insurance coverage
  5. Provide a subsidy to decrease rates for all Standard Insurance lines
  6. Provide a “basic” employer-paid long term disability benefit
  7. Subsidize the cost of medical coverage while employee is on long term disability
At that time, the Board agreed to consider only options 2, 4, 5 and 6. At the July 17, 2007, meeting the Board voted to pay the cost of increasing the employer provided basic life insurance from $5,000 to $10,000, effective January 1, 2009. 
The Board discussed the options and invited public testimony regarding the issue.
Testimony #1
Dave Bolton testified that he is represented by the Oregon Public Employees Union (OPEU). He thanked the Board for its work on the issue, and stated that the process began with his testimony before the Legislature against The Standard Insurance Company’s attempt to place the funds into a mutual holding company. His intent in doing so was that all state employees would benefit. All of the money should be used for the benefit of state employees; state employees paid the premiums for this. Standard is an excellent company. An option would be to throw out short-term disability. Due to the product’s design, not all employees who have built up their sick leave will really get any benefit; sick leave is a deductible item under the insurance plan. For severely disabled employees under long-term disability, SSDI is also deductible. It’s unfortunate that theAre isn’t a way for the state payroll system to separate out those employees who paid into the plan. A life insurance component would add the most value, especially for those lower-paid employees who aren’t able to afford the coverage. This would also benefit the state as the covered dependents would be less likely to request state programs for assistance after an employee dies. He would like the amount to be flat rather than a sliding percentage based on salary. He is not sure about a rate holiday due to concerns that group life insurance rates are rising while mortality costs are dropping for all other insurance coverage. He would not like the funds to subsidize rates. He feels very strongly about this issue and is hopeful that it will benefit all union and state employees.
Testimony #2
Paul Sundermier testified that he is employed with the Department of Justice (DOJ). He stated that he is the person who PEBB sued eight years ago following his written demand on behalf of members who paid for insurance from Standard through payroll deductions, and whose payments created the capital surplus that had to be disseminated upon Standard’s demutualization. He contended that those members of PEBB should have been entitled to the money from that demutualization.
He concluded his testimony with the recommendation that the Board table its decision on the current options until it can review this or other “more fair” suggestions and then issue the Final Order that governs how the fund should be distributed (click for full testimony).
Following the testimonials, the Board resumed discussion of the options with a preference for options 4, 5 and 6 or a combination of the three.
Staff will work with its consultant to provide the costs and other data for implementing options 4, 5 and 6 or a combination of all three. The information will be presented to the Board at its June meeting for final consideration and a decision.
Operations Subcommittee Report
Follow-up to March 18, 2008 Public Comments and Update from DOJ on TRICARE
Paul McKenna reported that at its April 8 meeting, the Operations Subcommittee heard two testimonials regarding members opting out of PEBB medical coverage due to enrollment in TRICARE. As part of a motion, the Subcommittee decided to request an opinion from the Attorney General regarding whether or not PEBB could amend its rule based on an informal letter.
Wendy Edwards reported that in response the Operation Subcommittee’s request at its April 8 meeting, staff approached the DOJ for an Attorney General’s opinion regarding an informal letter in the case of Medicare and to examine the TRICARE proposed rule and the current rule that does not allow opting out against TRICARE. Additionally, the Subcommittee authorized staff to proceed with an amnesty program for those opting out of PEBB medical coverage to provide details on what plan they are opting out against. This information would be captured in the PEBB.benefits system so that these individuals could be contacted directly regarding any updates to this issue.  
She reviewed the DOJ’s written response, as follows:
By way of background, PEBB's administrative rules currently allow most Eligible Employees (defined in ORS 243.105(4)(a)) to opt out of PEBB coverage. OAR 101-020-0015. Opting out currently results in a cash benefit, in an amount set by the PEBB Board. PEBB requires proof of other insurance in order for an Eligible Employee to opt out. OAR 101-020-0015(2). If the other insurance is from Medicare or TRICARE (the US Department of Defense) then PEBB's current rules do not allow the Eligible Employee to opt out. OAR 101-020-0015(4). This administrative rule is based on the prohibition on "financial incentives" to not enroll in a group health plan. 42 USC 1395y(b)(3)(C). PEBB's rule prohibiting a Medicare covered individual from opting out of PEBB coverage has been effective since January 1, 2001. Recently, PEBB adopted a revised OAR 101-020-0015 rule that also prohibits TRICARE members from opting out of PEBB. This is because a newly enacted law (effective January 1, 2008) states that the prohibition on "financial incentives" that apply to Medicare also apply to TRICARE eligible members. 10 USC 1097c. 
In 2002, Paul Olenick, the Director of the Division of Integrated Delivery Systems, Purchasing Policy Group, at CMS wrote a letter that provided written answers to questions submitted by a Florida law firm. The letter became part of the attachments to an American Bar Association (ABA) meeting of the ABA's Joint Committee on Employee Benefits. The letter is available on the ABA's website. The letter offers the opinion that "As long as any cash payment to an employee is made based on the employee's election as a benefit offered under the employer's cafeteria plan, i.e., one which meets the requirements of section 125 of the IRC, it would not be a violation of the Medicare law, which prohibits an employer from offering an individual entitled to Medicare any financial or other benefits as a incentive not to enroll in, or to terminate enrollment in, a [Group Medical Plan] which would be, or is primary to Medicare." Q/A 3. No citation to statute or rule is given in this letter. Therefore, CMS is not bound by Mr. Olenick's opinion. It should not be considered a precedent. PEBB has not relied upon this 2002 opinion to change its prohibition on Medicare eligible beneficiaries and I recommend it wait to consider changing its rule until CMS issues more formal guidance, such as an administrative rule.  
In addition, pursuant to the Department of Defense's new statute prohibiting incentives, it has proposed a new rule that explains, in the proposed rule's background, that "[e]mployers who adhere to the requirements of section 125 and offer all employees without regard to TRICARE eligibility a choice between health insurance and cash payment equivalents are not considered in violation of 42 USC 1395y(b)(3)(C)." 71 Federal Register 16612. Based upon this new rule, PEBB may want to consider amending OAR 101-020-0015(4) to offer TRICARE eligible employees the option to opt out of PEBB. Because this rule is proposed, however, the DOJ suggests no change to PEBB's rule until the Department of Defense's notice and comment period on the proposed rule expires (May 27, 2008) and the rule becomes final. How long it will take the Department of Defense to adopt a final rule in unknown.
PEBB’s Attorney General recommends PEBB make no changes to its current rules that prohibit Medicare and TRICARE eligible employees from opting out under OAR 101-020-0015. If the Department of Defense's proposed rules become final, then PEBB may want to revisit this issue and perhaps amend its rules to allow TRICARE members to opt out. 
At the Board’s request, she read the motion as stated at the April 8, 2008 Subcommittee meeting, as follows:
“Rocky King moved to approve the staff recommendation for an amnesty program for opt-out members followed by an audit process with the agencies, as follows:
  1. Send a letter and form to the 1,752 employees whose other group coverage the PEBB system does not identify.
  2. Explain PEBB opt-out rules, federal regulations, the Medicare and TRICARE prohibition, and instructions on making midyear changes.
  3. Require these employees to identify and certify the other group coverage that allows them to opt out.
  4. Update PEBB’s system to reflect member responses.
  5. Send to agency payroll and benefit staff a list of members who did not identify their other group coverage; request that they research their documentation to provide PEBB with the necessary information.
  6. Update PEBB’s benefit management system to reflect agency responses.
  7. Follow up directly with employees identified by agencies as continuing to opt       out against Medicare, TRICARE or coverage that does not meet PEBB’s       definition of “other group coverage.”
Additionally, to request a formal Attorney General opinion regarding informal letters relative to Medicare & TRICARE. If allowed, PEBB will amend OAR 101-200015 to allow employees with either Medicare or TRICARE coverage to opt out of PEBB medical coverage.”
Rich Peppers moved to reconsider the motion.
Peter Callero seconded the motion.
  • Hearing no further discussion, the motion passed unanimously.
Paul McKenna moved, based on the Attorney General’s advice, that PEBB not amend the rules relating to opting out for TRICARE or Medicare, and to proceed with the Operations Subcommittee motion relating to information gathering and communications. Additionally, the issue will be reconsidered when the Board has a final rule from the Department of Defense regarding TRICARE opt-outs.
Sue Nelson seconded the motion.
Hearing no further discussion, the Board voted as follows:
Peter Callero:
Rocky King:
Diane Lovell:
Paul McKenna:
Sue Nelson:
Rich Peppers:
Bret West:
  • The motion passed with a vote of  6-1.
Operations Staff Update
Wendy Edwards referred to Bdattach.4 and provided a summary of operations staff updates from March 2008.
Other Reports
History of the Stabilization Fund
Wendy Edwards referred to Bdattach.5 and outlined the history of the Stabilization Fund. She expressed her appreciation to PEBB staff and Paul McKenna for their efforts toward the development of this document.
ODS Funding Transfer
Wendy Edwards referred to Bdattach.6 and explained that on March 18, 2008, PEBB staff and ODS mutually agreed to transfer funds from ODS to PEBB, fulfilling the contract terms under the fully insured arrangement between the parties. The money was deposited into the PEBB stabilization account on April 1, 2008. PEBB will reimburse ODS for any claims with service dates prior to December 31, 2006 and submitted to ODS prior to March 31, 2008.
Overview of Medical/Primary Care Home Concepts
Margaret Smith-Isa referred to Bdattach.7 and outlined the various medical home initiatives occurring both nationally and in Oregon. The document described the key efforts currently underway including both broad national multi-stakeholder initiatives and more focused local efforts.
Guidelines for Public Comment
Wendy Edwards referred to Bdattach.8 and outlined the proposed process for submitting public comment during Board meetings, for Board consideration. She added that with the Board’s approval these guidelines could be posted to PEBB’s Web site.
Diane Lovell suggested adding information about additional ways to contact the Board.
Rich Peppers suggested that the section on providing notice be softened to include the words “if possible”. The guidelines should also include a statement that members shouldn’t expect an action in response to their comment. He would like flexibility around public comments relating to topics on that day’s meeting agenda, and language explaining that no appeals will be allowed. He prefers a loose format for public comments. Additionally, he would like it stated that up to 5 minutes will be allowed for each comment.
Lydia Lissman reported that announcements regarding new PEBB staff are forthcoming.
OregonHealth Fund Board
Diane Lovell reported that committee work continues, with the goal to provide reports to the full Board in May.