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SALT LAKE CITY -- Compared with six major insurance carriers in the state, Utah's Public Employees Health Program has higher medical, hospital and pharmacy costs and isn't as competitive in seeking lower rates.
And although its members are generally younger, they visit doctors and hospitals more often than members of other health care systems, according to a legislative audit released Tuesday.
PEHP collects over a half-billion dollars worth of premiums annually to cover costs of its insured members
| 2010 | 2009 | |
|---|---|---|
| Revenues | 608,704,842 | 598,755,123 |
| Insurance benefits | (550,469,905) | (568,770,800) |
| Administrative expense | (23,205,127) | (23,083,981) |
| Net gain/loss | 35,119,810 | 6,900,342 |
| Contingency Reserve | 146,361,961 | 111,242,151 |
Legislative Audit Subcommittee Chairman Sen. Mike Waddoups, R-Taylorsville, warned the agency, which is a division of the Utah Retirement System, to reign in costs because the state "can't continue to sustain that."
Come budget time, Waddoups said lawmakers will be looking to PEHP for help in controlling costs and effectively managing state funds.
Members of PEHP can expect to pay $316 each month when members of other plans pay about $282 per month in premium costs for similar services. Auditors say that although the financial practices within PEHP are solvent, purchase practices and contract management is poor.
Auditors also discovered nearly $35 million in excess reserves that could be refunded to PEHP's 73,000 state employee members and their employers. However, various risk pools within PEHP ended last year with deficits, creating a need to re-balance funding structures.
Since a 2003 audit on the same issues, the state's total claim costs have gone up by about 27 percent, whereas they were 15 percent lower seven years ago and now exceed other local carriers' costs by about 12 percent. Hospital claims costs are 37 percent higher than the average of the other insurance providers and PEHP pharmacy claims are 35 percent more than the average.
PEHP takes seriously its charge to provide high-quality and cost-effective benefits to Utah's public employees.
–Jeffrey Jensen, PEHP director
#jensen_quote
"PEHP should negotiate contract rates more aggressively with health providers before considering reducing health plan benefits to help control costs," the audit report states.
Auditors recommend that PEHP develop strategies to contain costs, including more aggressive negotiation with health care providers. They also suggest the Legislature revisit PEHP with a similar audit every other year to monitor progress and adherence to concerns addressed in the report.
PEHP officials say they will cooperate with recommendations provided in the audit report, but maintain that it is difficult in an ever-changing market such as health care, especially with ongoing efforts for reform on both the state and federal levels.
"PEHP takes seriously its charge to provide high-quality and cost-effective benefits to Utah's public employees," PEHP director Jeffrey Jensen wrote in letter responding to the audit. He said the program has obtained 33 percent better discounts for hospital claims on one of its plans, effective Jan. 1.
Jensen said controlled prescription coverage, including increased generic use and a formulary list, has positively impacted cost savings.
Auditors noted that PEHP saves its members a lot of money on administrative costs, with its smaller-than-usual staff, and has a "well-run, aggressively managed pharmacy program," according to the report.
Jensen said the program will be taking a better look at managing the health of its members, including implementation of prevention mechanisms for general health and wellness and weight management.
E-mail: wleonard@desnews.com
