OEBB Puts Off New Contract Discussions for Another Year

The Oregon Educators Benefit Board will not have a better designed health contract in place before the 2017-2018 school year, raising questions about whether the health plan for teachers will be able to keep medical cost inflation anywhere near the 3.4 percent cap set by the Legislature.

The Oregon Educators Benefit Board voted unanimously Tuesday to delay its contract redesign for another year, arguing they are not yet prepared to take on the extensive work to rethink their health plan to save on costs while improving the patient experience.

“We’re at a crossroads, and some of us feel a little rushed,” said OEBB board member Dave Fiore, a Pendleton consultant representing the Oregon Education Association, the state’s top teacher’s union. “I’m not sure if we the members of the board are all on the same page.”

“I feel very rushed,” concurred Bob Stewart, a board member and the superintendent of the Gladstone School District.

OEBB’s consultants from Towers Watson had scheduled the new request for proposal to be released Sept. 9, but now a new contract will not be in place before the 2017-2018 school year, making it increasingly unlikely OEBB will be able to keep its health insurance costs below the 3.4 percent annual inflation cap set by the Legislature.

Costs to OEBB have not been under control, leaving a number of school districts grousing about their desire to leave the health pool. Moda Health raised its premiums 8 percent in the past year, although that increase has been buffered by a low 2.3 percent increase from Kaiser Permanente, an additional option for OEBB members in the Portland metropolitan area.

Deputy administrator Denise Hall viewed the 3.4 percent inflation cap as a mandate, and said discussions will now take place with Moda Health this autumn to negotiate how OEBB can keep its costs below that figure, but was short on details on how OEBB might force Moda Health to limit premium hikes.

“They’ll work with the company to be sure they’re doing things to control costs. The expectation is that they provide better care at a lower cost,” Hall told The Lund Report. “It’s clear the Legislature doesn’t want to pass costs onto the consumer.”

It had been hoped that if OEBB followed PEBB into revamping its health plan along a coordinated care model, that like PEBB, the state and school districts would finally get their costs under control while creating a better healthcare experience for members.

Moda Health does offer a coordinated care model in most of Oregon, but that option is absent for teachers in central Oregon, Douglas and Curry counties. Hall said Moda recently expanded this option in Klamath County. That coordinated model has not proven very popular yet, but finding a way to get more teachers to select it may be one of the few ways OEBB could reduce costs without limiting benefits.

The 3.4 percent inflation cap was put in place in 2013 with the support of legislative budget drafters, including Sen. Alan Bates, D-Medford. Last-minute lobbying by the public employee unions resulted in the cost controls being amended out, but a line-item veto by Gov. John Kitzhaber restored them.

That goal may have always been unrealistic. Coordinated care organizations have been able to keep costs down primarily by steering Oregon Health Plan clients away from emergency rooms and coordinating the care of people who receive free healthcare through primary care homes. But OEBB and PEBB members, who, unlike Medicaid members, face high copayments for misusing the emergency room for non-emergency care, have never utilized the emergency room at such a high rate, so there’s less low-hanging fruit.

As a government program where hospital systems are expected to share risk, the Oregon Health Plan also has more leverage to keep provider costs down. OEBB, by contrast, pays some of the highest hospital rates in the state. A 2013 study conducted on behalf of the Oregon Education Association showed all Oregon hospitals were charging the health plan twice the rate of Medicare, and one hospital -- the for-profit Willamette Valley Hospital in McMinnville -- charged OEBB as much as four times that rate.

Lack of Leadership

Another key reason for the board’s reluctance to issue a request for proposal for a new contract may be the absence of a permanent administrator since the ouster of Joan Kapowich in late 2013, in the middle of the Public Employee Benefit Board recontracting discussions.

Former Kaiser Permanente executive and Oregon Health Authority Chief Financial Officer Kelly Ballas became interim director to oversee the new PEBB contract.

But now Ballas has retired, leaving PEBB deputy administrator Kathy Loretz to pull double-duty as interim administrator for both PEBB and OEBB. A search for a permanent joint administrator failed to find a suitable candidate, and on Tuesday, the OEBB board voted to begin the recruitment for an administrator who will serve only OEBB. The Health Authority will also have to replace Hall, who on Tuesday announced her retirement effective at the end of the year.

The past year has produced chaos in the Oregon executive branch, topped by an ethics scandal that resulted in Democratic politicians ordering the resignation of Kitzhaber, who made healthcare his chief policy area. His exit followed the resignation of several top officials assigned to implement healthcare and insurance policy, including Oregon Health Authority Director Dr. Bruce Goldberg.

The new director, Lynne Saxton, has had less than six months to lead the agency away from that upheaval.

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