State Legislation May Affect Health Care Benefits in 2005

In early 2004, the Indiana state legislature passed a bill requiring the Indiana Department of Administration to implement a prescription drug purchasing program for state employees and certain other governmental entities, including state universities. While some governmental entities may voluntarily participate in this program, state institutions of higher education, like Indiana University and Purdue University, are mandated to use the program for their employee health care plans. There is brief reference in the legislation to the possibility of a waiver of participation by state institutions of higher education if the negotiated arrangement does “not result in an overall financial benefit” and the waiver is approved by the State Budget Agency.

Several months ago, the Indiana Department of Administration distributed a request for proposal (RFP) to companies that provide management services for contracting with retail pharmacies, providing Rx mail order services, processing Rx claims, preparing ID cards and providing general customer service. (These “prescription benefit manager” companies are called PBMs.) The state is expected to finalize a contract with a PBM by the end of September 2004. At that time, Indiana University will be able to analyze the State’s PBM arrangement for any “overall financial benefit” to the University. If such a program does not include financial advantages for the University, then a request will be prepared to obtain a waiver by the State Budget Agency.

The timing of this process has significant implications for Indiana University. First, Indiana University normally sends Open Enrollment information to the printer in early September; allowing for Open Enrollment information sessions in late October and employee considerations in November. Employee Open Enrollment elections can then be entered into various information systems, with the updating of eligibility files by the beginning of the year and the distribution of new ID cards around January 1st. This will not be possible if final decisions from the State are not made until October.

A new PBM provider will result in the following possible changes:

• Different retail pharmacies (changes may primarily be out-of-state pharmacies)
• Different mail order pharmacy
• Different ID card
• Different Rx filling or refilling program
• Different customer service operations
• Potential mandatory use of mail order for refills
• Potential drug formulary for preferred drugs
• Different drug utilization management programs, such as prior authorizations, “step therapy” etc.
• Potential discontinuation of exceptions for overseas travel

(There would be many details about coverage, customer service, enrollment records, ID cards, etc. to work out. Indiana University would normally take four to six months to coordinate the installation of such changes with a third-party.)

Impact on Indiana University
The best “negative impact” is that HEA 1265 will result in a delay in the timing of the Open Enrollment process; as a result, there will be a shorter period for employee enrollment considerations and ID cards will not be ready until after January 1st. The worst case is that there will be insufficient information from the State in October to immediately proceed with a new PBM. For this later situation, Indiana University will conduct an abbreviated Open Enrollment, including current PBM arrangements, and then implement the new PBM after the first of the year.

In any event, the coming Open Enrollment will not be the same as in the past. More information about this topic will follow in the Fall.

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