For the past four years, Department of Finance and Administration (DFA) managers have postponed making necessary, but politically unpopular, business decisions to manage the State Employees’ Health Plan. DFA also did not develop an adequate system to monitor the position of the reserve fund regularly and analyze claims data and usage patterns upon which to base management decisions.
DFA allowed the Plan to become financially unsound with only $3 million in cash reserves at October 31, 1991, far short of the industry standard ($17.9 million, which represents the claims liabilities owed by the Plan) and well below the May 1988 $25 million reserve. This depletion of reserves occurred because DFA failed to follow the recommendations of its actuarial consultants to raise premiums. As a result, the state or state employee Plan members will have to finance large premium increases in one year rather than smaller increases over a period of several years.
For a paper copy of this report, contact PEER by telephone at 601-359-1226 or by e-mail at reports@peer.ms.gov.