Financial Status of State Health Plan

A message from Jack Walker, executive administrator of the State Health Plan (SHP)

Now that elections are over, the focus on our state budget intensifies and so does concern about the State Health Plan's own financial health.

I would like to offer you a broad perspective on some of the challenges we continue to face, as well as the progress we are making on behalf of the plan. The State Health Plan continues to focus on cost savings initiatives, too, along with a commitment to improving member health status. Here are some of the current commonly asked questions (and sometimes repeated from earlier member updates):

Is there a shortfall and what does it mean for members and others? Based on current projections, the State Health Plan's shortfall will be $300 million in the year ending June 30, 2009. The plan will need this infusion of cash by April 2009. The Plan also anticipates needing additional resources in the upcoming biennium.

It is important to emphasize that nothing will be decided until the legislature convenes and considers options and remedies.

Is the State Health Plan making financial improvements at this time? The State Health Plan has taken a number of steps to address the cash flow.

On the positive side, we have revised or recasted the original budget.  Using this new tool, we are tracking very closely to the revised budget projections. We have also negotiated with our vendors to postpone some payments until April 2009 and thereafter.

Do you have confidence that a solution will be found to restore the State Health Plan to stability? Yes. I believe that a solution will be found to restore the State Health Plan to stability. Anything else is unthinkable.

A solution will most likely encompass a range of carefully chosen remedies. There will be hard choices and trade-offs in the process. But I know that the State Health Plan holds high value to more than 660,000 state and county employees, teachers, professors and retirees, and I feel confident that it will survive these current pressures in a marketplace that is also presenting serious challenges.

What's next? The legislature, during the upcoming long session beginning in January 2009, will review a range of options, request additional research from the State Health Plan and, I envision, pursue the most prudent path to address member and taxpayer concerns and funding priorities.

Working closely with the legislature, and with input from our members, we will find the necessary remedies. Meanwhile, we will also put in place a number of the strategies we discussed at our Nov. 18 board meeting – strategies developed to make a significant difference in terms of saving money and improving the health of members.

Please visit the SHP Web site's News and Media Center ( to review the strategies discussed at the November Board of Trustees meeting (

In particular, I hope that you will review the September financial report (, indicating that:

The ending cash balance for the month of September was $49.9 million, which exceeded the projection by $25.5 million. Total Plan expenses for the first quarter of the fiscal year totaled $678.5 million, which is $22.3 million less than the $700.8 million projected. Although expenses are exceeding income, the plan's net loss at the end of the first quarter is only$89.8 million, compared with the projection of $115.4 million. Some of the variance or difference between the projected budget and actual experience is the result of the timing of various payments, but overall the plan's financial results are in line with expectations.


Be sure to look for a copy of the 2009 Preferred Drug List (, coming soon in your mailbox with your PharmacyWise newsletter. The convenient, pocket-sized Preferred Drug List reflects changes made in the past year and those effective Jan. 1, 2009.