FISCAL NOTE

Date Requested: February 08, 2017
Time Requested: 04:18 PM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
1297 Introduced HB2051
CBD Subject: State Personnel


FUND(S):

2180

Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The purpose of this bill is to authorize insurance to married workers without children at reduced rates under the West Virginia Public Employees Insurance Act. The premise for this bill is the belief that two adults married without children should not be paying a family coverage health insurance premium at the same rate as a family with children. When looking at insurance rate setting without claim experience data there could well be a presumption that two married adults without children on their policy would be cheaper than a family with children. However, a review of the actuarial experience of these two groups does not support this reasoning. The WV Public Employees Insurance Agency has had its contracted data warehouse consultant examine this issue in the past and it was found that reality is they cost the same. PEIA actual experience has been that the Employee and Spouse (no children) coverage tier is responsible for the same amount of costs to PEIA per policyholder as the Family coverage tier. This is largely because the members in the Employee and Spouse Only coverage tier tend to be older couples, whose children have reached adulthood and left home, who have higher needs for medical care and therefore, present higher health care utilization, resulting in similar claims costs to the PEIA Plan (compared to younger families with children). In contrast, children overall do not cost as much to cover as older adults and member families with children tend to be younger adults who are also less expensive to cover. Passage of this bill will cause an artificial cost increase within PEIA. The premiums would have to be adjusted upward for other member tiers (for example; Single or Family) to create a cost neutral change for the PEIA Plan overall. This would be needed to subsidize the newly proposed tier. The other PEIA members in other coverage tiers and their respective employers would pay more to make up the lost premiums from subsidizing the artificially created lower premiums, which would not cover the real costs of the proposed Employee/Spouse only tier. PEIA’s present family premium rate is based upon a blending of the experience of both the married couples with and without children. If PEIA were to adjust premium to reflect underlying risks, then the married couples without children group would see a similar, or higher premium rate while the family with children premium rate would decrease. In short, PEIA’s claims information for the Family Coverage Tier indicates this newly proposed policy tier does not warrant a lower cost, and other policy tiers in the plan would have to be increased to subsidize the artificially lower premium. The amount of subsidization would be relative to the level of artificially reduced rate established. There would be no additional cost to the PEIA should this bill be passed but the premium rate structure using the experience data that is presently employed by the PEIA would be affected. Premium rate shifting would cause other coverage groups to have their rates adjusted to subsidize the married couples without children.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


There would be no additional cost to the PEIA should this bill be passed but the premium rate structure using the experience data that is presently employed by the PEIA would be affected. Premium rate shifting would cause other coverage groups to have their rates adjusted to subsidize the married couples without children.



Memorandum






    Person submitting Fiscal Note: Jason Haught
    Email Address: jason.a.haught@wv.gov