FISCAL NOTE
Date Requested: January 18, 2022
Time Requested: 02:53 PM |
| Agency: |
Public Employees Insurance Agency (PEIA) |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2034 |
Introduced |
SB418 |
|
|---|
| CBD Subject: |
Insurance |
|---|
|
FUND(S):
PEIA Basic Insurance Fund
Sources of Revenue:
Special Fund
Legislation creates:
Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The purpose of this bill is to remove the Public Employees Insurance Agency’s (PEIA) exemption from regulation by the WV Offices of the Insurance Commissioner (OIC) under the entirety of Chapter 33 of the WV Code. PEIA is enabled and created by State Code as a West Virginia Governmental Agency. If PEIA were regulated as an insurer by the OIC, it would effectively be treated the same as a private health insurer.
Chapter 33 contains sixty (60) different Articles, and those that relate to health insurance regulate both claims payments as well as financial structure of the health insurance provider. Many of these Articles directly conflict with the benefit design and structure of the PEIA plan and would have an immediate financial impact to the State of West Virginia.
PEIA cites WV Code §33-51-9(f), “A pharmacy benefit manager may not reimburse a pharmacy or pharmacist for a prescription drug or pharmacy service in an amount less than the national average drug acquisition cost for the prescription drug or pharmacy service at the time the drug is administered or dispensed, plus a professional dispensing fee of $10.49.” PEIA’s current reimbursement rate to pharmacies is a significant savings for the State of WV compared to that of private insurers regulated under Chapter 33. Additionally, W. Va. Code § 33-51-11 limits the use of a restrictive specialty network which would disallow PEIA’s exclusive specialty pharmacy. If PEIA would be required to reimburse pharmacies under the NADAC + $10.49 dispensing fee methodology, and lose the exclusive specialty pharmacy, PEIA will incur $24,862,800 in additional costs annually.
There are Articles of Chapter 33 which contradict the inherent benefits provided to State Agencies. A significant portion of Chapter 33 applies to the risk of financial loss present with a private insurer. As PEIA is a State Agency, with its assets deposited in state funds and investment pools, this is not a risk for which PEIA and the State are exposed. A tremendous amount of unnecessary burdens would be placed on the State for assets already in the State’s possession and control if PEIA were not clearly exempted from certain provisions under chapter 33. PEIA currently is exempted from paying the total 3% premium taxes that would be imposed under WV Code §33-3-14(a). Without clear exception to the premium tax presented in Chapter 33, if PEIA is subjected to these taxes, PEIA would incur $21,000,000 in additional annual costs.
PEIA currently sets premium rates based on a 10-tier salary scale design allowing our members the benefit of a sliding scale premium. Retirees are offered discounted premium rates based on years of service to the State of WV. W. Va. Code §33-20-3 (b) mandates that “rates may not be excessive, inadequate, or unfairly discriminatory.” PEIA believes there will be discriminatory challenges submitted to the OIC for the current rate design if the exemption to Chapter 33 is removed. In the event that OIC were interpreted to review and approve PEIA rates, a change in rate structure will disrupt the affordability of premiums for a significant portion of our members.
PEIA currently benefits from multiple legal structures and internal appeal processes which significantly reduce its overall litigation and other legal risks and burdens. Chapter 33, Article 11, would subject PEIA to the Unfair Trade Practices act, and PEIA would also become subject to the OIC complaint process, resulting in additional legal department administrative burdens and associated costs. Because PEIA is created and controlled by its State Code, PEIA is able to efficiently achieve the same assurances these Chapter 33 provisions provide with PEIA’s current internally-administered processes, along with our elected officials’ constituent services, to remain responsive and accountable to our members.
Currently, PEIA’s plan is not subject to the laws of the states or other legal territories where its members reside, and its contractual, privacy and security frameworks are protected by State sovereignty. PEIA’s privacy and security compliance is governed by HIPAA. If PEIA were regulated as insurance under Chapter 33, PEIA could be subjected to the laws of other states, or for members who live abroad in the EU or UK, PEIA could be required to comply with the General Data protection Regulation (GDPR) instead of HIPAA, at an average additional compliance cost of $1,300,000 annually. The West Virginia Office of Technology (OT) likewise depends on being compliant only with HIPAA, and it is unknown what additional costs OT may be required to incur in order to ensure PEIA’s GDPR compliance.
PEIA and the State have benefited from a long-term exemption from the Employee Retirement Income Security Act (ERISA) based on the definition of a governmental plan, “a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. PEIA’s existing contracts contain provisions clarifying that PEIA is a non-ERISA plan and that PEIA is not governed by the OIC, thus allowing for regulatory streamlining which reduces administrative costs. Removing PEIA’s exemption under Chapter 33 would affect PEIA’s ERISA exemption.
PEIA’s members currently enjoy the benefits of the West Virginia Omnibus Healthcare Act, which includes a general prohibition on patient balance billing, with certain specific exceptions. PEIA utilizes the Omnibus Healthcare Act to set reimbursement for healthcare providers. PEIA is able to further contain costs by taking advantage of certain Federal Law opt-outs and applicability safe harbors with regard to the ACA, which a private insurer cannot use.
There is not sufficient data available to estimate the full additional costs PEIA and its members would incur as a result of these effects. PEIA recovers millions of dollars each year through subrogation that it could potentially lose. The combination of PEIA’s sovereign immunity and representation by the WV Attorney General’s Office and Board of Risk Insurance Management significantly lowers all litigation and recovery costs compared to a private insurer. To mitigate the additional administrative, financial, and legal burdens as required under W. Va. Code §33-11, 33-33, 33-45, 33-51, and 33-55 and other Articles of Chapter 33, that are expected if the proposed bill becomes law, PEIA would need to hire 10 additional employees with an estimated annual cost of $563,713.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2022
Increase/Decrease
(use"-") |
2023
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
11,931,628 |
47,726,513 |
0 |
| Personal Services |
140,928 |
563,713 |
0 |
| Current Expenses |
11,790,700 |
47,162,800 |
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):
Fiscal Year 2022 estimated costs are prorated to 1/4 of the total expected annual costs assuming the exemption from Chapter 33 would take immediate effect after passage.
Pharmacy impact of $24.9M is based on study provided by our current PBM.
Premium tax of $21M estimate is based on assumed $700M in Premium Revenue at 3% tax.
GPDR compliance estimate of $1.3M is based Ernst & Young's, "EY and International Association of Privacy Professionals report."
Personal Services estimate is comprised of the following new employees hired at the DOP Market Rate:
3 Attorneys
3 Paralegals
2 Accountants
2 PEIA Provider Relations
Memorandum
PEIA currently is exempted from paying the total 3% premium taxes that would be imposed under WV Code §33-3-14(a). Without clear exception to the premium tax presented in Chapter 33 this area is open to interpretation.
Additionally, In the event that OIC were interpreted to review and approve PEIA rates, a change in rate structure will disrupt the affordability of premiums for a significant portion of our members.
Person submitting Fiscal Note: April Taylor
Email Address: April.A.Taylor@wv.gov