FISCAL NOTE
Date Requested: February 09, 2022
Time Requested: 09:08 AM |
| Agency: |
Public Employees Insurance Agency (PEIA) |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2260 |
Introduced |
SB574 |
|
|---|
| CBD Subject: |
Health |
|---|
|
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 require PEIA to negotiate the reimbursement level to any hospital that provides inpatient care to a non mandatory permissive participant (Non-State) beneficiary, as defined in WV Code §5-16-22. The newly negotiated hospital reimbursement level is proposed to be implemented October 2022 per this bill.
PEIA clarifies that the following costs will not affect the State and these costs would be borne by entities and/or members participating in the Non-State plan. Due to the variability that will occur with negotiated inpatient rates at individual hospitals, a definitive fiscal impact on the Non-State Pool cannot be provided. However, PEIA consulted on a model to project increased claims expenses for the Non-State Pool at various reimbursement levels that may be negotiated. Were PEIA to reimburse in state hospitals at 100%, 125% or 150% of Medicare reimbursement levels it would increase the Non-State Pool’s annual claims expense by $7,186,710, $11,478,773, and $15,770,836 respectively. PEIA prefers not to negotiate by hospital and instead prefers to use a fixed percent of Medicare PPS for the reimbursement. Assuming PEIA were to reimburse at 100% of Medicare for 2023 the ending plan reserve as a percent of expenses is projected to be 11%, which is dangerously near the statutory requirement.
If required to negotiate with every hospital, in the extraordinary occurrence that a WV hospital is moved out of network, there would be disruption to members preferred location of service and great confusion.
WV Code §5-16-25 requires the PEIA Finance Board to maintain a reserve of 10% of the projected plan expenses for the purpose of offsetting unanticipated claims losses in any fiscal year and to provide future stability. PEIA has upheld a longstanding commitment to maintain a reserve at the actuarially recommended level of 14% to ensure fiscal solvency for the plan.
The Non-State Pool’s reserve as a percent of expenses is projected by the actuaries to be 14.7% for plan year 2023 presently, and thus any alteration of the hospital reimbursement levels will result in the Non-State Pool’s reserve falling below the actuarially recommended level, and also endangers the pool to going below the 10% statutorily required reserve.
The preparation of any estimate of future health costs requires consideration of a broad array of complex social and economic events. The estimate of insurance program costs continue to contain considerable uncertainty and variability to actual experience.
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 |
0 |
11,478,773 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
11,478,773 |
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):
PEIA presented the middle cost assumption in the fiscal note detail:
Reimbursing at 125% of Medicare resulting in $11,478,773 increased expense.
PEIA clarifies that the costs included within this fiscal note will not affect the State and these costs would be borne by entities and/or members participating in the Non-State plan. Due to the variability that will occur with negotiated inpatient rates at individual hospitals, a definitive fiscal impact on the Non-State Pool cannot be provided. However, PEIA consulted on a model to project increased claims expenses for the Non-State Pool.
Memorandum
The preparation of any estimate of future health costs requires consideration of a broad array of complex social and economic events. The estimate of insurance program costs continue to contain considerable uncertainty and variability to actual experience.
Person submitting Fiscal Note: April Taylor
Email Address: april.a.taylor@wv.gov