FISCAL NOTE

Date Requested: March 04, 2022
Time Requested: 04:20 PM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
2260 Comm. Sub2. Eng. 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 the PEIA plan to reimburse hospitals that provide inpatient care and also emergency medical service providers at a rate of 110% of the Medicare reimbursement rate for services provided to a participating beneficiary of the plan. These reimbursement rate increases will be funded by reserve dollars held in the reserve fund. These changes would be implemented July 1, 2023. PEIA would incur a minimum of $40,000,000 in additional annual claims expense increases if it were to reimburse Medicare at 110% for inpatient services. Any increase of plan costs will result in an incremental increase in the reserve requirement as the reserve amount is based on plan expenses. The PEIA Finance Board must set an actuarial recommended reserve of the projected plan expenses for the purpose of offsetting unanticipated claims losses in any fiscal year and to provide future stability. PEIA has firmly committed to maintaining a reserve at the actuarially recommended level of 14% to ensure fiscal solvency for the plan. Due to this provision, PEIA interprets this Bill to require the reserve be greater than the required reserve before permitting reimbursement of WV inpatient hospital services at 110% of Medicare. Without additional revenue increases or benefit changes to the current PEIA Financial Plan, implementing the 110% of Medicare inpatient reimbursement in FY 2024 would result in a Non-State Employee Insurance Plan Reserve of 7.5% and a State Employee Insurance Plan Reserve of 4.2%, both below the Statutory Minimum Reserve of 10% and the Actuarial Recommended Reserve of 14%. This would result in non-compliance with WV Code. To fulfill statutory requirements and the actuarial recommended reserve of 14%, PEIA currently has in the financial plan the intent to raise premiums 7.3% for the Non-State Employee Insurance Plan and 9.4% for the State Employee Insurance Plan effective July 1, 2023. (The Governor has committed the PEIA Rainy Day Fund balance to fund the State Employee Insurance Plan increase.) If the proposed bill passes, PEIA will need to increase premiums an additional 7.6% for the Non-State Employee Insurance Plan for a total premium increase of 14.9%, and an additional 11.8% for the State Employee Insurance Plan for a total premium increase of 21.2% respectively. These additional percentages result in a total increase of $31.8 million for the Non-State Employee Insurance Plan and $134 million for the State Employee Insurance Plan. (The $134 million would be reduced to $60 million after PEIA Rainy Day Fund balance commitment.) Otherwise, the increase could be offset with benefit reductions for both the State and Non-State Employee Insurance Plans. In the event the increases are funded with a premium increase, the State Employee Insurance Plan increase will be borne eighty percent by employers and twenty percent by employees. With the proposed bill a conflict of code exists as PEIA is required by §5-16-8a(a) to pay air ambulance Service Providers at the Medicare Rural Rate, which fluctuates annually. As written, PEIA would be required by this bill to reimburse not only emergency medical service providers providing ground ambulatory care at 110% of Medicare but also air ambulance service providers. The fiscal impact of paying air ambulance at 110% of the current Medicare Rural Rate would be approximately $135,000 in additional expenses.



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 0 40,135,000
Personal Services 0 0 0
Current Expenses 0 0 40,135,000
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 consulted on a model to project the claims expense increase.



Memorandum


In the event the increases are funded with a premium increase, the State Employee Insurance Plan increase will be borne eighty percent by employers and twenty percent by employees. With the proposed bill a conflict of code exists as PEIA is required by §5-16-8a(a) to pay air ambulance Service Providers at the Medicare Rural Rate, which fluctuates annually. As written, PEIA would be required by this bill to reimburse not only emergency medical service providers providing ground ambulatory care at 110% of Medicare but also air ambulance service providers. The fiscal impact of paying air ambulance at 110% of the current Medicare Rural Rate would be approximately $135,000 in additional expenses.



    Person submitting Fiscal Note: April Taylor
    Email Address: april.a.taylor@wv.gov