FISCAL NOTE
Date Requested: February 13, 2018
Time Requested: 01:05 PM |
| Agency: |
Public Employees Insurance Agency (PEIA) |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2421 |
Introduced |
HB4521 |
|
|---|
| CBD Subject: |
Insurance, Salaries, State Personnel |
|---|
|
FUND(S):
PEIA
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 allow employees to elect to receive compensation in the amount of the premium the State would otherwise pay for their health insurance under the Public Employees Insurance Agency and to sunset the Public Employees Insurance Agency. PEIA currently maintains three separate risk pools of health insurance. The retiree fund, non-state agency fund and the state fund. This fiscal note assumes the option for employer premium compensation will be available to state fund employees. This constitutes state agencies, higher education and secondary education.
Based on PEIA’s understanding of the intent of this bill, the state is providing the employee an option to receive the value of employer premium in compensation, in lieu of healthcare coverage, and eventual sunsetting of PEIA. Due to PEIA’s extremely competitive healthcare provider reimbursement levels, absence of profit margin in costs, and competitive bidding for its third-party administrator and pharmacy benefit manager, the cost of PEIA’s benefits and administration is at or below market rates. Therefore, adjusting the cost to market rates will increase costs to the state.
The exchange of compensation for no employer health insurance would not likely result in savings as the employee would face higher costs in the individual health insurance market place for comparable coverage. Additionally, twenty percent of employer and employee premium revenue is allocated to fund the retiree subsidy. To continue funding the retiree subsidy, the employer premium deemed compensation for an employee would have to be reduced by the twenty percent retiree subsidy. This would reduce the compensation to employees, leaving less for the employee to buy health insurance in the individual market.
In the event an employee chooses to accept the reduced employer premium, the State would then lose the employee’s twenty percent share of the retiree subsidy. This is currently worth $25 million in total and $423 per employee annually. Assuming ten percent would accept the option, the State would be required to fund an additional $2.5 million in retiree subsidy.
The eventual sunsetting of PEIA would not likely result in savings as the state would simply be moving the cost of employee healthcare to a different administrator. In the event the healthcare is fully insured by a private entity, the cost would either increase due to the profit load and higher provider reimbursement levels, or stay the same with reduced benefits to offset these costs.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2018
Increase/Decrease
(use"-") |
2019
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
2,500,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
2,500,000 |
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):
In the event an employee chooses to accept the reduced employer premium, the State would then lose the employee’s twenty percent share of the retiree subsidy. This is currently worth $25 million in total and $423 per employee annually. Assuming ten percent would accept the option, the State would be required to fund an additional $2.5 million in retiree subsidy.
Memorandum
Person submitting Fiscal Note: Jason Haught
Email Address: jason.a.haught@wv.gov