Senate Bill No. 267
(By Senators Hunter, Dempsey, Unger and Love)
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[Introduced January 25, 2006; referred to the Committee
on Pensions; and then to the Committee on Finance.]
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A BILL to amend and reenact §5-16-5 of the Code of West Virginia,
1931, as amended, relating to preventing the Public
Employees Insurance Agency from raising retired employees'
premiums more than five percent above premium rates in
effect on the first day of January, two thousand six, until
the Legislature enacts a cost of living adjustment for
retired employees receiving annuities from public retirement
plans administered by the Consolidated Retirement Board.
Be it enacted by the Legislature of West Virginia:
That §5-16-5 of the Code of West Virginia, 1931, as amended,
be amended and reenacted to read as follows:
ARTICLE 16. WEST VIRGINIA PUBLIC EMPLOYEES INSURANCE ACT.
§5-16-5. Purpose, powers and duties of the finance board;
initial financial plan; financial plan for following
year; and annual financial plans.
(a) The purpose of the finance board created by this article
is to bring fiscal stability to the Public Employees Insurance Agency through development of annual financial plans and long-
range plans designed to meet the agency's estimated total
financial requirements, taking into account all revenues
projected to be made available to the agency and apportioning
necessary costs equitably among participating employers,
employees and retired employees and providers of health care
services.
(b) The finance board shall retain the services of an
impartial, professional actuary, with demonstrated experience in
analysis of large group health insurance plans, to estimate the
total financial requirements of the Public Employees Insurance
Agency for each fiscal year and to review and render written
professional opinions as to financial plans proposed by the
finance board. The actuary shall also assist in the development
of alternative financing options and perform any other services
requested by the finance board or the director. All reasonable
fees and expenses for actuarial services shall be paid by the
Public Employees Insurance Agency. Any financial plan or
modifications to a financial plan approved or proposed by the
finance board pursuant to this section shall be submitted to and
reviewed by the actuary and may not be finally approved and
submitted to the Governor and to the Legislature without the
actuary's written professional opinion that the plan may be
reasonably expected to generate sufficient revenues to meet all
estimated program and administrative costs of the agency,
including incurred but unreported claims, for the fiscal year for which the plan is proposed. The actuary's opinion on the
financial plan for each fiscal year shall allow for no more than
thirty days of accounts payable to be carried over into the next
fiscal year. The actuary's opinion for any fiscal year shall not
include a requirement for establishment of a reserve fund.
(c) All financial plans required by this section shall
establish:
(1) Maximum levels of reimbursement which the Public
Employees Insurance Agency makes to categories of health care
providers;
(2) Any necessary cost containment measures for
implementation by the director;
(3) The levels of premium costs to participating employers;
and
(4) The types and levels of cost to participating employees
and retired employees: Provided, That retired employees'
premiums may not be raised more than five percent above premium
rates in effect on the first day of January, two thousand six,
until such time as the Legislature enacts a cost-of-living
adjustment for retired employees receiving annuities from public
retirement plans administered by the Consolidated Retirement
Board.
The financial plans may provide for different levels of
costs based on the insureds' ability to pay. The finance board
may establish different levels of costs to retired employees
based upon length of employment with a participating employer, ability to pay or other relevant factors. The financial plans
may also include optional alternative benefit plans with
alternative types and levels of cost. The finance board may
develop policies which encourage the use of West Virginia health
care providers.
In addition, the finance board may allocate a portion of the
premium costs charged to participating employers to subsidize the
cost of coverage for participating retired employees, on such
terms as the finance board determines are equitable and
financially responsible.
(d) (1) The finance board shall prepare an annual financial
plan for each fiscal year during which the finance board remains
in existence. The finance board chairman shall request the
actuary to estimate the total financial requirements of the
Public Employees Insurance Agency for the fiscal year.
(2) The finance board shall prepare a proposed financial
plan designed to generate revenues sufficient to meet all
estimated program and administrative costs of the Public
Employees Insurance Agency for the fiscal year. The proposed
financial plan shall allow for no more than thirty days of
accounts payable to be carried over into the next fiscal year.
Before final adoption of the proposed financial plan, the finance
board shall request the actuary to review the plan and to render
a written professional opinion stating whether the plan will
generate sufficient revenues to meet all estimated program and
administrative costs of the Public Employees Insurance Agency for the fiscal year. The actuary's report shall explain the basis of
its opinion. If the actuary concludes that the proposed
financial plan will not generate sufficient revenues to meet all
anticipated costs, then the finance board shall make necessary
modifications to the proposed plan to ensure that all actuarially
determined financial requirements of the agency will be met.
(3) Upon obtaining the actuary's opinion, the finance board
shall conduct one or more public hearings in each congressional
district to receive public comment on the proposed financial
plan, shall review such comments and shall finalize and approve
the financial plan.
(4) Any financial plan shall be designed to allow thirty
days or less of accounts payable to be carried over into the next
fiscal year. For each fiscal year, the Governor shall provide
his or her estimate of total revenues to the finance board no
later than the fifteenth day of October of the preceding fiscal
year: Provided, That, for the prospective financial plans
required by this section, the Governor shall estimate the
revenues available for each fiscal year of the plans based on the
estimated percentage of growth in general fund revenues. The
finance board shall submit its final, approved financial plan,
after obtaining the necessary actuary's opinion and conducting
one or more public hearings in each congressional district, to
the Governor and to the Legislature no later than the first day
of January preceding the fiscal year. The financial plan for a
fiscal year becomes effective and shall be implemented by the director on the first day of July of the fiscal year. In
addition to each final, approved financial plan required under
this section, the finance board shall also simultaneously submit
financial statements based on generally accepted accounting
practices (GAAP) and the final, approved plan restated on an
accrual basis of accounting, which shall include allowances for
incurred but not reported claims: Provided, however, That the
financial statements and the accrual-based financial plan
restatement shall not affect the approved financial plan.
(e) The provisions of chapter twenty-nine-a of this code
shall not apply to the preparation, approval and implementation
of the financial plans required by this section.
(f) By the first day of January of each year the finance
board shall submit to the Governor and the Legislature a
prospective financial plan, for a period not to exceed five
years, for the programs provided in this article. Factors that
the board shall consider include, but are not limited to, the
trends for the program and the industry; the medical rate of
inflation; utilization patterns; cost of services; and specific
information such as average age of employee population, active to
retiree ratios, the service delivery system and health status of
the population.
(g) The prospective financial plans shall be based on the
estimated revenues submitted in accordance with subdivision (4),
subsection (d) of this section and shall include an average of
the projected cost-sharing percentages of premiums and an average of the projected deductibles and copays for the various programs.
Beginning in the plan year which commences on the first day of
July, two thousand two, and in each plan year thereafter, until
and including the plan year which commences on the first day of
July, two thousand six, the prospective plans shall include
incremental adjustments toward the ultimate level required in
this subsection, in the aggregate cost-sharing percentages of
premium between employers and employees: Provided, That for the
period beginning the first day of July, two thousand five,
through the thirty-first day of December, two thousand five, the
portion of the policy surcharge collected from certain fire and
casualty insurers and transferred into the fund in the State
Treasury of the Public Employees Insurance Agency pursuant to the
provisions of section thirty-three, article three, chapter
thirty-three of this code shall be used, in lieu of an increase
in costs to active state pool employees, to subsidize any
incremental adjustment in those employees' portion of the
aggregate cost-sharing percentages of premium between employers
and employees. The foregoing does not prohibit any premium
increase occasioned by an employee's increase in salary:
Provided, however, That for the period beginning the first day of
July, two thousand five, through the thirty-first day of
December, two thousand five, in lieu of an increase in costs to
retired state pool employees, such funds as are necessary to
subsidize any increase in costs to retired state pool employees
shall be transferred from the reserve fund established in section twenty-five of this article into the fund in the State Treasury
of the Public Employees Insurance Agency. Effective in the plan
year commencing on the first day of July, two thousand six, and
in each plan year thereafter, the aggregate premium cost-sharing
percentages between employers and employees shall be at a level
of eighty percent for the employer and twenty percent for
employees, except for the employers provided in subsection (d),
section eighteen of this article whose premium cost-sharing
percentages shall be governed by that subsection. After the
submission of the initial prospective plan, the board may not
increase costs to the participating employers or change the
average of the premiums, deductibles and copays for employees,
except in the event of a true emergency as provided in this
section: Provided further, That if the board invokes the
emergency provisions, the cost shall be borne between the
employers and employees in proportion to the cost-sharing ratio
for that plan year: And provided further, That for purposes of
this section, "emergency" means that the most recent projections
demonstrate that plan expenses will exceed plan revenues by more
than one percent in any plan year.
(h) The finance board shall meet on at least a quarterly
basis to review implementation of its current financial plan in
light of the actual experience of the Public Employees Insurance
Agency. The board shall review actual costs incurred, any
revised cost estimates provided by the actuary, expenditures and
any other factors affecting the fiscal stability of the plan and may make any additional modifications to the plan necessary to
ensure that the total financial requirements of the agency for
the current fiscal year are met. The finance board may not
increase the types and levels of cost to employees during its
quarterly review except in the event of a true emergency.
(i) For any fiscal year in which legislative appropriations
differ from the Governor's estimate of general and special
revenues available to the agency, the finance board shall, within
thirty days after passage of the budget bill, make any
modifications to the plan necessary to ensure that the total
financial requirements of the agency for the current fiscal year
are met.
NOTE: The purpose of this bill is to prevent retired
employees' PEIA premiums from being raised more than five percent
above premium rates in effect on January 1, 2006, until the
Legislature enacts a cost-of-living adjustment for retired
employees receiving annuities from public retirement plans
administered by the Consolidated Retirement Board.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.