Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

The purpose of this bill is to permit Medicare-eligible retired employees to transfer coverage from Medicare-specific plan to coverage directly from the agency. In 2006, at the request of Governor Manchin, a study of the Public Employees Insurance Agency (PEIA) was conducted by PRAG. The analysis by PRAG and the PEIA actuary suggested that PEIA should do two things to contain future costs. The first was to change the way PEIA coordinated benefits with Medicare and require its Medicare eligible members to assume some of the cost share of benefits through co-payments and co-insurance. The second was to move its Medicare eligible retirees to an approved Medicare Advantage and Prescription Drug (MAPD). With these two changes the PEIA would realize a savings of approximately $60 million a year. It was determined that the realized savings with these two actions would reduce the existing unfunded Other Post Employment Benefit (OPEB) liability from approximately $8 billion to less than $4 billion. In December 2006, the PEIA Finance Board accepted the recommendation of PRAG and its actuary and changed the coordination of benefit with Medicare and directed the agency staff to investigate the feasibility of transferring the PEIA’s Medicare eligible retiree to a MAPD and if it was determined to be workable to implement this move on July 1, 2007. Financial reports to date reveal that the projected savings have been realized and are likely to continue in the future. It is expected that should this bill become law, approximately 80% of the Medicare eligible PEIA members would return to the PEIA Health Care and Pharmacy Benefit Plans resulting in a massive loss to the savings being realized and would again increase the unfunded OPEB liability due to these increases. Medical and drug cost trends will inflate the annual loss by roughly 8%. The projected cost to the Plan is: Fiscal Year Loss to the Plan FY09 $40,000,000.00 FY10 $43,200,000.00 FY11 $46,656,000.00 FY12 $50,388,480.00 Total $180,244,480.00 The present projected unfunded OPEB liability on June 30, 2007 is $3.36 billion. The expected additional increase in the unfunded OPEB liability with bill passage is $2.00 billion. The projected unfunded OPEB liability if bill is passed will increase to $5.36 billion.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2008 Increase/Decrease (use"-")	2009 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	0	0
Personal Services	0	0	0
Current Expenses	0	0	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):

Memorandum

Person submitting Fiscal Note: Chip Myers
Email Address: CLIFFORD.M.MYERS@WV.GOV