FISCAL NOTE



FUND(S):

2180

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 a Medicare-specific plan to coverage directly from the WV PEIA. The savings that PEIA realized in moving the Medicare-eligible retired employees to a Medicare Advantage Prescription Drug (MAPD)the expected future savings would be lost if a migration back to the PEIA PPB. Plan should occur. A review by CCRC Actuaries estimated that 80% of the existing MAPD population would elect to return to the PEIA PPB. The expected loss to the PEIA Plan would be approximately $64 million. This migration would also result in an increase to the Other Post Employment Benefit (OPEB) unfunded liability that had been dramatically reduced when the Medicare-eligible retired employees were transfered to the MAPD. The annual reduction in savings represented below is due to the expectation that the Federal government will reduce the amount of capitation provided for each Medicare-eligible member.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2009
Increase/Decrease
(use"-")
2010
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 25,000,000 22,000,000 17,000,000
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 25,000,000 22,000,000 17,000,000


Explanation of above estimates (including long-range effect):


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 10%.



Memorandum






    Person submitting Fiscal Note: J. Michael Adkins, Deputy Director
    Email Address: michael.adkins@wv.gov