Date Requested:March 22, 2013
Time Requested:12:41 PM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
2013R2485 Amendment HB2877
CBD Subject: HEALTH BENEFIT PLAN
FUND(S)
2541
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 the Director of the Public Employees Insurance Agency to operate the Medicare retiree plan on a calendar year if it is financially advantageous to the state. The bill provides that financial plans shall continue to be on a fiscal year basis.
    The revision changing from “any of the agency’s health benefits plans” severely restricts the Director of PEIA from recognizing and implementing this cost saving strategy should the situation present itself for any other PEIA program. If a situation would prove to be financially advantageous the PEIA would have to approach the legislature to have legislation introduced and enacted. Limiting this legislation to only the Retiree Health Benefit Trust (RHBT) Medicare plan could potentially cost the state money should an opportunity arise with pre-65 retirees or the active employee plans. There are sufficient controls in place with the requirement for public hearings and Finance Board approval to allow the Director of PEIA the discretion to run programs that will benefit the State of West Virginia without limiting it to only Medicare retirees.
    Changing from a fiscal year to calendar year would qualify the Medicare Advantage Prescription Drug (MAPD) plan to meet the Center for Medicare and Medicaid Services (CMS) prescription drug reinsurance reimbursement guidelines. Chapter 12 of the CMS guidelines stipulate that non-calendar year Employer Group Waiver Plans (EGWP) are not eligible to receive reinsurance payments. Since the MAPD benefit is on a non-calendar basis substantial dollars are essentially excluded from being paid.
    Prescription drug reinsurance reimbursements would be made to the MAPD carrier who in turn would apply those payments back into the benefit program. This would allow monthly premium capitations paid by the RHBT to be reduced thus presenting RHBT with cost savings. By moving to a calendar year basis effective January 2014, RHBT could begin seeing prescription drug reinsurance reimbursements as soon as July 1, 2013. By moving to a calendar year plan and taking advantage of this benefit the RHBT would reduce cost approximately $9-10 million dollars annually.
    The RHBT currently has 39,450 retirees enrolled in the MAPD program. CMS reimburses approximately twenty-one dollars a month per member for reinsurance. Potential savings to the RHBT amount to $9.9 million dollars. Evaluations by Humana, MAPD administrator, resulted in the estimated saving potential in excess of $9 million.
    Passage of this bill would significantly reduce costs for the RHBT. In anticipation of passage, the Finance Board has included the cost savings into their five year financial forecast on a fiscal year basis.
    
    
    
    
    
    
    
    
     Medicare Retiree Plan Year Change
    • PEIA is proposing to move Medicare retirees to the Medicare Plan Year (calendar year) to take advantage of millions of dollars in savings which have been incorporated into our new financial budgets.
    
    • To bring about this change, we require legislation that will allow us to deviate from the prescribed fiscal plan year requirements.
    
    • These savings are the result of additional reimbursement the PEIA Medicare plan can receive from Medicare through its reinsurance program. By moving to a calendar year plan, our Medicare plan claims will accumulate from January to December and reach the necessary levels to receive the reinsurance program savings otherwise not attainable in a July to June plan year.
    
    • The only way to acquire these savings is to move the Medicare retirees to a calendar year plan which runs from January through December.
    
    • To accomplish this we will run a six-month plan year from July 1, 2013, to December 31, 2013.
    
    o During this shortened plan year we will use the following benefit design
     Reduce medical out-of-pocket maximum from $750 to $400
     Reduce prescription drug out-of-pocket maximum from $1,750 to $900
     Maintain the medical deductible at $25
     Maintain the prescription deductible at $75
    o All other benefits will remain the same.
    
    • Benefits will return to their previous levels on January 1, 2014.
    o medical out-of-pocket maximum of $750
    o Prescription drug out-of-pocket maximum of $1,750
    o Medical deductible of $25
    o Prescription deductible of $75
    
    • Premiums will remain unchanged from July 1, 2013, to December 31, 2014.
    
    This change is projected to bring PEIA $10 to $12 million dollars each plan year.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2013
Increase/Decrease
(use"-")
2014
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
3. Explanation of above estimates (including long-range effect):
    


Memorandum
Person submitting Fiscal Note:
Chip Myers
Email Address:
clifford.m.myers@wv.gov