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 credit increases in copays, coinsurance, deductibles and out-of-pocket maximums adopted by the Public Employees Insurance Agency Finance Board to the twenty percent aggregate employee premium payment for insurance. Copay, coinsurance, deductibles and out-of-pocket maximums have traditionally been used by health insurers to help contain the cost of medical service delivery by reducing the overall cost to the Plan of the service received and to be used as a tool to steer utilization that would be advantageous to the Plan. Because the employee out-of-pocket costs have been in the past separate from the medical and pharmaceutical claims costs in Financial Plan they were not factored into the 80/20 PEIA premium cost share required by WV law. Should this bill become law any further benefit changes that result in an increase in the employee out-of-pocket costs would be rolled into the aggregate Plan costs and the PEIA premium determined from that number. The primary effect would be to increase the employer cost for maintaining the solvency of the PEIA Plan. Historically, the employee out-of-pocket Plan cost share on claims was 21%. The change purposed in this bill would alter that and effectively reduce the employee cost share from its present level to about 18% by FY 2013. The difference resulting from this reduction on the employee would have to be offset by the employer. Since this bill does not seem to touch the status quo and will only impact the PEIA Plan in the event there are increases in employee out-of-pocket cost after July 1, 2011, the development of this fiscal note was difficult. At present there is no firm expectation of changing the employee out-of-pocket costs so there is no way to adequately anticipate how much impact will be seen to the employer share in dollars. The PEIA Board Actuary, CCRC Actuaries, purposed an example of what could be expected if an adjustment to the employee out-of-pocket costs would be if we compare a small increase using this bill's required methodology and if we use the existing formula. The three years used will begin on July 1, 2011 and end on June 30, 2014. All additional cost would be those of the employer (State): Plan Year Employee Share Increase to Employer FY 2010 20% (no change, bill not effective) FY 2011 19% $ 2,450,005.00 FY 2012 19% $ 5,839,848.00 FY 2013 18% $ 7,736,030.00 Total $ 16,025,883.00 FY 2013 $ 7,736,030

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2009 Increase/Decrease (use"-")	2010 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	0	7,736,030
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	7,736,030

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

An analysis of this bill was done by CCRC Actuaries, the PEIA Finance Board Actuary. The amount of cost is based upon a comparsion of the way employee out-of-pocket costs are viewed and how they must be included in the Plan cost analysis should this bill become law.

Memorandum

As was stated earlier, employee out-of-pocket costs have traditionally been used to steer utilization and contain rising claims costs. It is unclear whether this bill, by making the employee total Plan cost share reduce with each benefit change, if the ability to steer ulitization would not be reduced.

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