Date Requested: January 16, 2015
Time Requested: 11:30 AM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
2295 Introduced HB2173
CBD Subject: State Personnel


FUND(S):



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 authorize insurance to married workers without children at reduced rates under the West Virginia Public Employees Insurance Act.
     The premise for this bill is the belief that two adults married without children should not be paying a family coverage health insurance premium at the same rate as a family with children. When looking at insurance rate setting without claim experience data there could well be a presumption that two married adults without children on their policy would be cheaper than a family with children. However, a review of the actuarial experience of these two groups does not support this reasoning.
     The WV Public Employees Insurance Agency has had its contracted actuary group examine this issue in the past and it was found that reality is exactly the opposite of the presumptive basis for this bill. PEIA actual experience has been that the Employee and Spouse (no children) coverage tier is responsible for more costs to PEIA per policyholder than the Family coverage tier. This is largely because the members in the Employee and Spouse Only coverage tier tend to be older couples, whose children have reached adulthood and left home, who have higher needs for medical care and therefore, present higher health care utilization, resulting in more claims costs to the PEIA Plan (compared to younger families with children). In contrast, children overall do not cost as much to cover as older adults and member families with children tend to be younger adults who are also less expensive to cover.
     Passage of this bill will cause an artificial cost increase within PEIA. The premiums would have to be adjusted upward for other member tiers (for example; Single or Family) to create a cost neutral change for the PEIA Plan overall. This would be in order to subsidize the newly proposed tier. In other words, the other PEIA members in other coverage tiers and their respective employers would pay more to make up the lost premiums from subsidizing the artificially created lower premiums, which would not cover the real costs of the proposed Employee/Spouse only tier.
     PEIA’s present family premium rate is based upon a blending of the experience of both the married couples with and without children. If PEIA were to adjust premium to reflect underlying risks then the married couples without children group would see a higher premium rate while the family with children premium rate would decrease.
     In short, PEIA’s claims information for the Family Coverage Tier indicates this newly proposed policy tier does not warrant a lower cost, and other policy tiers in the plan would have to be increased in order to subsidize the artificially lower premium. The amount of subsidization would be relative to the level of artificially reduced rate established.
     There would be no additional cost to the PEIA should this bill be passed but the premium rate structure using the experience data that is presently employed by the PEIA would be dramatically affected. Premium rate shifting would cause other coverage groups to have their rates adjusted to subsidize the married couples without children.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
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