COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION



FISCAL NOTE



L.R. NO.: 3801-10

BILL NO.: Truly Agreed and Finally Passed HCS for SS for SCS for SB 885

SUBJECT: Health Care; Insurance - Medical; State Departments

TYPE: Original

DATE: May 24, 2000




FISCAL SUMMARY



ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
All funds (Over $100,000) (Over $100,000) (Over $100,000)
Total Estimated

Net Effect on All

State Funds

(OVER $100,000) (OVER $100,000) (OVER $100,000)



ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
None
Total Estimated

Net Effect on All

Federal Funds

$0 $0 $0



ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Local Government $0 $0 $0

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 4 pages.



FISCAL ANALYSIS



ASSUMPTION



Officials from the Joint Committee on Public Employees Retirement, the State Highway Employees and Patrol Retirement System, the Department of Transportation, the Department of Public Safety - Missouri State Highway Patrol, and the Department of Health assume this proposal would not fiscally impact their agencies.



Office of Administration (COA) officials state there may be a fiscal impact from this proposal. However, COA states any potential fiscal impact from this proposal would be determined through the actuarial report from the Missouri Consolidated Health Care Plan in the rate they certify to COA.



Missouri State Employees Retirement System officials state the proposal would not affect their system.



Officials from the Missouri Consolidated Health Care Plan (HCP) state their may be a fiscal impact as a result of the provision addressing state employees without HMO health coverage but are unable to determine the fiscal impact until the plan offer is complete. HCP believes the fiscal impact would exceed $100,000.



HCP states that adjusting the fiscal year poses several possible results: 1) The plans currently know what HCP's appropriations request is prior to providing bids on HCP's RFP. Prior knowledge of HCP's appropriations could have an inflationary impact on the bids. Consequently, changing the fiscal year would reverse this order and could provide some savings with the bids; 2) In the standard market, the plans prefer to bid 2-3 months prior to the coverage effective date because they can more accurately predict the cost of doing business. HCP currently requires the plans to provide a bid eight months prior to the effective date. Adjusting the fiscal year to an October 1 start date would add approximately four months to this process. Determining the cost of medical care and inflation one-year in advance could result in the plans overstating their bids to protect themselves from inflation and underbidding the contract; and, 3) HCP is currently negotiating with bidders for CY2001. Adjusting to the new fiscal year would require HCP to negotiate a nine month extension (1/02 to 09/02) of these contracts before the end of this 2000 year. Determining the total fiscal impact is very difficult. There could be some savings from changing the order of the bid process and the appropriation process. However, there could be additional costs due to the extended bidding time frame. If costs are higher than any corresponding savings, HCP estimates every one percent increase in premium results in a fiscal impact of $1,700,516.





FISCAL IMPACT - State Government FY 2001

(10 Mo.)

FY 2002 FY 2003
ALL FUNDS
Costs - All Funds
Increased state contributions (Over $100,000) (Over $100,000) (Over $100,000)
ESTIMATED NET EFFECT ON ALL FUNDS



(OVER $100,000)


(OVER $100,000)


(OVER $100,000)
FISCAL IMPACT - Local Government FY 2001

(10 Mo.)

FY 2002 FY 2003
$0 $0 $0



FISCAL IMPACT - Small Business



No direct fiscal impact to small businesses would be expected as a result of this proposal.



DESCRIPTION



This proposal would make several changes to the Missouri Consolidated Health Care Plan. The proposal would: (1) increase membership of the board of trustees from 11 to 13 members (Section 103.008, RSMo); (2) require the board to submit a plan to the General Assembly by September 1, 2000, regarding state employees in counties without HMO coverage, allowing those employees to receive medical benefits that are substantially identical to HMO benefits. The cost for coverage may not exceed the state's average HMO cost (Section 103.081);

(3) require medical benefits to have been continuous, either under a separate policy for at least 6 months or since the effective date of the most recent open enrollment prior to the member's termination, in order for a member's medical benefits to continue after termination from state employment (Section 103.085); (4) prohibit any member agency from participating in the plan

for 2 years after its termination date (Section 103.136); (5) recommend that the board implement a health care provider plan period based upon a fiscal year beginning October 1 of each year, rather than the calendar year (Section 1); and (6) remove the word "instrumentality" from the definition of "participating member agency" (Section 103.003(16)).



This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.



SOURCES OF INFORMATION



Missouri Consolidated Health Care Plan

Joint Committee on Public Employees Retirement

Office of Administration

MOSERS

State Highway Employees and Patrol Retirement System

Department of Transportation

Department of Public Safety

Missouri State Highway Patrol

Department of Health















Jeanne Jarrett, CPA

Director

May 24, 2000