THE MISSISSIPPI LEGISLATURE

The Joint Committee on

Performance Evaluation and Expenditure Review

Report # 574

Assessment of Opportunities for Local Political Subdivisions’ Employee Health Insurance Coverage

Executive Summary

Introduction

PEER received a legislative request to determine whether it would be feasible to allow Mississippi’s counties and municipalities either to participate in the State and School Employees’ Health Insurance Plan (also referred to in this document as the state health plan) or to utilize the plan’s broad negotiation potential, but retain their own plan administrators.

Current Health Insurance Coverage and Benefits for State and School Employees

MISS. CODE ANN. Section 25-15-3 et seq. (1972) established the State and School Employees’ Life and Health Plan, which is administered by the State and Public School Employees Health Management Board and is self-insured. A third-party administrator (currently Blue Cross and Blue Shield of Mississippi) processes medical claims.

State law presently limits participation in the plan to employees of state agencies (including the Legislature, the courts, and their respective staffs) and educational institutions; employees of local political subdivisions are not eligible to participate. The plan provides active employees with two choices in health insurance coverage (i. e., base or select) that differ in monthly premium costs and deductible thresholds.

Possibility and Feasibility of Incorporating Local Political Subdivisions into the State Health Plan

Local Political Subdivisions’ Participation in the State Health Plan: Possibility vs. Feasibility

For purposes of this report, PEER defines “possibility” as whether an option for health insurance for employees of local political subdivisions could be implemented based on legal requirements or insurance industry standard practices. “Feasibility” is defined as whether incorporation of local political subdivisions into the state health plan would be a logical approach for providing more cost-effective health insurance coverage or achieving an optimal cost-benefit ratio at the local level.

Possibility of Participation

If the Legislature amended the definition of “eligible employee” in MISS. CODE ANN. Section 25-15-3 (1972) to include employees of local political subdivisions, these employees could participate in the state health plan. However, because the contract for the state health plan’s current provider network was based on the current number of covered lives and their claims experience, local political subdivisions could not utilize the state health plan’s negotiation potential and provider network while retaining their own plan administrators.

Feasibility of Participation

The feasibility of incorporating employees of local political subdivisions into the state health plan cannot be determined without an actuarial analysis first being conducted in order to formulate premium rate estimates based on the addition of this new population. If these employees are not immediately added to the state health plan, a separate statewide group health plan for local political subdivisions could be a potential cost-effective option.

While the current feasibility of incorporating local political subdivisions into the state health plan is unknown, PEER identified multiple key factors that should be taken into consideration in completing a comprehensive feasibility analysis in the future. These key factors include:

• the need for an actuarial analysis to formulate monthly premium rates;
• upcoming changes in response to federal health care reform;
• the potential number of additional covered lives (i. e., the risk pool);
• how to assure widespread participation;
• a possible reduction in administrative costs;
• the potential difference in funding philosophies of the state health plan or separate statewide group health plan in comparison to the funding philosophies of fully insured local political subdivisions; and,
• the interest level of local political subdivisions and potential changes at the local level.

The report provides details on each of these key factors.

How Counties and Municipalities Currently Provide Health Insurance Coverage to Their Employees

Low Survey Response Rate Inhibited PEER’s Comparison of Local Insurance Coverage to the State Health Plan

In conducting this review, PEER developed a health insurance coverage survey instrument to obtain information from counties and municipalities regarding their current health insurance coverage, health insurance benefits, and interest in a statewide group health plan. PEER administered the survey to all eighty-two counties and to a sample of municipalities.

Because of a low response rate for the survey, PEER was not able make an extensive comparison of the health insurance practices of and benefits currently provided by counties and municipalities to the benefits of the State and School Employees’ Life and Health Plan. Of the 164 counties and municipalities surveyed, seventy-five responded, a response rate of 45.7%.

Appendices H and I, pages 40 and 42, summarize the counties’ survey responses and Appendix G, page 39, lists those counties that did not respond to the survey. Appendices J and K, pages 67 and 68, summarize the municipalities’ survey responses and Appendix G, page 39, lists those municipalities that did not respond to the survey.

PEER’s Inability to Determine Cost-Benefit Ratios for Counties’ and Municipalities’ Current Health Plans

Again, due to the low survey response rate, PEER could not determine cost-benefit ratios for counties’ and municipalities’ current premium rates and benefits. These cost-benefit ratios would be necessary for an actuary to use in determining the fiscal feasibility of incorporating local political subdivisions into the state health plan or into a separate statewide group health plan.

Little Interest Expressed in a Statewide Group Health Plan for Local Political Subdivisions

Of those counties and municipalities responding to PEER’s survey, most did not provide an answer to the question regarding their level of interest in creation of a statewide group health plan. PEER assumes that this could be because the person who completed the survey response was not in a position to make that decision on behalf of the entity or because estimates of potential cost savings were not presented.

Recommendations

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  • In view of the fact that there is considerable uncertainty in the insurance market following the implementation of federal health care reform (i. e., the Patient Protection and Affordable Care Act), the Legislature should not take any action regarding a health insurance plan for local political subdivisions until after January 1, 2015 (one year after all provisions of the federal health care reform act become effective, including those provisions that make health insurance available to local political subdivisions with fewer than fifty employees).
  • After January 1, 2015, should the Legislature deem it advisable to take action on establishing a health insurance plan for local political subdivisions; it should take the following steps:
    
    
    • Appropriate sufficient funds to the Department of Finance and Administration’s Office of Insurance to conduct an actuarial study of the potential costs of either creating a plan solely for local political subdivisions or placing them in the same plan with state employees and teachers. Such a study should attempt to determine the premium amounts for both options.
    • Require through general law that local political subdivisions cooperate in the actuarial study, including providing the Department of Finance and Administration with access to claims history information for all group health insurance plans currently administrated for the benefit of the employees of local political subdivisions.
    • Consider adopting penalties or providing a means of civilly enforcing the duty to cooperate with the Department of Finance and Administration.
  • Following completion of the actuarial study, the Department of Finance and Administration should prepare a report to the Legislature containing recommendations for future action. Should the report recommend that there be either a separate health plan for local political subdivisions or that these employees be placed in the state employees’ and teachers’ plan, the department should address the following matters:
    
    
    • Mandating levels of participation--such a mandate could include a requirement of 100% participation or a deadline for opting into or out of the plan;
    • Subsidies--a short-term state subsidy, no longer in duration than thirty-six months, to assist local political subdivisions whose premiums may be higher under the plan than under their current group plans; and,
    • Optional levels of coverage--since local governments bear the cost of providing coverage to their employees, a state plan could offer options to local governments that could allow them to control costs by picking the amount of coverage they wish to procure for their employees and dependents.

  Further, the department should report on any other matters it determines to be relevant to the issue of providing health insurance for employees of local political subdivisions.

• Should the Legislature decline to pursue the statewide group health plan option, local political subdivisions with fewer than fifty employees could still explore the option of seeking coverage through the federal insurance marketplaces. Starting January 1, 2016, local political subdivisions with fewer than one hundred employees can explore this option.

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