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House | June 30, 2014 | Chamber | Government

Full MP3 Audio File

Good afternoon and welcome to the House committee meeting on government. From Monday June the thirtieth June fourteen. Ladies and gentlemen I want to start out introducing our Sergeant arms Young Bay, Bob Rossi, here we go, Doug Harris and Ward Hawkins. And because the North Carolina of General Assembly is so great we have no pages this week. We kept y'all and sent them home. (laughter) SPEAKER CHANGES: Chair. We actually got pages, we just don't have them. SPEAKER CHANGES: The Senate... SPEAKER CHANGES: No. No we have 'em ?? SPEAKER CHANGES: Welcome well this committee doesn't have pages for today so we'll move forward ladies and gentlemen we have two bills on the calendar today. First bill up short titled are Senate bill one Oh five. SPEAKER CHANGES: And PCS.. ?? SPEAKER CHANGES: Representative Balls moves with a PCS forest. Representative Ball you have the floor. SPEAKER CHANGES: Thank you mister chairmen, this bill started in the Senate as a bill to tighten up regulations of political science and it was amended to add two towns to the state health plan. That being Matthews and Elizabeth town, the sign thing had become so controversial that Senator Tillman graciously allowed us to strip all of the sign provisions out so the bill before you today does two things. It adds the current employees for the town of Elizabeth town to the State health plan and it allows the current employees to the town of Matthews to the state health plan. Because retiree coverage is not going to be provided by either town there is no impact on potential state debt. The terms under which they are added is the towns will be responsible for making all of the payments to the state health plan in a timely manner collecting any employee portions from the employees and in any month that the towns are late they accrue late payment penalties of one and a half percent per month or portion of month for being late on their payments. An actuarial note has been provided and mister chairmen I think David...how does one pronounce your last name? You told me twice and I apologize. SPEAKER CHANGES: Yeah. SPEAKER CHANGES: Thank you there. Representative Ballwood we're gon' go to the committee now for some comments I think first we have up is Representative Cleveland. SPEAKER CHANGES: Thank you mister chairmen. This is probably for staff. I thought we did something about four years ago. To stop towns and cities from coming into the state health plan. Did we not? SPEAKER CHANGES: Staff? SPEAKER CHANGES: Yes David Van Wine from the fiscal research division. That was roughly I believe two thousand seven was the last time the General Assembly passed a bill allowing a local goverment to come into the state health plan. SPEAKER CHANGES: Follow up. SPEAKER CHANGES: Follow up my question was. In the back of my mind I believe we actually did something in law to stop cities and towns from coming into the state health plan. SPEAKER CHANGES: Staff? SPEAKER CHANGES: Previously you were allowing them on one at a time or you were allowing them with legislation specifically named the local governments that would come in. So there wasn't anything...as long as you didn't pass any further legislation allowing additional one's on there wasn't any need to stop anything. SPEAKER CHANGES: Follow up. SPEAKER CHANGES: So what I'm hearing is everybody just agreed not to put anybody on the state health plan? That's not what I remember but fine thank you. SPEAKER CHANGES: Thank you. Representative Fisher. SPEAKER CHANGES: Thank you mister Fisher this might be for staff as well. How many cities or towns currently are enrolled in the state health plan? SPEAKER CHANGES: Staff SPEAKER CHANGES: Is it in the summary oh it's in the summary which I have now. SPEAKER CHANGES: Representative Floyd? SPEAKER CHANGES: A test question for ?? didn't we do something as it relates to Smith?? hospital last year? ?? SPEAKER CHANGES: You might be referring to Johnston Candid memorial hospital. That was a different system the local governmental employees retirement system and they were allowed to leave the retirement system as opposed to joining the state health plan which is what this is. SPEAKER CHANGES: Follow up. SPEAKER CHANGES: Follow up. At the appropriate time mister chair...

Any other questions from the committee? [SPEAKER CHANGES] Representative Fisher. [SPEAKER CHANGES] Thank you, Mr. Chairman. So, just for my own edification, clarification, what are the advantages/disadvantages for the state for adding towns to the state health plan? [SPEAKER CHANGES] Staff? [SPEAKER CHANGES] Certainly where there's a group that might have a lower cost, so it's possible Elizabethtown will have a lower cost because their premiums are being forced higher by the provisions of the Affordable Care Act. So in that case, that might represent a savings, that could potentially represent a savings to the state but we don't really know until they come in. Otherwise, it's just helping out local governments, there's not really a ?? to the state. [SPEAKER CHANGES] Follow up. Representative Pittman. [SPEAKER CHANGES] Thank you Mr. Chairman. I want to go back to staff on Representative Cleveland's question because I would like a little more definitive answer to what he was asking. I don't think I'm necessarily against this but I'd like to be more certain that we don't have something in statute against it before we move forward with it, so I would appreciate a little more definitive answer if we could get it. [SPEAKER CHANGES] Staff. [SPEAKER CHANGES] Maybe if you were more detailed in your question, Representative Pittman, they will answer. So I guess clarify remarks, what you exactly want. [SPEAKER CHANGES] Well, Representative Cleveland was suggesting that he thought a few years ago we had done something in law to make this illegal, basically. To say you couldn't do this. And I'd like. to know for sure if we did that or not, or whether you all did it before I got here. Because if there is such, then this is a problem. If not, it may not be. But I'd just like to have a better idea on that. [SPEAKER CHANGES] Representative Pittman, I think we can all say that we do things every year, not expecting someone to come back in the following term, but no one General Assembly combined, another General Assembly coming in, so the rules change every year. And also every Committee. So it's the land of zombies. Everything comes back here. [SPEAKER CHANGES] Any other questions for the committee? [SPEAKER CHANGES] I have one question. I want to know, there's no physical impact for these two, is that correct or not? [SPEAKER CHANGES] Staff. [SPEAKER CHANGES] That is not correct. You have an actuary note in front of you. You should have it now. And it shows that there, both of the actuaries estimate an impact due to Mathews. So Mathews would pay a premium that is equal to the fully contributory premium for state employees in the state health plan. And it's estimated that their actual costs would be higher than that so that premium would not cover the full cost. So there would be a small net cost to the state. Relative to the total inflow and outflow of the plan of 3 billion dollars a year, it's very small. But there would be some net cost. The actuaries differed on their assessment of Elizabethtown. One said there would be no material cost. The other said there would be a cost. [SPEAKER CHANGES] Chair. [SPEAKER CHANGES] Thank you. Representative Adams. [SPEAKER CHANGES] Thank you Mr. Chair. I wanted to ask staff in the event I think someone raised the question about other counties may want to come in, so that would be, would that be an increase as well? Should that happen? Based on what you just said. [SPEAKER CHANGES] That would potentially have a cost, but that would require additional legislation to allow those to come in and that cost could be considered at the time that legislation was considered. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] And I understand that. But just say it did happen, I guess my question is is there a point where we would have too many? I mean, then it would seriously impact the state? Is there any kind of cut-off anywhere, in your mind? [SPEAKER CHANGES] Staff. [SPEAKER CHANGES] I don't know that there's a hard cut-off but yes, it could certainly become a noticeable number if almost all of the local governments in North Carolina joined the plan. [SPEAKER CHANGES] I've got a question, and I'm making sure I'm not losing track here. The cost for this program is fully funded by these cities and towns, correct? [SPEAKER CHANGES] Premiums. Right. So for example if the premium for coverage is $448 a month, but the actual claims on average for a certain town's employees are $500 a month, then the premium does not cover the real costs of having that town in the plan. [SPEAKER CHANGES] Who pays? [SPEAKER CHANGES] It is up to the town to decide whether the town or the employee, what portion the town will pay and what portion the employee will pay of the

$448 in my example. But in total, the state health plan has to collect that $448 from either the town or the employees or a mix of the two. But in some cases, that might not cover all of the true cost of claims if that is in my example $500. [SPEAKER CHANGES] So that would leave the state health plan paying the difference? [SPEAKER CHANGES] Right. [SPEAKER CHANGES] Representative Ramsey, question. [SPEAKER CHANGES] Mr. Chairman, can I ask a question of the staff? Based on the fiscal analysis, we really can't tell whether this group will have higher cost, or they may actually have lower costs than the state average, so the actuarial number is just the best guess, is that correct? [SPEAKER CHANGES] It is the best guess. The numbers are positive, particularly on the line so it seems more likely that it would have a cost than a savings but it is just a best guess, correct. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] No follow up. Representative McNeill. [SPEAKER CHANGES] I think this would be for staff also. The state health plan overall, is it losing money? Gaining money? Is it okay? [SPEAKER CHANGES] You have in the appendices to the note, you have some financial statistics. It is generally in very good financial shape right now. I guess on page six of the actuarial note, the beginning cash balance for calendar year 2014 was 838 million dollars. Much higher than it's been in the past. It is projecting losses, small losses according to this projection, for those years. Just because experience has been so good so premium increases haven't been as rapid. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Representative Bell. [SPEAKER CHANGES] Mr. Chairman, I guess this is a question for staff, but should this bill take a dip in finance? I noticed there was no referral to finance, but just ?? wonder whyit didn't go to finance. [SPEAKER CHANGES] It did go to finance. It passed finance. It went to state personnel. And state personnel and some members of this committee wanted it to take a dip in this committee which was not required because they were concerned about the signs and we agreed to take a dip in this committee so you could script the signs out. Without the signs, you wouldn't have seen this bill at all. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] So it's taken a dip in all the appropriate dipping places, correct? [SPEAKER CHANGES] Yes it has. It's passed everywhere it needed to go for state health plans. [SPEAKER CHANGES] Representative Cleveland. [SPEAKER CHANGES] Wilkins. [SPEAKER CHANGES] Representative Bell asked my question. But for clarity, we from looking at this, the state health plan is going to have an operating loss for calendar year 14 and calendar year 15. And the reason we stopped having cities and towns put on the state health plan was because of the condition of the state health plan, and the monies it was bleeding and taking out of the general fund. I think we're setting a bad precedent here. I don't like to be the guy throwing cold water, but I think this is going to open the flood gates and we're going to see a whole lot of cities and towns coming back, wanting to get on the state health plan. [SPEAKER CHANGES] Representative Brown. [SPEAKER CHANGES] Thank you, Mr. Chair. I want to get something straight. These two towns had no health care benefits, no plan for their employees, is that correct? [SPEAKER CHANGES] That is not correct. They both currently offer coverage to their employees. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] You said something about as a result of the national health care law, that they are seeking to become part of the state health plan. Can you just elaborate on that just a little bit? [SPEAKER CHANGES] Yes, I would say that is a relevant factor for Elizabethtown only. So Elizabethtown is a small employer under the Affordable Care Act. They have less than 50 employees. Small employers can no longer have their premiums based on their actual experience. Their experience based on the premiums they're paying seems to be very good. The premiums that they're paying for 13, 14 year are quite a bit less than what they would be under the state health plan. But because of the Affordable Care Act for 14, 15 they would have to be charged a premium based purely on the age distribution of their employees, not based on the health status of their employees. So that premium would be a lot higher since they seem to have some very healthy employees. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] You're saying

[0:00:00.0] The majority of the employees are older is that what you are saying and they are younger? [SPEAKER CHANGES] Healthier, healthy but older. [Laughter] [SPEAKER CHANGES] Only Chair can clarify the staff. You are saying the employees are older and healthier but on the current plan it had to pay more because they have 50 or less and if they do in the state there is chance that the health become down possibly. [SPEAKER CHANGES] The premium they would pay would be lower than if they went to and insure for the 14-15 year because that insure what have to charge them right they are based purely on the age distribution of their employees which is non-unusual, I mean they have some young employees and some old employees, they could not base their premium on their health status. So, it would be I believe the premium would be more like $500 or $600 a month rather than $450 a month under the State Health Plan or 300 something that they are paying now. [SPEAKER CHANGES] Follow up recognized Bell? [SPEAKER CHANGES] Thank you, so just let me be real clear, it’s more advantageous for them fiscally speaking to join a State Health Plan but the natural consequences this national law is that their premiums would have gone up, correct? [SPEAKER CHANGES] Follow up staff? [SPEAKER CHANGES] Yes, it’s very similar to any other individual for instance if individual buying coverage on exchange who is very healthy generally they saw higher premium because the premium could no longer be based on their health. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] So, as to recognized Cleveland’s point is that there is gonna be a stampede to the State Health Plan I will bet you. Do you do anticipate that or do you think I’m off base? Thank you. [SPEAKER CHANGES] The Chair can ask one of those questions, we currently have a building committee for the many reasons to the state I think. Representative Collins… [SPEAKER CHANGES] I just wanna to point out that according to what we just heard, there is a couple of things we might wanna think about, number for those municipalities that are less, that are fewer than 50 employees like Elizabeth ___[02:07], if we have a stampede to those people to the State Health Plan it will be for the reason Mr. Wando just stated because they are healthy. And therefore, we want those people in the State Health Plan and also kind of does a way with the logic that this company used where they were taken Elizabeth Fund premium and plan design and put 50% of ___[02:31] for adverse selection because normally in the insurance when you would think that if people will run away from their plan and that was because they are un-healthy but because of the strange ramifications of the ICA that Mr. Wando just mentioned for small employees not only for those with fewer than 50 but for the ones like Elizabeth Fund we may see a stampede to the State Health Plan because the people are healthy and don’t want to pay the premiums they will have to pay under ICA which will be a good thing for the State Health Plan. So, you got two different situations between Mathews and Elizabeth Fund here in this bill. [SPEAKER CHANGES] Representative Gill. [SPEAKER CHANGES] Thank you Mr. Chairman. I gotta a question for staff, one example you gave earlier that said the state may have some cause because if a premium of $448 does not cover $500 in claim, this is not some vehicle for rate adjustment when claims are higher than premiums? [SPEAKER CHANGES] Staff? [SPEAKER CHANGES] In theory, I mean the State Health Plan, I can speak to this I think they would have extreme administrative difficulty in handling such a plan, they may have some legal concerns I don’t know if they want to address that. [SPEAKER CHANGES] Hold on for a second. Chair like __[03:41] for State Health Plans, please introduce yourself and let me hear your thoughts. [SPEAKER CHANGES] Account for even if the State Health Plan, there really isn’t a mechanism to adjust through that. So, what we do with the premium is we figure out what the average cost is for everyone? So, it would be the universities, state employees, retirees, the community colleges that becomes an average of $448.12 is what the state pays each month. I would guess that very, very few people exactly hit that total. So, we would have to, in the example you brought up manually adjust for 675,000 people that would be fairly complex administratively and I think there would be some legal concerns about charging people different amounts. So, what we do is we take the average premium cost and determine that would be and that’s what we charge each local unit and that’s what you kicking for state employees. [SPEAKER CHANGES] Also the committee we have got another person, if you ask questions too if you need to. I will go back to Representative Gilman. [SPEAKER CHANGES] I have a follow up. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] But if the entire State Health Plan has claims exceeding premiums then you adjust the whole plan… [0:04:59.8] [End of file…]

It seems like that would take care of the issue on a larger scale. [SPEAKER CHANGES] Staff. [SPEAKER CHANGES] Yes, for the whole state. Yes, you would adjust the premiums but you would be losing money potentially on that one local government relative to if they had not joined the plan. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] One more follow up. So ultimately what happens in a case like that is all the other people in the pool cover the additional costs if there is a situation like that. [SPEAKER CHANGES] Yes, that's correct. And the general fund puts in about 2 billion of the 3 billion that goes into the state health plan every year. So mostly it would be the general fund covering that shortfall. [SPEAKER CHANGES] Representative Holley. [SPEAKER CHANGES] Thank you Mr. Chair, I have two questions. My first question is, I was in finance and I don't recall seeing this actuary note that we were passed out here. Does anyone know was that presented in finance and I just overlooked it? [SPEAKER CHANGES] The chair will go to the bill sponsor, Representative Brawley. [SPEAKER CHANGES] It was not presented in finance because the preparation of it had not been completed. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up. My second question is for the state employees health plan gentlemen. I'd like to know how they feel about these counties, cities, and municipalities coming into the state health plan and does, if an influx started coming in do they foresee a problem with it? [SPEAKER CHANGES] Thanks for the question. It's a complicated question. We think that there's language written into this specific proposal that significantly improved upon what other municipalities and charter schools have had in the past in terms of giving us flexibility to collect if folks don't pay, or take some action if folks don't pay so from that perspective there's some definite good things in the language included in this bill. The more entities that join, obviously there's some administrative complexity that comes with it. We'd need to prepare an actuarial note each time to determine the impact of the plan. I think there are opportunities where there is good risk that's coming on and there's opportunities where there's bad risk coming on, where things would cost more. And that would have to be a case to case basis to determine when that tipping point is, to really make an impact. So we don't have a broad opinion about this, but there are some advantages to the way this bill is drafted, versus previously. We had some exclamation points in the positive direction, for how it was written from that perspective. But this definitely would be more administrative work, the more accounts that would come on, particularly on the billing side of things. [SPEAKER CHANGES] Thank you. Follow up, Representative? All right. Representative Wilkins. [SPEAKER CHANGES] Mr. Chair, a couple of exchanges have answered my questions, thank you. [SPEAKER CHANGES] Thank you. Representative Adams. Representative Earle. [SPEAKER CHANGES] Thank you. Have we allowed local municipalities to come into the state health plan before? [SPEAKER CHANGES] Staff. [SPEAKER CHANGES] Yes. Those are the ones listed in the bill summary. [SPEAKER CHANGES] Okay. So I guess my question is if we have allowed this in the past, which I do recall that we had, then I don't see what the issue is with allowing these small towns to come into the plan. It's not like it's the first time it's every been done and I don't think that it's had that kind of a negative impact on the state health plan. [SPEAKER CHANGES] Any other questions from the committee? Representative Warren. [SPEAKER CHANGES] I think Representative Earle brings up a good point and so does Representative Cleveland and I'm just curious. If we've done this in the past and apparently we've done it 19 times, why do we pass legislation prohibiting it or restraining it? [SPEAKER CHANGES] Staff? According to Representative Cleveland we did. [SPEAKER CHANGES] Just a follow up to Representative Cleveland's original question, I do believe there was an informal policy decision not to have any more local governments come on. So I think for instance the state health plan at the time might have told legislators that wanted their local governments to come on that the financial situation was not good, and so they should not introduce a bill or the state health plan was going to speak against the bill, or something along those lines. Prior to the previous administration of the state health plan. So I think there was a policy decision made. I don't believe there was a bill passed that prevented it but I think there was a conscious policy decision made not to pass any new legislation letting any new local governments on after 2007. [SPEAKER CHANGES] Thank you. Any other questions from the committee? Any closing remarks from the bill sponsor? [SPEAKER CHANGES] I think we're prepared to

Representative Floyd, do you want to propose a motion? [SPEAKER CHANGES] Move for a favorable report of PCS and not favorable to the original, and it doesn’t have a referral. [SPEAKER CHANGES] Thank you. Ladies and gentlemen, we have a motion before you. All in favor say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Any opposed? [SPEAKER CHANGES] No. [SPEAKER CHANGES] In the opinion of the Chair, the ayes have it. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Next up we have Senate Bill 874. This is a re-referral to Finance. Senator, you have the floor. [SPEAKER CHANGES] Thank you Mr. Chairman, members of the committee. This bill, despite some discussions that have apparently gone on for a few years in the town of Spruce Pine, certain property owners have come to an agreement with the town that it is in their both best interests to part ways and they should no longer be a part of the town. There’s agreement from the property owners as well as town council and the town of Spruce Pine. [SPEAKER CHANGES] Senator Hise, I’ve got a question for you real quickly. Do you know if anyone has any opposition to this bill? [SPEAKER CHANGES] I’m not aware of any. [SPEAKER CHANGES] Any questions from the committee? Representative Bell. [SPEAKER CHANGES] I’d like to make a motion at the appropriate time. [SPEAKER CHANGES] Representative Pittman. [SPEAKER CHANGES] ?? [SPEAKER CHANGES] ?? [SPEAKER CHANGES] Representative Bell, you’re recognized for your motion. [SPEAKER CHANGES] I’d like to move that Senate Bill 874 favorable and referred to Finance. [SPEAKER CHANGES] Ladies and gentlemen of the committee, we have a motion before us. All in favor say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Any opposed? The motion carries. Thank you, ladies and gentlemen. Enjoy your 4th of July, and this is the close of this committee.