Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 4th Meeting

of the 2003 Interim


<MeetMDY1> September 30, 2003


The<MeetNo2> 4th meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Tuesday,<MeetMDY2> September 30, 2003, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Senator Tom Buford and Representative James Bruce, Co-Chairs, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Representative James Bruce, Co-Chair; Senators Lindy Casebier, Julie Denton, Ernie Harris, R.J. Palmer II, Albert Robinson, Richard Sanders Jr, Larry Saunders, and Dan Seum; Representatives James Comer, Brian Crall, Ron Crimm, Robert Damron, Mike Denham, Ted "Teddy" Edmonds, Danny Ford, James Gooch, J. R. Gray, Dennis Horlander, Don Pasley,  Steve Riggs, Arnold Simpson, Brandon Smith, Roger Thomas, Tommy Thompson, Ken Upchurch, and Susan Westrom.


Guests:  Carol Palmore, Secretary, Personnel Cabinet; Greg Mitchell, Frost, Brown & Todd;  Brian Brezosky, Kentucky Hospital Association; and Ronnie Pryor, Capital Solutions.


LRC Staff:  Greg Freedman, Rhonda Franklin, and Jamie Griffin.


The minutes of the August 26, 2003, meeting were approved.


Carol Palmore, Secretary, Personnel Cabinet, addressed the committee regarding a comparison of the Commonwealth’s health insurance plan provisions to other large employers and other states, using a Mercer 2002 National Survey.


 Secretary Palmore stated that about 33,000 active employees are waiving their coverage into a flexible spending account.  She stated that at $234 monthly, the Commonwealth’s 2003 flexible spending account contribution will be roughly $93 million (15.6% of total health insurance expenditures).  She stated that in a 2001 state survey of 36 respondents only 4 other states or 10% provided an alternative benefit to waivers.  She stated that a 2002 survey of large, private sector Kentucky employers showed that 25% offered an alternative benefit to healthcare waivers.  She discussed the Commonwealth group trends, enrollment by tier, and enrollment by plan/option.  She stated that HMO enrollment has dropped to the 1996 level and PPO enrollment has increased 20% from 1996.  She discussed enrollment by carrier, enrollment by group, and healthcare costs by age in the Commonwealth group.  She stated that there has been a 6.13% increase in average prescriptions per person from 2001 to 2002.  She stated that a small percentage of individuals drives the cost of claims.


Representative Jim Gooch asked how many other large employers allow groups to pick from several insurers and how many other states are operating this way.  Secretary Palmore stated that there isn’t enough data available to be able to answer that question at this time.


Representative J.R. Gray asked if Secretary Palmore could comment on the recent lawsuit that has been filed against the Personnel Cabinet.  Secretary Palmore stated that the Personnel Cabinet had not been served with the paperwork and she could not comment on the legal action.


Representative Bob Damron asked who makes the decision to fully or partially pay for the employees’ health insurance plans.  Secretary Palmore stated that it is statutory.  Representative Damron asked when the flexible spending accounts started.  Secretary Palmore stated that she believed it was during Governor Brereton Jones administration.  Representative Damron asked why the decision was made not to rate regionally.  Secretary Palmore stated that the decision is made by choosing was is the best for the most and what gives the most more choices.


Greg Mitchell, Frost Brown & Todd, and Brian Brezosky, Kentucky Hospital Association addressed the committee regarding the 1997 merger of the Compensation Hospital Association Trust (CHAT) and The Virginia Insurance Reciprocal, (TVIR) which resulted in formation of Reciprocal of America, (ROA) which provides workers’ compensation insurance for numerous Kentucky Hospitals.  ROA filed for liquidation and is currently in receivership in Virginia.  Mr. Mitchell and Mr. Brezosky explained that ROA has adequate reserve funds to pay CHAT claims that pre-date the 1997 merger in accordance with the merger agreement, but due to the liquidation proceeding 191 claimants are not currently receiving their indemnity payments and/or their medical expenses.  The Kentucky Group Self-Insurance Guaranty Association has declined to cover these claims in the interim, although it would be reimbursed when the liquidation proceeding of ROA proceeds through the Virginia federal court.


Mr. Mitchell asked the committee to adopt a resolution to be sent to Scott Webster, Executive Director, of the Kentucky Insurance Guaranty Association, requesting that KIGA to continue paying all workers’ compensation claims assumed by ROA as “covered claims”.  Mr. Mitchell further requested that the committee request that KIGA inform members of the Banking and Insurance Committee, Commissioner of Insurance, and the Commissioner of Workers’ Claims in writing of its intention to cease paying the aforementioned claims and its reasons for such actions at least 60 days prior to such action occurring.


Representative Jim Gooch made the motion that the resolution be adopted.  Second by Representative Brian Crall.


Ronnie Pryor, Capital Solutions, stated that the claims are being paid at this time, but feels that this resolution will encourage KIGA to continue paying and keep the committee informed of any problems.


The Committee voted to adopt the resolution.


With no further business the meeting adjourned.