Bill Reducing Taxpayer Payment for Politicians’ Insurance Goes to Governor

OKLAHOMA CITY (May 19, 2011) – Legislation that would reduce taxpayer expenditures on lawmaker’s health insurance now awaits Gov. Mary Fallin’s signature.

House Bill 1062, by state Rep. Dustin Roberts, would allow legislators and other state employees to opt out of state-funded insurance coverage if they already have policies through the private sector.

“It makes no sense to spend taxpayer dollars on insurance policies legislators don’t need or want,” said state Roberts, R-Durant. “In a year when schools face funding cuts, it is important to save money every way we can.”

“Under existing law, legislators have no choice but to accept the insurance. That is a pointless waste of money,” said state Rep. Glen Mulready, a Tulsa Republican who co-authored the bill. “This bill implements a common-sense reform that is long overdue that will free up funds for more important uses, such as schools and roads.”

Supporters of the bill said state employees who have coverage through a spouse’s private-sector insurance coverage could also take advantage of the bill.

It is expected that 2 percent to 5 percent of state employees will opt out of state-funded coverage, ultimately saving $1.5 million to $3.5 million annually. 

House Bill 1062 passed the Oklahoma House of Representatives on an 86-9 vote and gained final passage in the state Senate on a 46-0 vote today. The bill now goes to the governor to be signed into law.

Fiscal Analysis

Section 1 authorizes the Oklahoma State and Education Employees Group Insurance Board (OSSEGIB) to contract with providers for specific services based on levels of outcomes.  OSEEGIB officials inform that this will allow OSEEGIB to explore and possibly provide bariatric services that would result in better health outcomes and savings, which are not expected to result in insurance premium increases.

Sections 2, 3, 4 State Employee Opt Out

The measure allows state employees to opt out of participation in health insurance plans offered through the state’s flexible benefit allowance in exchange for an in lieu of payment of $150 per month, provided the employee is currently covered by a separate group health insurance plan.  Officials for OSEEGIB expect the number of state employees who will elect to opt out to be low, estimated 2-5%.  OSEEGIB also estimates an average annual state agency savings of $5,400 per opt out per year, resulting in a total state agency savings of $1.5-3.5 Million annually.  The agency savings are a result of the difference between the flexible benefit allowance opted out of and the in lieu of payment.  OSEEGIB does identify the potential for adverse selection in the opt out, but that the number of individuals expected to opt out would likely be low enough that no insurance premium increases are expected.

Section 5 requires OSEEGIB and the Office of State Finance (OSF) to contract with a vendor to make available health savings accounts (HSA) for enrollees in the HealthChoice qualified high-deductible health plans.  Based on discussions with potential vendors OSEEGIB believes a contract can be entered into at no material costs to OSEEGIB or OSF.  The practical consideration for the vendor would be the opportunity to profit as a financial institution from the HSA deposit base.

Section 6 Pilot Project

The Section instructs OSEEGIB to contract with a vendor to provide a web-based healthcare cost containment pilot program for 3 years.  The measure requires that the pilot program cover at least 15,000 eligible employees and their dependents.  OSEEGIB estimates a program cost of $78 annually per eligible employee.  The total cost to OSEEGIB of the program is estimated to be $1,170,000 per year.  The measure instructs OSEEGIB to fund the pilot program with operating funds and not pass along costs to premium payers.  The Pilot Project is designed to incentivize healthier behavior, when fully implemented the program is designed to create a net savings due to lower health care costs and improved health outcomes resulting in lower health care premiums.  Though not expected in the first year of implementation, savings could surpass costs in future years.