KRS 18A.2254: Self -insured plan for public employees -- Contract for third -party

administrator -- Formulary change -- Health reimbursement account, health

flexible spending account, or health savings account -- Public employee health

insurance trust fund -- Annual audit -- Quarterly status reports.

(1) Based on the recommendation of the secretary of the Personnel Cabinet, the

secretary of the Finance and Administration Cabinet, in lieu of contracting with one

(1) or more insurers licensed to do busin ess in this state, shall procure, in

compliance with KRS 45A.080, 45A.085, and 45A.090, and reviewed by the

Government Contract Review Committee pursuant to KRS 45A.705, a contract

with one (1) or more third -party administrators licensed to do business in the

Commonwealth pursuant to KRS 304.9 -052 to administer a self -insured plan

offered to the Public Employee Health Insurance Program for public employees.

The requirements for the self-insured plan shall be as follows:

(a) 1. The secretary of the Personnel Cabinet shall incorporate by reference in

an administrative regulation, pursuant to KRS 13A.2251, the plan year

handbook distributed by the Department of Employee Insurance in the

Personnel Cabinet to public employees covered under the self -insured

plan. The plan year handbook shall contain, at a minimum, the

premiums, employee contributions, employer contributions, and a

summary of benefits, copays, coinsurance, and deductibles for each plan

provided to public employees covered under the self-insured plan;

2. Notwithstanding any other provision of KRS Chapter 18A to the

contrary, the administrative regulation shall not be subject to review by

the Personnel Board prior to filing the administrative regulation with the

Legislative Research Commission; and

3. The secretary of the Personnel Cabinet shall file the administrative

regulation for the self -insured plan with the Legislative Research

Commission on or before September 15 of the year before each new

plan year begins;

(b) The self-insured plan offered by the program shall cover hospice care at least

equal to the Medicare benefit;

(c) The Personnel Cabinet shall provide written notice of any formulary change

to employees covered under the self -insured plan who are directly impacted

by the formulary change a nd to the Kentucky Group Health Insurance Board

fifteen (15) days before implementation of any formulary change. If, after

consulting with his or her physician, the employee still disagrees with the

formulary change, the employee shall have the right to appeal the change. The

employee shall have sixty (60) days from the date of the notice of the

formulary change to file an appeal with the Personnel Cabinet. The cabinet

shall render a decision within thirty (30) days from the receipt of the request

for an appeal. After a final decision is rendered by the Personnel Cabinet, the

employee shall have a right to file an appeal pursuant to the utilization review

statutes in KRS 304.17A -600 to 304.17A-633. During the appeal process, the

employee shall have the right to continue to take any drug prescribed by his or

her physician that is the subject of the formulary changes;

(d) The Personnel Cabinet shall develop the necessary capabilities to ensure that

an independent review of each formulary change is conducted and includes

but is not limited to an evaluation of the fiscal impact and therapeutic benefit

of the formulary change. The independent review shall be conducted by

knowledgeable medical professionals and the results of the independent

review shall be posted o n the Web sites of the Personnel Cabinet and the

Cabinet for Health and Family Services and made available to the public upon

request within thirty (30) days of the notice from the Personnel Cabinet

required in paragraph (c) of this subsection;

(e) If the self -insured plan restricts pharmacy benefits to a drug formulary, the

plan shall comply with and have an exceptions policy in accordance with KRS

304.17A-535;

(f) Premiums for all plans offered by the Public Employee Health Insurance

Program to employees shall be based on the experience of the entire group;

(g) The plan year for the Public Employee Health Insurance Program, whether for

fully insured or self-insured benefits, shall be on a calendar year basis; and

(h) The self-insured plan shall comply with subsection (4) of this section.

(2) (a) 1. In addition to any fully insured health benefit plans or self -insured

plans, beginning January 1, 2015, the Personnel Cabinet shall offer a

health reimbursement account or health flexible spending account for

public employees insured under the Public Employee Health Insurance

Program.

2. The Personnel Cabinet may offer a health savings account in

conjunction with a high deductible health plan option as defined by 26

U.S.C. sec. 223(c)(2) or as an optional a ccount to which the Personnel

Cabinet may deposit funds of an employee who waives coverage in

accordance with paragraph (b) of this subsection, provided the employee

who waives coverage is eligible to contribute to a health savings

account.

(b) If a public employee waives coverage provided by his or her employer under

the Public Employee Health Insurance Program, the employer shall forward a

monthly amount to be determined by the secretary of the Personnel Cabinet

for that employee as an employer contributi on to the health reimbursement

account or health flexible spending account, but not less than one hundred

seventy-five dollars ($175) per month, subject to any conditions or limitations

imposed by the secretary to comply with applicable federal law.

(c) The administrative fees associated with the employee's health savings

account, health reimbursement account, or health flexible spending account

shall be an authorized expense to be charged to the public employee health

insurance trust fund.

(3) (a) The publ ic employee health insurance trust fund is established in the

Personnel Cabinet. The purpose of the public employee health insurance trust

fund is to provide funds to pay medical claims and other costs associated with

the administration of the Public Emplo yee Health Insurance Program self -

insured plan under a competitively bid contract as provided by KRS Chapter

45A and reviewed by the Government Contract Review Committee pursuant

to KRS 45A.705. Unless authorized by the General Assembly, the trust fund

shall not utilize funds for any other purpose and the trust fund receipts from

prior plan years shall not be used to pay claims and expenses for current or

subsequent plan years, except as provided by paragraph (b) of this subsection.

(b) In the event of a projected deficit in the trust fund balance of a prior plan year,

the secretary of the Finance and Administration Cabinet may declare an

emergency and transfer up to twenty -five percent (25%) of another prior plan

year's balance to that plan year, provided t he Governor, all members of the

General Assembly, and Legislative Research Commission are notified at least

thirty (30) days prior to the transfer. The Legislative Research Commission

shall refer the notice to appropriate committees of jurisdiction for the ir

review.

(c) The following moneys shall be directly deposited into the trust fund:

1. Employer and employee premiums collected under the self-insured plan;

2. Interest and investment returns earned by the self-insured plan;

3. Rebates and refunds attributed to the self-insured plan; and

4. All other receipts attributed to the self-insured plan.

(d) Any balance remaining in the public employee health insurance trust fund at

the end of a fiscal year shall not lapse. Any balance remaining at the end of a

fiscal year shall be carried forward to the next fiscal year and be used solely

for the purpose established in paragraphs (a) and (b) of this subsection. The

balance of funds in the public employee health insurance trust fund shall be

invested by the Office o f Financial Management consistent with the

provisions of KRS Chapter 42, and interest income shall be credited to the

trust fund. Any balance for a specific plan year and any subsequent interest

income for that specific plan year shall be accounted for separately.

(e) The Auditor of Public Accounts shall be responsible for a financial audit of

the books and records of the trust fund. The audit shall be conducted in

accordance with generally accepted accounting principles and shall be

completed within ninety (90) days of the close of the fiscal year. All audit

reports shall be filed with the Governor, the President of the Senate, the

Speaker of the House of Representatives, and the secretary of the Personnel

Cabinet.

(f) The secretary of the Personnel Cabinet shall file a quarterly report on the

status of the trust fund with the Governor, the Interim Joint Committee on

Appropriations and Revenue, the Kentucky Group Health Insurance Board,

and the Advisory Committee of State Health Insurance Subscribers. The fi rst

status report shall be submitted no later than July 30, 2006, and subsequent

reports shall be submitted no later than sixty (60) days following the end of

each calendar quarter. The report shall include the following:

1. The current balance of the trus t fund and the amount of the balance

associated with each plan year;

2. A detailed description of all income to the trust fund since the last

report;

3. A detailed description of any receipts due to the trust fund;

4. A total amount of payments made for me dical and pharmacy claims

from the trust fund by plan year;

5. A detailed description of all payments made to the third -party

administrator of the self-insured plan by the trust fund;

6. Current enrollment data, including monthly enrollment since the last

report, of the Public Employee Health Insurance Program self -insured

plan;

7. Any other information the secretary may include;

8. Any other information requested by the Interim Joint Committee on

Appropriations and Revenue concerning the operation of the Public

Employee Health Insurance Program self -funded plan or the trust fund;

and

9. In addition to the information required under s ubparagraphs 1. to 8. of

this paragraph, the quarterly report filed in July and January shall also

include the following:

a. A projection of the medical claims incurred but not yet reported

that are considered liabilities to the trust fund;

b. A statement of any other trust fund liabilities;

c. A detailed calculation outlining proposed premium rates for the

next plan year, including base claims, trend assumptions,

administrative fees, and any proposed plan or benefit changes;

d. A detailed description of th e current in -state and out -of-state

networks provided under the plan, any changes to the networks

since the last report, and any proposed changes to the in -state or

out-of-state networks during the next six (6) months; and

e. Specific data regarding the third-party administrator's performance

under the contract. The data shall include the following:

i. Any results or outcomes of disease management and

wellness programs;

ii. Results of case management audits and educational and

communication efforts; and

iii. Comparison of actual measurable results to contract

performance guarantees.

(4) (a) Any fully insured health benefit plan, self -insured plan, or other health plan,

as defined in KRS 304.17A -591, offered, issued, or renewed to public

employees under this section or KRS 18A.225 shall comply with KRS

304.17A-591 to 304.17A -599, including any state cabinet, agency, or official

that contracts with a third -party administrator to administer any self -insured

plan offered, issued, or renewed to public employees un der this section or

KRS 18A.225.

(b) The plan or plans referred to in paragraph (a) of this subsection shall be filed

with the commissioner of the Department of Insurance, and the commissioner

shall review the plan or plans in accordance with KRS 304.14-120(6).