Interim Joint Committee on State Government


Minutes of the<MeetNo1> 2nd Meeting

of the 2008 Interim


<MeetMDY1> September 24, 2008


The<MeetNo2> second meeting of the Interim Joint Committee on State Government was held on<Day> Wednesday,<MeetMDY2> September 24, 2008, at<MeetTime> 1:00 PM, in<Room> Room 154 of the Capitol Annex. Senator Damon Thayer, Co-chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Damon Thayer, Co-Chair; Representative Mike Cherry, Co-Chair; Senators Walter Blevins, Jr., Julian Carroll, Carroll Gibson, Dan Kelly, and Ed Worley; Representatives Eddie Ballard, Sheldon Baugh, Johnny Bell, Dwight Butler, Tim Couch, Will Coursey, Tim Firkins, Joseph Fischer, Danny Ford, Jim Glenn, Derrick Graham, Mike Harmon, Melvin Henley, Jimmy Higdon, Jimmie Lee, Mary Lou Marzian, Lonnie Napier, Sannie Overly, Tanya Pullin, Tom Riner, Carl Rollins II, John Will Stacy, Greg Stumbo, Tommy Thompson, John Tilley, Jim Wayne, Alecia Webb-Edgington.


Guests:  Sandy Gruzesky, Kentucky Division of Water; Jeff Eger and Jack Bender, Sanitation District No. 1 of Northern Kentucky; Bob Miller and John Cole, city of Ryland Heights, KY; Harold Parks, city of Fairview, KY; Timothy Longmeyer, Fred Nelson, and Joe Cowles - Personnel Cabinet.


LRC Staff:  Joyce Crofts, Brad Gross, Alisha Miller, Karen Powell, Greg Woosley, and Peggy Sciantarelli.


Discussion of storm water fees was first on the agenda. Senator Thayer said he represents two unincorporated cities in northern Kentucky (Ryland Heights and Fairview in Kenton County) that are required to pay storm water fees—sometimes referred to as a “rain tax”—without receiving the services that other, more suburban areas receive. He went on to say that he introduced a bill in the 2008 regular session (SB 229) to exempt persons in areas not served by a sanitary system from the storm water fees charged by that system. The legislation generated some controversy, and he promised those on both sides an opportunity to discuss the issue with the State Government Committee.


The first speakers were Bob Miller, Mayor of Ryland Heights (Kenton County); John Cole, city commissioner, Ryland Heights; and Harold Parks, Mayor of Fairview, (Kenton County). Mayor Miller and Mr. Cole provided the Committee with a packet of 2003 correspondence containing letters from James D. Giattina, U. S. Environmental Protection Agency (EPA); Darren Eyre, Center Line Engineering & Surveying; John Lyons, Sanitation District No. 1; U. S. Senator Jim Bunning; and several items of correspondence generated by Mayor Miller.


Mayor Miller said that he and Mr. Cole are appearing today in order to seek justice for the residents of Ryland Heights, who feel that the “rain tax” is being unfairly imposed on them. Mr. Cole read a prepared statement explaining the city’s position that it should not be subject to the fees, based on the fact that the city does not own or operate a municipal separate storm sewer (MS4) system. He noted that the city has been seeking exemption since 2003. In summary, he said that Sanitation District No. 1 contends that ditches alongside the city’s state and county roads are considered storm water systems. Neither Mark Mitchell of the EPA nor Johnny Gonzales of the Kentucky Department of Water could produce paperwork in which the EPA stated that the ditch lines are or are not considered storm water drains. Ryland Heights is a sixth class city with a population of approximately 800. Its residents are not hooked up to a storm sewer system but are paying the same fees as those in the large cities who actually receive services in return for their money. The relief that Ryland Heights is seeking is that either the Division of Water should redraw the boundaries of the storm water service area to exclude Ryland Heights, or that legislation should be passed in 2009 to exempt the city’s residents from paying the fees.


Mayor Parks said that the city of Fairview had never signed an agreement with Sanitation District No. 1 and does not have any storm sewer drains. He referred to a quarterly bill of $231.99 in storm water fees that had been received by a small church in Fairview and stressed that it is a hardship for Fairview’s citizens—many of whom are elderly—to pay the fees, particularly when no storm sewer services are received in return. He showed the Committee a small leaflet, “Three Steps to Cleaner Water,” and said the city was told that their payments are used to fund this educational material, even though the city already sends out this type of literature.


Mayor Miller noted that Ryland Heights had originally signed an agreement under threat of being fined approximately $25,000. He said the city felt it had no recourse but to comply, but with the option of opting out or being exempted at a later date. Mayor Parks said he has evidence that residents of Fairview who refused or were unable to pay the fee have been threatened with having their water service shut off, though this has been denied by Mr. Eger. He contended that another Fairview resident was threatened with having a lien placed on his property. He said he appreciates being heard today and hopes that Senator Thayer’s legislation will again be considered.


The next speakers were Jeff Eger, General Manager of Sanitation District No. 1, and Jack Bender, the District’s outside counsel from the firm of Greenebaum Doll & McDonald. They provided the Committee with copies of Mr. Bender’s February 2008 conference presentation entitled “Storm Water Planning and Enforcement.”


By way of background, Mr. Eger explained that Sanitation District No. 1 is a special district chartered under KRS Chapter 220. He went on to say that in 1994 the statute was amended to allow all local governments in northern Kentucky to turn over their sanitary sewer systems to the District, which all did except the city of Florence. In 1998, the local governments asked the General Assembly to amend Chapter 220 to allow the Sanitation District to take over responsibility for the storm water systems throughout northern Kentucky. As the District was implementing the takeover of ownership and maintenance, the EPA promulgated the Phase II regulations and named all three counties and all of the local governments in northern Kentucky, with the exception of Walton, as having to comply with the unfunded federal mandate to develop a storm water Phase II program. Sanitation District No. 1 does not own any storm sewer system but does own the sanitary sewage systems, both separate and combined, in the river city.


Mr. Bender discussed storm water planning and enforcement in general, noting that the requirements for storm water control that are being imposed on municipalities in Kentucky are growing and evolving. He went on to say that Kentucky has approximately 100 Phase II communities and two Phase I communities—Louisville and Lexington—that are subject to EPA storm water program requirements. The ultimate goal of these MS4 programs is to require municipalities to implement best management practices. The goal of the best management practices is to ensure that storm water runoff coming from urban areas through the MS4 systems—which can include road ditches, retention basins, and culverts—meets stringent in-stream water quality standards. The trend across the country today is that the requirements imposed under the MS4 programs will become more and more stringent. All Phase I and Phase II MS4 communities are required to implement a comprehensive storm water quality management program. Cities have no choice but to implement these programs throughout their jurisdictional area and then find the means to fund them.


Mr. Bender said that there will always be people who believe they are utilizing less of a service than someone else. He went on to say that part of the problem with respect to the fee systems is how to differentiate—how to establish who benefits most from a construction permit program in one part of a county that improves water quality there, if that is an area where more construction takes place. There is some unfairness in this system, but municipalities need the flexibility to comply with the unfunded mandates of these programs and apply the programs across industrial, commercial, residential, and even rural areas as required by EPA.


Senator Thayer commented on the randomness of the compliance area boundaries and questioned how they were decided. Mr. Eger said that could be answered better by the Energy and Environment Cabinet but that he believes the boundaries were based on EPA guideline standards of population density. He said the boundaries were drawn according to watersheds, so that all of the waters inside the boundaries flow within the affected populated area. He then reviewed PowerPoint slides showing maps of the northern Kentucky storm water permit compliance area, watersheds, and designated storm water outfalls, plus relevant aerial and land photos.


Mr. Eger noted that the sanitation districts have recently negotiated a consent decree, which is very unique, that employs a comprehensive, watershed-based approach. He went on to say that in the northern Kentucky regional Phase II program there are more than 8,000 storm water outfalls which the District is required to monitor on a regular basis—under the KPDES (Kentucky Pollutant Discharge Elimination System) permit—and that the storm water outfalls are well outside the sanitary sewer areas. He explained that an outfall is an area where a storm water system is discharging into a culvert, stream, creek, or pond.


Senator Thayer asked Mr. Eger to comment on the fees that are being charged to persons living in unincorporated areas that do not receive services from the sanitary sewer system. Mr. Eger said it is his responsibility to implement the program according to the established boundaries and that the law requires him to charge an equal, level fee throughout the service area. He added that construction oversight is also the District’s responsibility. Mr. Eger explained that the residential fee is the same for everyone in the service area—about $4.12/month. The nonresidential fee is a factor of every 2,600 square feet of impervious areas such as roof space, driveways, and parking lots. Senator Thayer asked Mr. Eger whether it is his opinion that the District cannot voluntarily exempt areas that do not receive storm water service. Mr. Eger said he does not believe they can be exempted but said, too, that he is also not sure that the District is not providing them a service. He added that although Fairview has challenged whether it has an obligation, its residents do reside in the service area.


Representative Harmon asked about the fee structure relative to roads and driveways, for example, with pervious rather than impervious surfaces. Mr. Eger said that nonresidential customers implementing such best practices can apply for water quantity or water quality credits. In certain instances they might also be eligible for potential grant funding from the District.


Representative Henley asked to whom fees collected by the District are being expended, and for what purpose. Mr. Eger said those funds are used for improvement of the storm water infrastructure in northern Kentucky. Representative Henley asked whether the District would have to pay if the Transportation Cabinet or a county billed the District for maintenance of roadside ditches within the service area. Mr. Eger said no—that the ditches are not the responsibility of the District, that the Transportation Cabinet has its own permit to comply with, and that the District does not receive any money from the Transportation Cabinet.


Representative Webb-Edgington asked whether state law or regulation would allow an exemption for churches or schools. Mr. Bender said that the regulations would not exempt them from the program requirements within an MS4 area. He said that any facility—whether state, federal, or a church—is required to comply. The issue of whether or not a church or somebody else would be exempt from the storm water fee is strictly a local government issue. Responding to another question from Representative Webb-Edgington, he said that the definition of “municipal separate storm sewer system” includes road ditches and culverts and not just traditional underground storm sewers. He explained that storm water might fall in Ft. Wright but end up in Covington, for example. For that reason, the District is charged with managing the storm water. He added that it is difficult for one municipality to manage the storm water coming from another municipality, whether coming from a ditch, creek, or a pipe system.


Representative Rollins asked whether the District would consider funding a proposal from a county government for an improvement that would prevent creek erosion. Mr. Eger said that the issue is complicated. He went on to say that when the Sanitation District became the regional storm water utility in 1998, as it began mapping the entire storm water system in northern Kentucky, the unfunded mandates came down from EPA to require the District to develop programs for public education and involvement, illicit discharge detection and elimination, construction management, and pollution prevention (good housekeeping). The District had to develop and is now implementing a program for all of the municipalities, including the three county governments. Funds collected are used for implementation of that program. Under an interlocal agreement with each local government, the District agreed to fund—up to 50 percent—any upgrade of the storm water systems until the District assumed ownership. The District is now in the process of revising the interlocal agreement and by this time next year should have full ownership responsibility of the storm water system. When finalized, the District will implement the necessary controls, funded entirely by the storm water fees, to remedy situations such as creek erosion.  


Representative Rollins asked whether the District works with city and county governments as they develop regulations to control storm water. Mr. Eger said yes—that the District is also working with planning and zoning agencies to revise rules and regulations for subdivisions and commercial developments. The District also has the ability to implement its own regulations relating to detention. From the audience, Mayor Parks said that Fairview officials have asked the District what the city should do in order to be relieved of the fees but that the District has not given the city any direction. Mr. Eger pointed out that granting Ryland Heights or Fairview an exemption may not exempt them from the federal requirement to implement the Phase II program. He went on to say that the District’s agreement with Ryland Heights is to implement the program on the city’s behalf. If nonsanitary customers were to be exempted from the fee, the interlocal agreement says that if the District cannot charge the fee to implement the program, the local government would then be responsible unless released from compliance with the Phase II EPA regulations through an agreement with the Kentucky Division of Water


Representative Stumbo asked whether the statute allows latitude to distinguish between older residences and those established after land development led to a problem with storm water runoff. He said it seems there should be equity involved in levying the fees—for example, charge a higher fee for the post-development households and exempt the older households. Mr. Eger said that would not be allowed under the statute. He pointed out that it is not always development that causes impairment. It could be the result of bad septic systems, agricultural runoff, animal pollution, etc. Representative Stumbo noted that the Sanitation District was created because northern Kentucky was a high development area. He said it seems to him that commercial developers should bear more responsibility because, technically, they created the situation. He asked whether other states allow a tiering of fees for households based on age of the residence—adding that this idea might be worth exploring. Mr. Eger said he is not aware of any. He went on to say that the District uses GIS imaging system mapping to determine impervious areas. To do it for each residence would be very costly, so the decision was to charge all households the same fee of $4.12, which is within the national average. A recent national study by the engineering firm Black & Veatch indicates that storm water fees range from 70 cents/house to $70.00/house per month. Mr. Eger also noted that, for the most part, the impaired streams in the District’s service area are in rural areas.


Representative Wayne said that in the past he has introduced legislation several times to permit local governments to impose impact fees on new development, and each time the home builders and realtors lobbied to defeat the legislation. He said he believes this type of legislation would be a partial remedy, because any new residential or commercial development would then be required by the developer to pay to the District a certain amount of up-front money. That would, in turn, keep fees lower for existing homeowners and businesses. Mr. Eger said that the District charges a “capacity connection” fee for new development and that this fee has increased by 50 percent since 1994. He said this is, in essence, a kind of impact fee.


Representative Fischer asked what percentage of the storm water fees are derived from areas not served by storm sewers. Mr. Eger said he believes it is about two or three percent of the annual fee received from the nonsanitary sewer customers. Representative Fischer said, then, that if those areas were exempt from the fees, it would be necessary to raise other customers’ fees by that same percentage. Mr. Eger said that is correct.


Senator Thayer thanked Mr. Eger and Mr. Bender. The next speaker was Sandy Gruzesky, Director of the Division of Water, Energy and Environment Cabinet. Ms. Gruzesky provided the Committee with a 3-page handout entitled “Population for Storm Water Entities as Defined by the 2000 Census” [Source: Federal Register]. It lists the Kentucky communities identified by the federal government that are required to be covered under the Phase II storm water program.


Ms. Gruzesky gave a PowerPoint presentation entitled “Storm Water MS4 Permitting Issues.” She noted that Phase II of the program went into effect in 2003 and Phase I in 1992. She spoke at length on the following topics: history of the storm water program; purpose of storm water regulation; impervious cover; watershed issues; storm water permits; definition of MS4 systems; MS4 storm water categories; northern Kentucky impaired rivers/streams/lakes; minimum controls for Phase II storm water programs; timeline for Phase II MS4 permit reissuance; and the Lexington-Fayette MS4 program and consent decree. (A copy of Ms. Gruzesky’s presentation is on file with LRC’s State Government Committee staff.)


Ms. Gruzesky explained that the storm water fees are funding the following activities required of Sanitation District No. 1: public education and outreach; public involvement and participation; control of construction storm water runoff and illicit discharge, including inspection and enforcement; post-construction storm water management; and pollution prevention.


Representative Webb-Edgington asked about the quality of water in urban areas compared to less developed areas of the state where there are straight lines running into streams. Ms. Gruzesky said that in parts of the state where straight pipes are an issue—particularly eastern Kentucky—waters are also impaired. She said that urban storm water involves a different kind of pollution but that there is impairment for a variety of reasons statewide. Representative Webb-Edgington asked whether there are any taxes or fees, other than for enforcement, that are imposed on people in areas that run straight pipes. Ms. Gruzesky said she is not aware of any.


Representative Henley asked whether he should contact the Division of Water when he receives a complaint about septic system runoff that cannot be addressed by the local health department. Ms. Gruzesky said yes—that the Division receives that type of calls frequently and will send an inspector to investigate and follow up. Representative Henley asked whether MS4 systems are responsible for post-construction management of pipes and ditches, for example. Ms. Gruzesky said yes. She said that sedimentation structures occasionally must be cleaned out in order to remain effective. Representative Henley asked whether communities could submit a bill for cleanup if a road ditch maintained by a county or the state becomes full of sediment. Ms. Gruzesky said that the state of Kentucky has its own permit and is required to do the cleanup in urbanized areas for state-owned roads. Representative Henley said it seems, then, that there is a duplication of services and that fees should be reduced for the small unincorporated cities that do not operate a storm water system, since all of their infrastructure is already being maintained by other parties that pay for the maintenance. Ms. Gruzesky pointed out that the storm water is coming from private property. She said the Transportation Cabinet will clean out the ditches but that the material in the ditches came from parking lots and other impervious areas.


Representative Higdon said that everyone agrees on the need for clean water and the other goals of the Clean Water Act. He disagreed with the “one size fits all” approach taken by the sanitation district and suggested looking for a solution whereby the folks in the small cities without storm water systems would be charged lesser fees than those in the larger urban areas. Discussion concluded, and Senator Thayer thanked all the speakers.


Discussion of the 2009 Kentucky Employees Health Plan (KEHP) was next on the agenda. Guest speakers from the Personnel Cabinet were Tim Longmeyer, Deputy Secretary; Fred Nelson, Commissioner of the Department of Employee Insurance; and Joe Cowles, General Counsel for the Department of Employee Insurance. The meeting materials included the Cabinet’s “Benefits Selection Guide”; copies of Mr. Longmeyer’s and Mr. Nelson’s PowerPoint presentation, “Briefing on 2009 Rates and Benefits”; and a letter to the General Assembly from Crystal Pryor, the Cabinet’s Chief of Legislative Affairs.


Mr. Longmeyer discussed the challenges faced by the Cabinet when developing the health plan for 2009. He said that health plan inflation continues. The 2008 employee contributions were artificially lowered, which created a shortfall in overall trust funds that could be used in developing the new plan year benefits. The benefits had not changed in years, and the highly used plans lacked diversity. About 98 percent of participants chose two of the four plans that were offered. This created consumer complacency, and most were not really aware of their benefits or whether they were enrolled in a plan that best met their needs. There was no meaningful wellness plan, though not for lack of trying. Many wellness efforts had been made, but there was little utilization. There was also little utilization of the HRA (health reimbursement account) plan—otherwise known a consumer-driven plan—which many companies, corporate entities, and states are moving toward in order to increase the level of consumer awareness.


Mr. Longmeyer said that those challenges were met with certain principles in mind. The goal was to provide uniform coverage across the Commonwealth; encourage wellness and healthy lifestyles; provide preventive care at little or no cost; improve chronic disease care; educate members about plans appropriate to their health needs; provide plan alternatives accessible to retirees; provide a quality PPO option; provide an improved subsidy for family and dependent coverage; and provide plans with unlimited lifetime maximums. He said that due to the great effort of the Department of Employee Insurance—and after many meetings with vendors, experts, stakeholders, employees, the Group Health Insurance Board, and the best practices Committee chaired by Secretary Jonathan Miller—he believes those challenges have been met and the guiding principles have been maintained.


Mr. Nelson reviewed details of the four plans being offered for 2009: Commonwealth Standard PPO, Commonwealth Capitol Choice, Commonwealth Optimum PPO, and Commonwealth Maximum Choice. He discussed the new Capitol Choice plan, which is a “hybrid” plan that combines features of a modern, consumer-driven plan with features of a traditional PPO plan. He went on to explain that the plan features a single co-payment of $100 for all in-network hospitalizations. Another unique feature is a $500 up-front benefit allowance per family member, which would provide 100 percent coverage for certain in-network services before payment of the deductible.


Mr. Nelson went on to explain that the new Commonwealth Optimum PPO plan merges features of the 2008 Commonwealth Enhanced and Commonwealth Premier plans. Commonwealth Maximum Choice is a consumer-driven plan that includes a health reimbursement account (HRA) and will offer the same benefits as 2008’s Commonwealth Select plan. The Commonwealth Standard PPO plan will offer the same benefits as the 2008 Commonwealth Essential plan. Mr. Nelson pointed out that 40 percent of KEHP members have annual pharmacy and medical expenses of $1,000 or less. Commonwealth Maximum Choice, which includes $1,000 in an HRA account for single coverage, would totally cover costs for members choosing single coverage under that plan. Twenty-eight percent of plan members have annual medical and pharmacy expenses of $500 or less; the new Capitol Choice hybrid plan would be ideal for them.


Mr. Nelson said that some pharmacy co-payments will increase slightly in 2009. He noted that at the beginning of 2006, the member cost share for overall pharmacy benefits was 19 percent, and KEHP paid 81 percent. Since 2006, because of medical and pharmacy inflation, the plan has been picking up a higher percentage of that cost. The 2009 adjustment in pharmacy co-pays returns members to the 19 percent share that they were paying at the beginning of 2006. Mr. Nelson also briefly touched on the pharmacy mail-order benefit, the specialty drug management program, the addition of some medications to the step therapy and prior authorization programs, the 75-prescription reduced co-pay benefit, the VirginHealth Miles walking program, and the improved disease management program. He noted that KEHP currently has a little more than 150,000 employee and retiree members; the addition of dependents raises the total membership to approximately 260,000.


Mr. Nelson reviewed the non-smoker premium rates for 2009. He said that the rate-setting process faced daunting challenges because of the overall budget situation and medical inflation, and because the previous administration had used $50 million from the trust fund to buy down premiums. He said that, with the exception of the Optimum PPO plan, the other three plans being offered will have a zero employee contribution for single coverage. The single coverage monthly premium for the Optimum PPO plan will be only $5 more than the premium for 2008’s Commonwealth Premier. Premiums for comparable dependent coverage will increase by five percent or less, compared to an increase of six percent for dependent coverage in 2008. Concluding his presentation, Mr. Nelson said that the 2008 premium surcharge for smokers is about $16 for single coverage, or $32 for dependent coverage; the 2009 surcharge will increase to about $21 for single coverage, or $42 for dependent coverage.


Representative Bell, citing personal experience, expressed dissatisfaction with the difficult process for obtaining KEHP approval to cover certain prescribed medications in lieu of generic or alternative drugs. He said he and a lot of his constituents feel that the current policy is not working. Mr. Nelson said that generally the plan follows a doctor’s recommendation, although prior authorization and step therapy programs may require an individual to first substitute a generic drug. Representative Bell said he understands that. He added that his doctor submitted the required information to get his prescription approved but that it was a fruitless effort. Mr. Nelson said he believes that in most situations the pharmacy benefit manager will agree to what a doctor prescribes if he can justify its use. He said the Department would be happy to assist anyone who is having a problem in this regard, and Mr. Longmeyer said that they will follow up with Representative Bell.


Senator Thayer acknowledged Personnel Cabinet staffer Charles Wells in the audience and advised the Committee that Mr. Wells is a designated contact person to help members of the General Assembly who have questions about the health plan.


Representative Pullin commended the Cabinet for its hard work in developing the health plan. She asked what can be done to help persons who believe they have correctly enrolled on line, only to find out after open enrollment ends that they did not get enrolled. Mr. Nelson said that this year, for the first time in many years, there will be a mandatory active enrollment. He went on to say that the Department is aware of the potential for problems and is committed to being as flexible and liberal as possible. Grace periods will be allowed in order to assure that people get enrolled. After the first of the year, it will probably be necessary for employees to file a grievance if they failed to complete the enrollment process, but it is the Department’s goal to be liberal in granting the grievances, which has not necessarily been the case in the past. Representative Pullin asked whether the Department will notify employees who have neglected to enroll. Mr. Nelson said that reports will be generated to current members who did not enroll online, and their names and social security numbers will be sent to the insurance coordinators for agencies and school systems so that they can contact those persons and assist them with enrollment. Mr. Longmeyer said that the Cabinet is sending out letters and e-mails to employees and will try to be as liberal as possible in administering open enrollment.


Senator Carroll said he thinks the Cabinet has done an excellent job. He suggested that they consider having an automatic “default enrollment” for employees who are currently in the health plan but fail to enroll for 2009. Mr. Nelson said that they have considered that but that it will not be possible under the new computer system KHRIS (Kentucky Human Resource Information System) that goes into effect January 1. Senator Carroll said that default paper enrollment perhaps could be completed by insurance coordinators for employees who neglect to enroll or respond when notified that they are not enrolled. Mr. Nelson said that they will give some thought to that idea.


Representative Stacy asked how the amount of the smoker surcharge is determined. Mr. Longmeyer said that there is a limitation of up to 20 percent of overall premium, according to HIPPA (Health Insurance Portability and Accountability Act) regulation. He went on to say that 14 percent of members currently report that they smoke, while it is known that the actual number of smokers in the Commonwealth is closer to 28 or 30 percent. It is apparent that quite a few are not reporting that they smoke. The surcharge is an important deterrent and encourages people to enter smoking cessation programs. The 2009 surcharge reflects an increase of 25 percent, which represents an overall increase of about 33 since the surcharge was first put in place a few years ago. Kentucky is one of only about a half dozen states that have a smoking surcharge. The 2009 $42 smoker surcharge for dependent coverage is believed to be the highest in the nation. The goal was to increase it in such a way as not to encourage people to falsely open enroll but still serve as an incentive for smoking cessation.


Representative Firkins also complimented the Cabinet. He said that he had not been able to get approval for a medication because of the step therapy requirements and had finally agreed to use the drug okayed by the pharmacy benefit manager. He encouraged the Cabinet to look into this problem and suggested it may be more prevalent than thought. Mr. Nelson said they will be glad to intercede on behalf of plan members who are experiencing problems.


Representative Riner asked whether there are incentives for people to answer the smoker question honestly. Mr. Longmeyer said the main incentive is that giving a false answer is fraud. He went on to say that there has not been an effort to prosecute so far. Instead, the 2009 plan will include an option for smokers who quit or who complete a smoking session program to qualify for the nonsmoker rate during the plan year and not just at open enrollment. The Cabinet is also looking at more aggressive methods such as potential prosecution or requiring affidavits but hopes that the option to change smoker status during the plan year will encourage people to get involved in the smoking cessation program.


Representative Graham said he hopes the Department will emphasize in its publicity that the HRA plan is still being offered and that the unused funds can be rolled over from one plan year to the next. Mr. Nelson noted that the HRA and its rollover benefit are discussed in the “Benefits Selection Guide.” Subsequent discussion touched on the October benefit fairs and the 90-day prescription mail-order benefit.


Representative Cherry asked the amount of the employer contribution for 2009 for employees who waive coverage. Mr. Longmeyer said it will be $175—the same as 2008.


The health insurance discussion concluded and Senator Thayer thanked the speakers. He then read the subcommittee report for the Task Force on Elections, Constitutional Amendments, and Intergovernmental Affairs, which met on September 23. The report was approved without objection, upon motion by Representative Firkins.


Business concluded, and the meeting was adjourned at 3:25 p.m.