Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> August 7, 2013


Call to Order and Roll Call

The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> August 7, 2013, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Senator Paul Hornback, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Paul Hornback, Co-Chair; Representative Wilson Stone, Co-Chair; Senators Carroll Gibson, Jimmy Higdon, Dennis Parrett, and Robin L. Webb; Representatives Mike Denham, Tom McKee, Terry Mills, and Jonathan Shell.


Guests: Joel Neaveill, Bill McCloskey, Angela Blank, Brian Murphy, and Biff Baker, Governorís Office of Agricultural Policy; Sharon Clark and D.J. Wasson, Department of Insurance.


LRC Staff: Lowell Atchley, Kelly Ludwig, and Kelly Blevins.


The July 3, 2013, minutes were approved without objection by voice vote, upon a motion by Senator Higdon and second by Representative McKee.


Governorís Office of Agricultural Policy

Mr. Joel Neaveill, Chief of Staff, and Mr. Bill McCloskey, Director of Financial Services, Governorís Office of Agricultural Policy (GOAP), testified about project funding decisions made by the Agricultural Development Board (ABD) during its July meeting.


Mr. Neaveill summarized tobacco settlement funding allocations for the previous month under the County Agricultural Improvement (CAIP), Deceased Farm Animal Disposal Assistance, and Shared-use Equipment programs.


The speakers provided additional information to Representative Stone, Senator Hornback, and Representative McKee on the types of equipment purchased by some counties under the Shared-use Equipment program and the method of disposal in a Deceased Farm Animal grant approval.


The GOAP officials summarized those projects approved for state funding during the previous ADB meeting: Kentucky School for the Deaf, approved for $10,000 in Boyle County tobacco settlement funds to buy a modified tractor for the schoolís farm; University of Kentucky Research Foundation, $113,347 for the UK Center for Crop Diversification, with the funds to be spent on Web-based marketing and production information intended for agricultural producers; Whitley County Farmersí Market Inc., $1,809 in state funds to develop a demonstration/marketing mobile unit; Hopkins County Extension Service, $12,130 in state funds to be used to upgrade the existing sales area; and Franklin County Farmersí Market, $5,200 to be used for the renovation and repair of the existing market complex.


As for the School for the Deaf funding request, the GOAP officials indicated the ADB was somewhat reluctant to commit funds to buy a tractor but agreed to the funding with the requirement that the tractor would be modified to make it safer for hearing-impaired youth.


Responding to Senator Parrett, the GOAP officials indicated that the Kentucky School for the Deaf school farm produces hay currently, but the school hopes to get into vegetable production.


Replying to Senator Gibson, GOAP officials indicated that the UK request was originally for $249,029, but was scaled back to a one-year commitment. Officials told the senator that the reduced commitment did not jeopardize the overall project and also said UK could request additional funds in a subsequent year.


GOAP officials described to Representative Shell how the UK Center for Crop Diversification will attempt to broaden its reach by offering webinars and the like, and also will revise some of the current crop growing profiles.


††††††††††† The UK Center for Crop Diversification received the funding with no match commitment, something the GOAP witnesses said was not out of the ordinary. Other agriculture-related groups also receive tobacco settlement funds with no match requirements.


††††††††††† Mr. Neaveill indicated that the Whitley, Hopkins, and Franklin county projects were funded under the 2013 Farmersí Market Infrastructure Competitive Grant Program.


††††††††††† Responding to a series of questions from Senator Gibson, officials described how farmersí markets are typically established and governed. Mr. Neaveill pointed out that farmersí markets typically will charge vendors a fee for the right to set up and place controls on other aspects of the markets. Co-chair Hornback said he was familiar with the set-up in Shelby, where vendors pay a fee to sell their farm products. Senator Parrett pointed out that Hardin Countyís market operates under a foundation type legal structure.


††††††††††† On other issues, GOAP Officials described to Representative Denham how the GOAP promotes the availability of tobacco settlement funds for agriculture diversification in the northeast part of the state. Representative Denham prefaced his question by describing the noticeable decline of tobacco production in his region. Senator Webb suggested that efforts should be made to increase farm production in light of worldwide food demands.


Health Care Improvement Authority and Kentucky Access

Ms. Sharon P. Clark, Commissioner, and Ms. D.J. Wasson, Legislative Liaison, Department of Insurance Next presented the annual report on the Health Care Improvement Authority (HCIA) and Kentucky Access.


HCIA is responsible for the oversight of the expenditures of the tobacco settlement payments that are provided for public health initiatives. Kentucky Access receives an annual tobacco settlement appropriation ($16.4 million currently).


Ms. Clark discussed the stratus of the HCIA, its membership, programs that it oversees, its role, funding, accomplishments by the various programs, and challenges, in particular, declining tobacco settlement appropriations.


Ms. Wasson delivered the report on Kentucky Access, which was established in Kentucky in 2001 to provide insurance coverage for people with pre-existing high-risk health ailments. It is funded mostly through member insurance premiums and tobacco settlement funds, along with insurance company assessments.


Much of Ms. Wassonís report centered on the phasing out of the Kentucky Access program and the advent of high-risk coverage under the federal Health Care Reform Act.


As of mid-year, Kentucky Access had about 4,100 active members, according to Ms. Wassonís report. Member premiums totaled almost $33.7 million. She said membership has been decreasingly slightly each month for the past year, mainly because of nonpayment of premiums, Medicare eligibility, or the ability to obtain other coverage.


In her remarks, Ms. Wasson indicated that beginning January 1, 2014, federal law will require insurers to guarantee issue health insurance coverage. Consequently, the last day of coverage for all Kentucky Access members will be December 31, 2013. Members and agents were notified in June that Kentucky Access coverage would be ending. An additional letter will be sent in September with options for 2014 and how to enroll in the new state health benefit exchange (Kynect) or the private market.


According to Ms. Wasson, even though Kentucky Access will be winding down, there will be a transition period during which lingering claims must be paid and ultimately settled.


Ms. Wasson and Ms. Clark responded to a series of questions from Senator Parrett agreeing that overall member premiums were expensive, but that is due to the high-risk conditions of those buying the insurance.


Senator Parrett what would happen if the federal program is not funded or otherwise does not become operational. Ms. Wasson said the Department of Insurance will keep the structure of the Kentucky Access program intact in case it has to be reactivated. Should something happen, according to Ms. Wasson, the Department of Insurance would re-visit Kentucky Access. She said she would not suggest repealing the enabling statutes in order to monitor what happens in the future.


Responding to Senator Hornback, who asked about the need for $16 million in funding, Ms. Wasson said that decision will be for the General Assembly, but some provider claims will remain outstanding. She said Kentucky Access has undertaken actuarial projections regarding how much would be needed to pay lingering claims, plus there are other provisions in the statutes for generating funding.


She testified that in September, when a new actuarial study is available, there should be a better estimate regarding payouts. Ms. Wasson said that people often elect to go ahead and undergo certain medical procedures done if it is known that a program is ultimately closing down.


††††††††††† Responding to Co-chair Hornback, Ms. Wasson said it would be difficult to predict if existing claims would be paid by the end of the next biennium, but she offered that it is believed about 90 percent will be paid out by then. But she pointed out that medical providers have one year to file claims and there also are appeal right periods that can extend the payment process as well.


Responding to a follow-up question from the senator, Ms. Wasson said Kentucky Access would be providing information to legislative budget writers on the numbers of claims outstanding and the potential payouts. Ms. Clark pointed out that persons covered under Kentucky Access could be in the hospital up until the last day of coverage and policies also have a continuum of care provision.


Ms. Wasson told Senator Higdon that there is not a surplus of funds available, but enough funding available to cover claims. The Department of Insurance officials described how incoming fund allocations will oftentimes lag behind current funding needs.


Responding to Senator Higdon, Ms. Wasson said the federal law covers aspects of smoking cessation, but that should not affect Kentuckyís smoking cessation program, which operates a quit smoking phone line, sponsors public announcements, and undertakes anti-smoking education efforts.


As for future uses of the tobacco settlement funds, Senator Higdon cited a need to fund state health programs for returning military veterans.


In a response to Representative McKee, Ms. Wasson said she hopes that premiums for those with high-risk ailments will be lower under the federal program. She responded that tobacco settlement funding for the Kentucky Access program has been declining.


Senator Webb told the committee that she is concerned about the potential defunding of the federal Health Care Reform Act. She said it would be prudent in the near future to maintain Kentucky Accessís statutory structure and not rush to spend additional money, even if necessary set put it in escrow until more is known about the federal act. She has expressed concerns to members of the Kentucky congressional delegation.


Documents distributed during the meeting are available with meeting materials in the LRC Library. The meeting adjourned at approximately 11:45 a.m.