ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Saturday, January 25, 1997 TAG: 9701270051
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: Associated Press
The state employees health insurance fund is in danger of going broke because the state drew money out of the fund and employees were allowed to skip three monthly premiums, according to a legislative committee report.
Unless the fund is replenished, the insurance program that provides coverage for about 175,000 state employees and their dependents will fall into debt, an auditor who helped committee staff prepare the report told two legislative committees Friday.
Bruce Kangisser of the A. Foster Higgins & Co. accounting firm told the House Appropriations and Senate Finance committees that the ``premium holidays'' and withdrawals deprived the fund of $123.8 million.
By allowing government workers to skip monthly premiums to the state-managed insurance programs, the Health Insurance Fund lost $112.4 million in revenue, according to the Appropriations Committee report.
An additional $11.4 million in interest earned on the fund's cash balance was diverted to the state general fund, the report said.
The committee report says that claims have exceeded revenue in the recent past, and the trend is expected to continue.
``The administration has known about this problem since last fall,'' said House Majority Leader Richard Cranwell, D-Vinton.
``When were they going to tell the General Assembly? Were they hoping to ride this out until George Allen leaves office, so he could deposit this crisis on the next governor's doorstep?''
Kangisser recommended increasing premiums by 24 percent to replenish the fund. Robert Vaughn, an appropriations committee financial analyst, said the panel would consider alternatives other than raising premiums.
Allen's secretary of finance, Ronald Tillett, said during a news conference that the independent auditor's report was no cause for alarm. Tillett said the fund was healthy, with $100 million in reserve, and he was not convinced that a premium increase was necessary. Employees were allowed to skip payments because of that surplus, state officials said.
``It's very clear that this is no crisis,'' said Tillett, one of four administration officials who responded to Kangisser's report. ``Employees do not have to worry about the current state of the fund.''
``I find it poor for them [the legislative committees] to frighten employees for no reason.''
The administration officials said the state comptroller was not consulted before the study was done and said they had not seen the report.
Kangisser was called in last fall after the two state departments that oversee the fund, the Department of Personnel and Training and the Department of Planning and Budget, disagreed over the condition of the fund.
Shortly after the General Assembly convened this year, the Appropriations Committee staff obtained two memos written in late October and early November by the Department of Personnel and Training's health benefits manager, the committee report said.
The two memos and subsequent analysis revealed that claims were exceeding premiums, that losses would continue, and that the fund ultimately would not be able to pay its expenses.
LENGTH: Medium: 64 lines KEYWORDS: GENERAL ASSEMBLY 1997by CNB