ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Thursday, January 30, 1997 TAG: 9701300035
SECTION: VIRGINIA PAGE: C-1 EDITION: NEW RIVER VALLEY
DATELINE: RICHMOND
SOURCE: Associated Press
MEMO: NOTE: Shorter version ran in Metro edition.
General Assembly budget writers are considering stripping Gov. George Allen of control over state employees' financially troubled health insurance program.
Alarmed by predictions KeyAdvantage could be insolvent within a year, members of the money committees on Tuesday suggested shifting responsibility for the $300 million-a-year plan to the Virginia Retirement System.
The VRS supplies monthly pensions to 80,000 retired local and state employees. It's an independent agency controlled by trustees selected by the governor and the General Assembly.
The Allen administration, still reeling from suggestions that it has mismanaged KeyAdvantage, attacked the proposal as an assault on gubernatorial authority.
Secretary of Administration Michael Thomas said that managing employee benefits is an executive branch function. ``We don't feel that [transferring it] would be a good idea,'' he said.
Such a shift might not take effect until next January, when Allen leaves office and therefore could not be seen as an affront to the Republican, lawmakers said.
Further, the money panels might conduct their own study of KeyAdvantage before a final decision on surrendering the program to VRS, which manages a $24 billion portfolio of stocks, bonds and real estate.
Several state retirement funds operate public employee health insurance programs. They include Colorado, North Carolina and Kentucky.
Turning KeyAdvantage over to VRS isn't a new idea. It's been suggested by the General Assembly commission that monitors the state work force. The notion has new currency given the crisis facing the insurance fund.
But VRS Administrator William Leighty said his board ``isn't interested in doing that.''
The GOP co-chairman of the Senate Finance Committee said a new master for KeyAdvantage could be one step toward stabilizing the program, which is losing $3 million to $5 million per month.
``We're going to examine all options available to use to ensure the integrity of the trust,'' said Sen. John Chichester of Fredericksburg.
The Finance Committee and the House Appropriations Committee - in versions of the budget due Sunday - may come up with extra cash to keep KeyAdvantage flush through the year.
Del. George Heilig Jr., D-Norfolk, who heads the appropriations subcommittee that oversees state employee wages and benefits, said the insurance fund could get an infusion of $25 million.
Allen aides insist KeyAdvantage is financially sound and deny they ignored warnings by its director - and later confirmed by the assembly's actuaries - that the plan faces potential bankruptcy in 1998.
Not having raised rates for its 175,000 participants since its inception in 1992, KeyAdvantage apparently has been weakened by rising medical costs, premium holidays and the loss of interest income to other priorities.
LENGTH: Medium: 62 lines KEYWORDS: GENERAL ASSEMBLY 1997by CNB