State of California

  M E M O R A N D U M

  REFERENCE CODE:
  2001-064


  DATE:
  December 17, 2001


  TO:
  Accounting Officers

  Budget Officers

  Personnel Officers

  Personnel Transactions Supervisors


  FROM:
  Department of Personnel Administration
  Benefits Division


  SUBJECT:
  Rural Health Care Equity Program Premium Reimbursement


  CONTACT:
  Belinda Collins, RHCEP Manager

  (916) 324-0468, CALNET 454-0468

  FAX: (916) 322-3769

  Email: belindacollins@dpa.ca.gov



  Pursuant to Government Code section 22825.01(f)(1), the 
  State Controller's Office (SCO) will issue Rural Health 
  Care Equity Program (RHCEP) premium reimbursement payments 
  to eligible, active State employees by the end of calendar 
  year 2001. The payment will be distributed to the 
  department in which the participant was employed as of June 
  30, 2001, or the last pay period of eligibility if prior to 
  the June 2001 pay period. 

  

  If the participant is no longer employed at the department 
  identified on June 30, 2001, it is the department's 
  responsibility to forward the RHCEP warrant to the 
  appropriate department or contact DPA at (916) 324-0468.  
  Please contact DPA prior to redepositing RHCEP warrants.   

  

  Payments will be made to previously identified employees 
  who participated in the RHCEP from January 1, 2001, to July 
  31, 2001 (December 2000 through June 2001 pay periods). 

  

  The RHCEP currently reimburses up to $1,500 per fiscal year 
  for deductible and co-insurance expenses for eligible, 
  active State employees who live in areas with no health 
  maintenance organization health plan option.  Within this 
  annual cap, the RHCEP must also subsidize " the preferred 
  provider plan premiums for the employee, by an amount equal 
  to the difference between the weighted average of board-
  approved health maintenance organization (HMO) premiums and 
  the lowest board-approved preferred provider plan premium."  
  (Government Code section 22825.01(f)(1)).

  

  Prior to January 1, 2001, the lowest board-approved 
  preferred provider plan premium (PERS Choice) was less than 
  the weighted average of the board-approved HMOs.  
  Therefore, no premium subsidies were available.  However, 
  as of January 1, 2001, the PERS Choice premium is higher 
  than the weighted average of the board-approved HMOs, so 
  that premium subsidies must be included in the $1,500 
  maximum allocated to eligible employees each fiscal year.

  

  The RHCEP premium reimbursement amount is based on the 
  employee's health plan party code for the December 2000 
  through June 2001 pay periods.  The monthly RHCEP premium 
  reimbursement amounts are: 

  

                  1 Party   $15.67

                  2 Party    $31.15

                  3 Party    $41.95

  

  Although the deductible and co-insurance reimbursements are 
  not subject to taxation, the RHCEP premium reimbursement is 
  subject to taxation.  State and federal taxes will be 
  withheld at the flat rate, 27.5% federal and 6% state.  
  Social Security and Medicare taxes will also be withheld at 
  6.2% and 1.45%, respectively, when applicable. 

  

  The RHCEP premium payment will originate from each 
  employee's respective departmental appropriation.  On the 
  same day, SCO Accounting will process a TC 38 transaction 
  to transfer funds from DPA's General Fund to the RHCEP 
  employee's department's appropriation.  The TC 38 
  transaction will post the gross amount of the transfer 
  including state contributions for Social Security and 
  Medicare and will reflect the period of coverage applicable 
  for reimbursement.  

  

  RHCEP premium reimbursements will be paid from the RHCEP 
  employee's annual allotment of $1,500 and recorded by DPA's 
  third party administrator, Application Software 
  Incorporated (ASI).  Eligible State active employees should 
  continue to submit RHCEP claims for eligible medical 
  expenses to ASI. ASI will ensure that the premium 
  reimbursement and the statutory claims reimbursement do not 
  exceed the maximum allotment of $1,500 per individual, per 
  fiscal year.  However, eligible expenses exceeding the 
  $1,500 maximum will still be reimbursable under the RHCEP's 
  normal secondary reimbursement process.

   
  Although it was previously agreed that the next RHCEP 
  premium reimbursement (for the 2001/2002 fiscal year 
  beginning with the July 2001 pay period) would be issued in 
  October 2002, DPA is considering issuing the RHCEP premium 
  reimbursement at more frequent intervals.  Any such changes 
  will be communicated in a subsequent PML Memorandum.

  

  Accounting and/or personnel staff with questions may call 
  Belinda Collins of the DPA Benefits Division at (916) 324-
  0468. Please refer RHCEP participants to the DPA RHCEP 
  contact at (916) 327-1439. 

  

  

  

  

  Terri Westbrook, Chief

  Benefits Division