Can Virginia cities, counties, and school boards pool together to run a single self-funded employee health insurance trust?

Plain-English summary

A senator and a delegate asked whether Augusta County, the cities of Staunton and Waynesboro, and their school divisions could create a single voluntary, self-funded trust to provide health insurance to their employees and dependents under Virginia's Joint Powers Act. The AG said yes.

The Joint Powers Act, through § 15.2-1300(A), provides that "Any power, privilege or authority exercised or capable of exercise by any political subdivision of this Commonwealth may be exercised and enjoyed jointly with any other political subdivision of this Commonwealth having a similar power, privilege or authority except where an express statutory procedure is otherwise provided for the joint exercise."

The AG then verified that each participant had separate authority to do this individually. Section 15.2-1517(A) lets localities provide health insurance for their officers and employees, through self-insurance, purchased insurance, or partial self-insurance. Section 22.1-85 lets school boards establish a fund for medical and related services for officers, employees, and dependents. Self-insurance generally means setting aside money to cover any loss, and a trust is a specific type of fund, so both authorities cover what these participants want to do.

Because each could do this individually, and no other Code provision governs that joint exercise, they could do it jointly under the Joint Powers Act.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is the Joint Powers Act?
A Virginia statute that lets any political subdivision (city, county, town, school board, sanitation district, etc.) jointly exercise any power it has on its own, with another political subdivision that has the same power. The Act fills in the cooperative gap that the Dillon Rule's strict-construction posture leaves.

Did the school board's statute require a separate fund?
Yes. Section 22.1-85 lets a school board establish a fund for medical and related services, funded from appropriations, payroll deductions, or other mode consistent with state and federal income tax law. A trust counts as a type of fund.

Does this opinion address how the trust is governed?
No. The opinion is about authority to create the trust. Governance structure, trustees, contributions, and benefit design are policy choices for the participants to negotiate in their joint exercise agreement.

Background and statutory framework

Virginia's Dillon Rule limits local governments and school boards to powers expressly conferred by law or necessarily implied from conferred powers.

Three statutes work together. Section 15.2-1300(A) is the Joint Powers Act enabler: any power any political subdivision can exercise can be exercised jointly with another, unless an express statutory procedure exists for that joint exercise. Section 15.2-1517 gives localities authority to provide health insurance through self-insurance, purchased insurance, or partial self-insurance. Section 22.1-85 gives school boards authority to establish a fund for medical and related services.

Citations

• Va. Code § 2.2-505 (Attorney General opinions)
• Va. Code § 15.2-1300 (Joint Powers Act; joint exercise of powers)
• Va. Code § 15.2-1517 (locality health insurance authority)
• Va. Code § 22.1-85 (school board health benefit fund)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2012/12-059_Hanger_Bell.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

October 5, 2012

The Honorable Emmett W. Hanger, Jr.
Member, Senate of Virginia
Post Office Box 2
Mount Solon, Virginia 22843

The Honorable Richard P. Bell
Member, House of Delegates
Post Office Box 239
Staunton, Virginia 24402

Dear Senator Hanger and Delegate Bell:
I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented
You ask whether multiple localities and school boards may create a single voluntary, self-funded trust to insure health benefits for their employees and the families of their employees as an authorized joint exercise of power pursuant to the "Joint Powers Act."

Response
It is my opinion that multiple localities and school boards may create a single voluntary, self-funded trust to insure health benefits for their employees and the families of their employees as a joint exercise of power.

Background
You state that Augusta County and the cities of Staunton and Waynesboro, along with their respective public school systems, desire to create a self-funded trust through which they would provide health insurance to their employees. You indicate that this trust would be created by an agreement between the political subdivisions pursuant to the Joint Powers Act.

Applicable Law and Discussion
Virginia follows the Dillon Rule of strict construction regarding the powers of local governing bodies, whereby such powers are limited to those conferred expressly by law or necessarily implied from conferred powers. The Dillon Rule also applies to school boards. Once a power is conferred, § 15.2-1300(A) provides that

Any power, privilege or authority exercised or capable of exercise by any political subdivision of this Commonwealth may be exercised and enjoyed jointly with any other political subdivision of this Commonwealth having a similar power, privilege or authority except where an express statutory procedure is otherwise provided for the joint exercise.

Accordingly, if localities and school divisions are afforded the authority to establish separately a self-funded employee health insurance trust, then they may do so jointly, provided no other Code provision governs such joint exercise.

Section 15.2-1517(A) expressly authorizes localities to provide health insurance programs for its officers and employees, while, pursuant to § 22.1-85, "[a]ny school board may establish a fund for the payment of hospital, medical, surgical and related services provided any of its officers, employees and their dependents . . . ." The health insurance offered by a locality "may be through a program of self-insurance, purchased insurance, or partial self-insurance and purchased insurance, whichever is determined to be the most cost effective;" and the fund established by a school board can be created "out of funds appropriated to the school board or by payroll deductions or other mode consistent with state and federal income tax law and regulations."

"Self-insurance" generally refers to any "plan under which a business sets aside money to cover any loss." Thus, the localities' plan to create a self-funded trust, as your inquiry presents it, comports with the authority granted them under § 15.2-1517. Further, a trust ordinarily is considered a specific type of fund; thus school divisions are authorized to create a self-funded health insurance fund under § 22.1-85. Accordingly, because each political subdivision is authorized to establish its own separate voluntary self-funded trust to insure health benefits for employees and their families, I conclude that the localities and their respective school divisions may collaborate in their exercise of such power and create such a fund jointly pursuant to the Joint Powers Act.

Conclusion
Accordingly, it is my opinion that multiple localities and school boards may create a single voluntary, self-funded trust to insure health benefits for their employees and the families of their employees as an authorized joint exercise of power pursuant to the Joint Powers Act.

With kindest regards, I am
Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General