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Benefit cuts loom for WV health insurer PEIA

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Benefit cuts loom for WV health insurer PEIA
By Phil Kabler, Statehouse Reporter, Charleston Gazette-Mail

With no new state funding available, the Public Employees Insurance Agency Finance Board will have to come up with about $60 million in benefit cuts to the health insurance plan for the 2016-17 plan year, PEIA Executive Director Ted Cheatham has confirmed.

That’s on top of $40 million in cuts imposed for the current plan year, cuts achieved primarily through increasing co-pays and deductibles.

“We are, much like last year, developing plan options to meet the financial requirements to keep the plan solvent,” Cheatham said. “I anticipate us putting together a list of options again, much as we did before.”

Cheatham said PEIA staff members are preparing a menu of possible benefit cuts to present to the Finance Board in October. Their preliminary recommendations will then go out to public hearings around the state in November, with the board to give final approval to the 2016-17 plan in December.

The changes approved will go into effect next July 1.PEIA is the health plan for employees of the state, public schools and other government entities.

Benefit cuts are necessary because, under the law, PEIA can increase premiums only if the state increases the employers’ contributions, to maintain a requirement that 80 percent of premiums are paid by the employer and 20 percent by the employee

.Although PEIA has not yet formally received the letter from the Governor’s Office spelling out 2016-17 state funding, Cheatham said he has been advised that the government share will remain at the current $422.4 million.

“We are not anticipating any more money,” he said, “and we are planning accordingly.”

Also, from 2012 through 2014, the PEIA Finance Board heeded the demands of insurees and dipped into its reserve fund, to avoid premium increases or plan cuts, but that fund has been depleted to its minimum balance, Cheatham said.

“We agreed to stave off significant changes by slowly spending down that reserve,” he said. “That reserve now is gone. It’s at its statutory minimum.”

Meanwhile, simple math shows that PEIA’s future is daunting. PEIA is paying out about $1 billion a year in medical and prescription drug claims for its 171,000 active insurees and 56,000 retired insurees, Cheatham said.

With the inflation rate for health care services running at 5 percent to 6 percent a year, Cheatham said, PEIA must find an additional $50 million to $60 million of revenue each year, or it will have to make benefit cuts of that size.

“I need $60 million a year to keep the plan where it is right now,” he said, adding, “We can’t sustain that rate of growth forever.” In the meantime, he said that, for most public employees and retirees, PEIA remains a good, affordable health insurance plan, compared to national averages.

Cheatham said he already has met with leaders of the state teachers and public employees unions to advise them that another round of benefits cuts will be necessary.

“A lot of people have misconceptions about what PEIA is,” Cheatham said. “We’re state employees, too, and we’re on this plan, as well. Still, we have a fiscal responsibility to the taxpayers of the state.”