September 24, 2009
PEIA recipients face premium increases, benefit cuts
By Phil Kabler
Staff writer
CHARLESTON, W.Va. -- Public Employee Insurance Agency recipients could see 4 percent premium increases, and benefit cuts totaling $23 million next year, under a plan given preliminary approval Thursday by the PEIA Finance Board.
As an alternative, board members tentatively approved offering a lower-priced plan for West Virginia-only coverage, which would pay for out-of-state health care only for emergencies or specialized treatment not offered in state.
The proposed benefit cuts come just two months after the PEIA board voted to eliminate retiree health coverage for all public school and state employees hired after July 1, 2010 -- an action intended to freeze a $7 billion unfunded liability in future retiree health costs.
Thursday's plan, which will be up for final approval in December, drew objections from employee representatives and retirees.
"For us to send out any increase in premiums, or any reduction in benefits, after what we have done is appalling to me," said public education representative Josh Sword, referring to the board's vote in July.
PEIA Executive Director Ted Cheatham noted that PEIA was formally served Thursday with a lawsuit filed by the West Virginia Education Association challenging the elimination of retiree health benefits for new hires.
"We have taken it on the chin," said Sword, a lobbyist with the West Virginia Federation of Teachers. "We took it on the chin last month when a $500 bonus was promised to public employees, and then snatched away from them. ... Morale is at an all-time low."
Retired state employee Sandy Latimer told the board that many retirees can't afford any increase in their health care costs.
"I wonder how many more nails can be pounded into the retirees' coffin?" Latimer asked the board.
"Every year, PEIA takes away from retirees' income, but state government does not add to it," he said. "Retirees are having a tough time as it is."
Administration Secretary Robert Ferguson, who serves as the board's chairman, said he understands that employees and retirees are struggling with health care costs, but said the board is mandated to come up with a financially sound plan.
"The numbers are the numbers," he said. "We have a fiduciary obligation, and a moral obligation, that whatever plan we adopt, we've got to be able to pay for."
In addition to 4 percent premium increases, the proposal calls for increasing annual deductibles for active employees and retirees by either $25 or $50 a year.
It also would double the annual out-of-pocket maximum for family plans, based on employees' salaries.
The proposal does offer one benefit increase: increasing the lifetime maximum benefit for each insuree from $1 million to $1.5 million.
Cheatham said there about 20 retirees who have reached the current lifetime maximum, but continue to receive coverage under the Medicare Advantage plan -- a federally funded program that could end in the near future.
"If they come back into PEIA, they won't have any coverage," he said.
The proposal also calls for creation of a "high performance" prescription drug formulary that covers only a very limited number of brand-name drugs, cutting PEIA's costs by about $8 million a year.
In order to cut premium costs, employees would have the option of switching to a new West Virginia-only plan. Under that coverage, PEIA would cover expenses for out-of-state care only for emergencies, or for patients referred for specialty care, but only at the Cleveland Clinic or Duke University.
With costs for out-of-state claims running about five times higher than in-state claims, that plan would save PEIA an additional $9.5 million a year, Cheatham said.
However, he conceded the proposal could be controversial in border counties, particularly in the Eastern Panhandle, where there are no in-state providers of services such as advanced cardiac care.
"They're not going to perceive it as, "You're saving me money," Cheatham said. "They're going to perceive it as, "You're punishing me for living in the Eastern Panhandle."
The Finance Board will conduct a series of public hearings around the state on the proposed 2010-11 plan, with a final vote on the plan slated for its December meeting.