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Emptied PEIA reserve fund led to benefit cuts, director says

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By Phil Kabler  
The Charleston Gazette  

After three years of spending down its reserve fund in lieu of premium increases, the state Public Employees Insurance Agency has reached the point where the fund will bottom out in 2015-16, forcing the agency to come up with nearly $40 million of benefits cuts, including $30 million for current state employees, PEIA Executive Director Ted Cheatham told legislators Wednesday.

Cheatham was grilled by members of the Joint Committee on Government and Finance, made up of ranking members of the House and Senate, over the PEIA Finance Board’s vote to cut benefits.

“We’ve been spending down a sizable reserve,” Cheatham said, noting that medical costs have trended up by an average of 5 to 6 percent a year.

By 2016, the reserve fund will drop to its lowest recommended level, at 15 percent of the agency’s annual expenses, or about $105 million, he said.

With no ability to dip further into the reserve fund, and with no increase in the governor’s proposed 2015-16 budget for employer premium payments, PEIA has no options but to cut costs, Cheatham said.

“PEIA has officially spent all of its reserve, or will have in FY16,” Cheatham said.

Jason Pizatella, acting Department of Administration secretary and chairman of the Finance Board, said employees will have a say in what cuts are to be made during six public hearings around the state in November.

PEIA has proposed a menu of options for cutting the $40 million in benefits. Those options primarily involve increasing co-pays, deductibles, and out-of-pocket maximums for a variety of medical and prescription drug benefits, but also include a couple of options for eliminating coverage for services.

“At the public hearings, we will lay out all the options to balance the 2015-16 plan year,” Pizatella told legislators.

Also Wednesday, Sharon Carte, executive director of the Children’s’ Health Insurance Program, explained that a drop in children enrolled in CHIP from more than 25,000 last November to 21,699 in September was the result of the expansion of Medicaid benefits.

With the expansion this year of Medicaid benefits to families with incomes equal to 138 percent of the federal poverty level, roughly $33,000 for a family of four, many children were transferred from CHIP to Medicaid coverage, she said.

“It’s what’s required under the ACA (Affordable Care Act),” Carte said. Ultimately, all children enrolled in CHIP will go into Medicaid or qualified health care plans, she said.