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PEIA proposes $120 million in employee benefit cuts

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PEIA proposes $120 million in employee benefit cuts
By Phil Kabler, The Charleston Gazette-Mail

With no likelihood of additional funding from the West Virginia government, and with its Reserve Fund already spent down to the minimum balance, the Public Employees Insurance Agency has no options but to make “draconian” cuts in benefits for active employees and retirees, executive director Ted Cheatham told the PEIA Finance Board on Thursday.

The board Thursday adopted a proposed 2016-17 plan that would cut benefits for active employees by $82.96 million, and cut retiree benefits by $40.99 million, primarily through sharply higher deductibles and out-of-pocket maximums.

It also would increase retiree premiums by 8 percent, and increase premiums for non-state employees (participating cities, counties and governmental agencies) by 3 percent.

“These are fairly draconian cuts to the plan that are being made,” Cheatham said. “We can’t tweak $2 here or there to get where we need to be.”

State and public schools employees would see deductibles increase by $500 for single coverage and $1,000 for family coverage, while annual out-of-pocket maximums would increase by $1,500 for single coverage and $3,000 for families.

Depending on the plan, out-of-pocket maximums for family coverage would increase to as much as $9,000 a year.

In addition to higher premiums, retirees would have higher deductibles and out-of-pocket maximums, although not as severe as the increases for active employees.

Additionally, the proposed plan increases deductibles and out-of-pocket maximums on prescription drugs for active employees and retirees.

“It’s going to be very difficult for some people on this plan if they get sick,” Cheatham commented.

Unlike last year, when PEIA went out to public hearings with a menu of about $70 million worth of options to come up with roughly $40 million in benefits cuts, the proposed 2016-17 plan has very few alternatives for stakeholders to consider, board member Josh Sword noted.

“For the most part, we’re truly at a point where the board’s hands are tied on this,” said Sword, who represents education employees.

Last year, the board approved a plan, currently in effect, that cut benefits for active employees by $33 million and for retirees by $8.5 million.

Gov. Earl Ray Tomblin did not propose any additional state funding for PEIA next year, beyond the current $422.4 million for the employers’ share of PEIA premiums.

Because state law requires that employers pay 80 percent of premiums, and employees pay 20 percent, that took away the option of premium increases for state and public schools employees, who make up the majority of PEIA insurees.

“It needs to be made clear here that the only way we can get away from $120 million in benefit reductions is if we get additional money from the Legislature,” Sword said.

Board members approved a motion by Elaine Harris, who represents labor, to send a letter to the Legislature asking that it provide additional state funding for PEIA in the 2016 legislative session.

Sword also said the need for additional funding from the Legislature should be emphasized at the six public hearings around the state on the proposed plan, which will take place from Nov. 2 to Nov. 17.

For active state and public schools employees, the bulk of the benefit cuts would come from the higher deductibles ($30 million), reductions in prescription drug benefits ($17.12 million) and increased out-of-pocket maximums ($16 million), according to PEIA.

The board will meet Dec. 3 to vote on final approval of the 2016-17 plan.