PEIA mess took a long time to create

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PEIA mess took a long time to create
By Phil Kabler, WV Gazette-Mail

As the Public Employees Insurance Agency embarks on a series of what are sure to be contentious public hearings this month over plans to cut insuree benefits by more than $120 million, a number of readers have asked how the state-run health insurance plan got in such a mess.

Suffice to say, it didn’t happen overnight.

PEIA hasn’t had a premium increase since the 2012-13 budget year, and that was an employer-only increase of 4 percent. You have to go back to the 2010-11 budget year to find the last premium increase for both employers and employees, which was 5 percent.

In reality, the PEIA Finance Board has little control over premiums for state and public school employees, since it is bound by what the governor and Legislature appropriate for the employer share of premiums.

(Not unexpectedly, given the state’s current financial woes, Gov. Earl Ray Tomblin notified PEIA in September that the state’s current contribution of $422.4 million for employer premiums will not increase for the 2016-17 plan year.)

In 2001, legislators mandated that PEIA premiums be paid 80 percent by employers and 20 percent by employees. That 80-20 ratio was intended, in part, to protect employees by assuring that the burden of premium costs could not be shifted onto them.

But it also hamstrings PEIA, which could not consider the option of softening benefit cuts with a small increase in employee premiums (like the 3 percent increase PEIA has proposed for non-state employee coverage, which is not bound by the 80-20 rule).

Meanwhile, PEIA softened the blow of its underfunding over the years by spending down its reserve fund. In 2013, the fund was at $156 million. By the end of the 2015-16 budget year, it will be down to $92 million — right at the minimum 15 percent of projected expenses that actuaries recommend be kept in the fund. (By state law, the fund can go as low as 10 percent, but that risky maneuver would free up less than $5 million to offset the $120 million shortfall.)

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The other side of the equation is rising health care costs. Since 2013, PEIA’s medical costs have gone up 4 percent a year, while prescription drug costs have increased 6.2 percent annually, according to PEIA’s figures.

As PEIA Executive Director Ted Cheatham has pointed out, since PEIA is a nearly $1-billion-a-year plan, 5 percent medical inflation means that PEIA needs an additional $50 million a year to meet its costs.

So, $150 million in increased costs — with no increase in premiums — even a mathematically challenged person like myself can see that doesn’t work.

Cheatham has tried some innovative methods to promote wellness, including the somewhat controversial Healthy Tomorrows, which in 2016 will require insurees to report their blood pressure, glucose, cholesterol and waist circumference, and in 2017 will require that they take action to bring those numbers within acceptable levels, or pay additional $500 deductibles annually.

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Numbers are just numbers, but they translate into teachers, state employees, and retirees who may not be able to afford their health care.

This e-mail from John Taylor was typical of those I’ve received from state employees and retirees:

“My wife is a DHHR employee. When she left the private sector for the DHHR, the enticement used to get her to accept the position were the benefits. She was told, ‘The salary is bad, we almost never get raises, but the benefits are great.’”

Taylor, who took medical disability retirement after an aneurysm, went on to describe difficulties he and his wife have had trying to get PEIA to pre-certify medical treatments, and concluded by saying, “Well, the pay is still bad, and now the benefits are too!”