Should PEIA be privatized in West Virginia like workers comp?

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Should PEIA be privatized in West Virginia like workers comp?
By Brad McElhinny, WV MetroNews

 Should the Public Employees Insurance Agency be privatized the way the workers compensation system was a decade ago?

Maybe, said Greg Burton, chief executive officer of BrickStreet Insurance and the guy who led the state Workers Compensation Commission years ago.

“Whether or not it correlates with PEIA and being able to privatize it, I’ll leave up to you all,” Burton told members of the Select Committee on PEIA, Seniors and Long-Term Care.

Members of the committee said there’s not yet any kind of serious move to switch insurance for public employees to private carriers.

But the committee co-chairman, Senator Mike Azinger, said he wanted to hear Burton discuss his experience in transitioning a whole group of policies, personnel and the public to the private market.

When Burton took over at the Workers Compensation Commission in 2003, it was losing $1 million a day. He credited then Gov. Bob Wise with beginning reforms to the system and then Gov. Joe Manchin with carrying through with privatization in 2005.

“Governor Wise and Governor Manchin clearly wanted this to happen and pushed it through,” Burton said.

Lawmakers asked what lessons might apply if the state should undertake a similar process with PEIA.

“Do you see any pitfalls, warning signs, red flags, don’t-go-there type things if we were to explore the possibility of privatizing PEIA?” asked Delegate Tom Fast, R-Fayette.

Burton recommended finding good examples elsewhere.

“I would look at whether other states have privatized whatever their version of PEIA is and get a consultant ot help you through that,” Burton said. “I would recommend going to find some people who have been through this to help you through it.”

BrickStreet had the workers compensation market in West Virginia to itself before it was opened up to other private carriers. Burton said that was a good experience because it provided competition and lowered costs.

But he said that would be different for health insurance, where markets already exist.

“One of the toughest things was getting ready for the private market, having other carriers come into the marketplace. You already have that here. You already have a private market,” Burton said.

Delegate John Kelly, R-Wood, asked for examples of what not to do.

Burton said the workers compensation system had set aside $35 million in a transition fund. He said that wound up not being enough to cover some of the first expenses.

“I think the funding of the transition fund, we should have done a better job,” he said.

He also said the rollout of broader privatization — competition by other companies — could have occurred in a shorter period of time, maybe about a year.

Senator Azinger, R-Wood, asked if comparisons are even worth making: “Is this apples to oranges with workers comp and PEIA?”

Burton again emphasized that one big difference was that there had not been a previous private market for workers compensation insurance where a private market already exists for health insurance.

He said the similarity might be in the process of making the change — having public meetings, preparing to transfer state employees to the public sector and so on.

“I personally struggle seeing the workers comp privatization to PEIA. It doesn’t mean shouldn’t be done,” Burton said. “I’m not sure all the successes with the workers comp privatization would translate over to PEIA. That’s out of my realm of expertise.”

He urged lawmakers to consider what problem they’re trying to solve before moving toward a solution.

“What do you hope to solve by privatizing PEIA?” Burton asked. “What do you hope to accomplish? I would argue that state government does a lot of things very, very well. Workers compensation coverage is one thing that states have gotten away from.”