PEIA has proposed cost increases to make up an estimated $113 million gap for the coming fiscal year because medical and drug expenses have outpaced the money available.
Public employees in the plan could face premium increases of 14% for the state fund or 16% in plans for local governments. Retirees would face a 12% premium increase.
The agency is proposing increases in deductibles of 40% — on average more than $300. Additional proposed cost increases for people with the insurance, including a bump in the surcharge for spouses to $350 from the current $147, are meant to help PEIA make up a total of $113 million. The other cost increases include higher copays for inpatient services, outpatient, therapy, pharmaceuticals and emergency room treatment.
“Our public employees are hurting, no question about it,” said Senator Mike Oliverio, R-Monongalia, who attended the most recent public hearing in Morgantown. “The inflation the last few years, four-year high inflation. Everybody’s hurt, gas prices, groceries, health care, everything is just escalating out of control. And while there have been some pay raises for public employees, clearly they haven’t caught up with these growing costs.
“Citizens who are not public employees are obviously experiencing some of the same concerns. The difference is, the public employees are our responsibility in that we are their employer and we have to be able to find a way to make health care, prescriptions, surgery, medicine, everything available to them. And so that’s our struggle with PEIA.”
The agency itself could make adjustments to those financial options, and PEIA is trying to take other actions like negotiating contracts on beneficial terms. But legislation passed a couple of years ago included language explicitly assigning fiduciary responsibility to members of the PEIA Finance Board, so the agency really has no choice but to find ways to make up its funding gap.
The cost pressures for insurance have occurred after legislation passed to mandate that the insurance plans snap back to an 80-20 cost split between the government employer and insured employees. Those 2023 changes to PEIA also responded to complaints that healthcare providers were having trouble making ends meet because of the state insurance’s traditionally low reimbursement rate. Lawmakers passed a bill making reimbursement rates for medical providers up to 110 percent of the federal Medicare rate.
Oliverio suggested another possibility could be to allow more flexibility for the funding formula to be no less than 80 percent by the state and no more than 20 by the employee.
“Right now, when we pour additional dollars into the plan to help prop it up, it basically triggers an increase in premiums for those employees — and the whole reason why we’re trying to pour money in there is to soften the blow a little bit for them,” Oliverio said. “So if we have a little bit of flexibility on the 80-20 rule, I think that would be helpful.”
Oliverio described a possibility for state officials to identify roughly $10 million to offset an increase in premiums on retirees, “understanding that these public employee retirees don’t have cost of living adjustments in their retirement accounts.”
West Virginia public educators went on a statewide strike in 2018 over concerns that their pay rates did not adequately compensate for the rising cost of insurance. Gov. Jim Justice’s administration dealt with the conflict with a series of pay raises.
The administration also pumped millions of dollars into a PEIA Rainy Day Fund that was meant to hold down cost increases. The fund did suppress cost increases to workers for a few years, but the practice has ended.
“Our state employees work really hard, and they do really good work — and so I tried, I tried with all in me to never increase the premiums and to never increase the cost of PEIA because these folks are not just paid outlandish salaries so they need us to stand up and help him,” Justice said during an administration briefing this week.
Justice, a Republican who has been elected to the U.S. Senate, is winding down the final weeks of his term as governor. During the administration briefing, he provided advice to the next administration.
“Jim knows this: Our families are hurting every way in the world and doing everything they can to get by. So from the standpoint of the future governor, my advice would be feel that and know that,” Justice said today.
“At the end of the day we need to try to take care and support our state workers and absolutely cover, more than cover, their costs or their increase in PEIA. That would be my recommendation, and we can do it but it takes business talent and people who are really good with numbers to figure it out.”
The incoming governor, Patrick Morrisey, recognized the problem and how it might affect employment decisions made by public workers when he addressed the issue during a debate last month.
“I’ve always been an advocate of teachers, and in fact, one of the things I’ve talked a lot about during this campaign is to make sure that West Virginia is competing much more effectively with all the states that we touch. That’s critical, because we touch a lot of states who end up coming in and stealing our teachers,” Morrisey, a Republican, said during the Oct. 29 debate.
Morrisey emphasized the plight of retirees facing increased insurance costs.
“There are a lot of state retires who benefit from PEIA, and these are people that are going to really struggle because they don’t have the ability to make it up through the pay raise, right? So I think we have to do what I mentioned before, do a close review and audit,” Morrisey said at the debate.
Lee, president of the WVEA, said this week that he was glad to hear Morrisey recognize the challenge and how it relates to retired workers.
“I believe there is some sentiment from Governor-elect Morrisey to look at this plan and look at ways to offset some of these costs, particularly to our retirees,” Lee said.