Public Employee Insurance Agency Director Ted Cheatham delivered a comprehensive and insightful presentation to the PEIA Task Force this week on how the state health insurance program works.

It took awhile. Cheatham spent two hours giving the 29 task force members a crash course in how the state insures more than 220,000 employees of state government, non-state agencies, retirees and their families.

Among the key points Cheatham made are:

–Privatization, as some have proposed, is not a panacea. PEIA is already a quasi-private operation.  The Agency has about 60 employees who administer contracts with private insurance companies that handle the claims. Cheatham estimates that if privatized, a company would have to have about 250 people to handle claims, while also turning a profit.

–Prescriptions are major cost drivers. “Drugs are a huge problem,” Cheatham told the task force. “Prices are just creeping up over time.”  PEIA tries to steer people to generics, but more expensive name brand and specialty drugs still make up three-quarters of all drug costs.

–Personal responsibility has to play a larger role in controlling costs.  We are an unhealthy state with higher-than-average rates of diabetes and hypertension.

–PEIA is a subsidized insurance program.  The state pays 80 percent of the costs, while plan participant costs are based on ability to pay.  Low wage employees have much lower premium and out-of-pocket costs than higher wage workers.

–PEIA will pay out about $1 billion in claims this year and those costs will rise by between $40- and $60-million a year.  Either more money is needed to pay claims or costs must be curtailed, or a combination of both.

Cheatham’s presentation, while covering a wide range of PEIA issues, also had a consistent theme; plan participants need to make smart choices about their healthcare, both in their personal health and what medicines and procedures they choose.

That’s good counsel, but it’s also difficult since our expectation is for the best care at low cost.  Additionally, the delivery system is not set up for patients to easily “shop” for the best deal or refuse a test or treatment to save money.

We do know this: the current trend in PEIA is unsustainable.

Plan members already believe they are paying too much; that was a primary driver behind the nine-day teacher strike.  However, finding another $40- to $60-million a year means higher taxes or cuts from other government spending.

What to do?  It’s up to the task force to gather information and make recommendations.  The members will continue to do that during a series of public meetings around the state.

Now they are armed with more knowledge about PEIA.  That’s helpful, but it’s also a stark reminder that there is no painless fix to the PEIA problem.

 

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