Lawmakers ask what happens after state rolls through PEIA Rainy Day Fund

CHARLESTON, W.Va. — The Public Employees Insurance Agency’s plan for the coming year includes no rate increases and no benefit cuts, but the plan might have to dip into a Rainy Day Fund.

Lawmakers asked about what happens if that fund, which was established last year by Gov. Jim Justice and the Legislature, is spent down.

Ted Cheatham

“I will be here asking for more revenue,” PEIA Director Ted Cheatham said, “or we’ll be reducing benefits.”

Cheatham provided an update Tuesday before the Select Committee on PEIA, Seniors and Long Term Care.

Although the insurance program is stable right now, the status of insurance for West Virginia public employees, including teachers, has been contentious for the past couple of years.

Two years ago, rising out-of-pocket insurance costs were a major factor in a statewide teachers strike that lasted more than a week.

Governor Justice set up a PEIA Task Force that met for months to make recommendations about providing a more consistent funding source or keeping costs under control.

Cheatham was not a member of the task force, but attended meetings and often provided context. He consistently estimated rising healthcare costs would increase the cost for PEIA by $50 million year over year.

In the end, Justice recommended establishing the PEIA Rainy Day Fund with $105 million from the state’s General Fund.

That provides a reserve and is a workaround for the 80/20 cost split between the government and the insured employees that can inadvertently raise costs for workers every time more money is provided by the state.

John Kelly

But during interim meetings, some lawmakers such as Delegate John Kelly, R-Wood, questioned what will happen when the PEIA Rainy Day Fund is spent down.

“There will be no increase in rates this coming year?” Kelly asked.

“That’s correct,” Cheatham answered.

“Yet we’re going to take funds from the Rainy Day Fund?” Kelly continued.

“Yes sir, the PEIA Rainy Day Fund,” Cheatham said.

“And isn’t that the reason we got in a financial bind here a few years go by failure to increase rates and going in and raiding the Rainy Day Fund until we depleted it and got into somewhat of a situation that has taken us probably the last five years to get out of that hole?” Kelly asked.

Cheatham clarified that this particular Rainy Day Fund is newly-established but acknowledged that PEIA had used a different source of reserves in the past.

“What I see here is,” Kelly said, “we’re starting to turn into a path similar to what we were on here a few years go. If we’re not going to increase our rates and we’re going to continue to deplete our Rainy Day Fund, we’re going to be right back where we started from, and I don’t really want to go that direction.”

Cheatham said, as he often has, “We need $50 million a year to keep this plan sustainable at the current benefits.”

Randy Swartzmiller

Another delegate, Randy Swartzmiller, D-Hancock, also asked about PEIA’s long-term sustainability.

“So, what happens when that Rainy Day Fund is empty, if the Legislature doesn’t replenish it?” Swartzmiller asked.

That’s when Cheatham said he’d need to ask for more state money or find a way to cut benefits.

Swartzmiller than asked if the PEIA Task Force still exists. It was not formally disbanded but hasn’t met for more than a year.

“So just to assume the work group is not meeting,” Swartzmiller said, “it sounds like this was their fix just to throw money into it to get a couple of years down the road.”

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