Because medical and drug expenses have outpaced the money available, the Public Employees Insurance Agency is proposing significant premium increases and additional out of pocket costs for the coming fiscal year.
That means the public employees in the plan could face premium increases of 14% for the state fund or 16% in plans for local governments.
It means proposed increases in deductibles of 40% — on average more than $300.
Out of pocket maximums could increase on average to more than $1,500.
Additional proposed cost increases for people with the insurance, including a bump in the surcharge for spouses to $350 from the current $149, are meant to help PEIA make up a total of $113 million.
Representatives of labor organizations representing public employees said the increases would be tough to swallow.
“This is difficult,” said Elaine Harris, a representative of the Communication Workers of America, which represents public employees like workers in the corrections system.
The proposed cost increases were laid out during a Tuesday afternoon meeting of the PEIA Finance Board.
The full decision-making process will be laid out over additional weeks.
Another review of the proposal will occur at the next PEIA Finance Board meeting scheduled for Oct. 24. Additional valuable information will come from the governor’s estimate of total revenues due to the Finance Board on Oct. 15.
Then representatives of PEIA will take the plan out for public comment to several communities around the state in mid-November.
“It’s important for people to attend the public hearings in November and voice their concerns,” said Dale Lee, president of the West Virginia Education Association.
By Jan. 1, the Finance Board is supposed to provide an approved plan to state officials.
Following today’s meeting, Lee pointed out that state workers absorbed premium increases of 24% in 2023 — followed swiftly by additional 10% increases.
That all came after legislation passed to mandate that the insurance plans snap back to an 80-20 cost split between the government employer and insured employees.
“Our members are going to be very upset with this, particularly in knowing that one of the simple fixes would be to have the language of no less than 80% from the state and no more than 20% from the employees when we continue to tout that we have millions and millions of dollars in surplus that could easily offset this — but under the hard and fast 80-20 rule, the money that they put in would cause an increase too,” he said.
Asked about potential political repercussions, Lee responded by saying “Well, your guess is as good as mine.”
PEIA representatives today said inflation in the cost of prescription drugs was a major driver of the agency’s financial strains.
Gross drug claims for fiscal 2024 were expected to be $352.9 million but actually came in at $369.9 million. Drug rebates provided less of a break than expected. The state thought it would bring back $146.8 million in drug rebates but actually only saved $127.4 million.
Specifically, the agency said GLP-1 drugs that can be prescribed to fight diabetes or obesity or both were responsible for $52.5 million in costs.
PEIA Finance Board member Geoff Christian commented that, based on his experiences in the private sector, he was not surprised by the cost increases attributed to GLP-1 drugs.
“The cost increase is not sustainable,” Christian said.
Medical costs were out of line with estimates too. State officials had expected $598 million in medical costs — but, instead, $642 million in medical costs mounted.
“It’s like the perfect storm,” Christian said. “We’ve got provider consolidation, we’ve got increased reimbursement rates, we’ve got drug prices going through the roof, we’ve got inflation, we’ve got a lot of things going against us.”
He praised PEIA’s proposal, given the circumstances. “I like the plan of attack and explaining, because I think the public deserves to know, what’s driving these costs,” he said.
PEIA Director Brian Cunningham said the agency recognizes the pain of the increased costs.
“What we’ve endeavored to do here is to, for lack of a better word, minimize premium increases and to generate the revenue and savings needed through benefit changes — which very few have been made for a number of years now because we recognize that the premium increases come out of everyone’s pocket regardless of whether you utilize the healthcare or not,” he said.
“Not only do they come out of the employees’ pocket regardless of whether you utilize the healthcare or not but they come out of the pockets of the taxpayers of West Virginia. So we’ve really tried to minimize the increases and come up with a creative set of benefit changes to be able to generate the revenue that PEIA needs to be able to fund the reserve and to stabilize PEIA through FY ’26 and beyond.”
Cunningham went before state legislators earlier this week to talk about an $87 million supplemental allocation meant to replenish PEIA’s reserve fund to statutorily required levels. Lawmakers approved the appropriation, and without it Cunningham said the agency would have had to impose midyear premium increases of almost 25 percent.
Still, the request for $87 million underscored that the reserve had been needed for PEIA to balance its books.
“What assurances can you give this committee about your projections moving forward that we’re not going to be back here next year, asking for this same deficit,” asked Delegate Clay Riley, R-Harrison, during a meeting this week of the Joint Committee on Finance.
Cunningham responded that’s a great question and outlined some of the steps PEIA is taking to try to even out its finances.
“Many of you are probably aware of some of the things that PEIA is doing to try to bend the curve on the cost trend,” Cunningham told lawmakers. “We’ve been very aggressive in some of those efforts. As I shared with leadership with I met with them in April, unfortunately these initiatives take time to mature and they take time to be recognized in the experience of the plan.”
He went on to outline that the agency halted a weight management pilot program that had racked up high costs from GLP-1 drugs. He also described attempting to shift from high cost drug brands to lower cost generics. He outlined other initiatives intended to rein in costs as well — including keeping positions open at the 55-employee agency.
Finally, he previewed to legislators the other moves that were outlined a day later, today, at the Finance Board meeting.
“Most importantly, as part of the two-year plan PEIA will propose to the board a series of benefit changes such as increasing co-pays and deductibles, rightsizing the spousal surcharge and adopting premium increases that will generate $113 million in FY 2026 and bring us back to the 10% statutory reserve.”