The director of the Public Employee’s Insurance Agency described financial pressures to state lawmakers.
This came as PEIA is taking out for public comment a plan for next year that will raise costs for workers to counter the anticipated expenses for medical and pharmaceutical benefits.
Agency director Brian Cunningham spoke on Monday before the Joint Standing Committee on Insurance and PEIA during legislative interim meetings. He said the financial pressures will continue in coming years.
“I want to make sure everybody sees this is PEIA is projecting premium increases going forward through 2029,” he said, showing lawmakers a chart of PEIA’s five-year projections.
For the coming year, The Public Employees Insurance Agency is proposing significant premium increases and additional out of pocket costs 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, in an addition outlined by PEIA on Thursday afternoon, 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.
Cunningham suggested those increases are not out of line with what other states and other plans are going through.
He outlined for lawmakers some of the factors in how PEIA draws up its financial estimates.
“A lot of people have questions about, How does PEIA create these finance plans that go before the Finance Board, out to public hearings, and ultimately set our premium increases and out of pocket maxes for coming years? So our goal is to project revenue and expenses on the dot, and the way that’s done is in conjunction with the actuaries, we review experience from previous fiscal years,” Cunningham said.
That review process also includes looking at industry trends.
“What do we know about the industry? What are healthcare costs going across the country, what is the rate of inflation and prescription drugs? Are there new prescription drugs coming to market that we need to be aware of now,” Cunningham said.
And he described adjustments based on legislative changes to the plan’s requirements. That has included 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.
He suggested lawmakers might want to re-examine that 110% requirement for some providers.
“So one thing that the legislature can consider is clarifying the rule in Senate Bill 268 around under 110% of Medicare,” Cunningham told lawmakers.
“What we’d like to consider at PEIA is not paying 110% to all healthcare providers. And in fact, what we see in PEIA is that we are overpaying compared to national averages for some services.”
Near the end of today’s meeting, lawmakers alluded to legislation that could make that kind of change — and said it will be discussed in greater detail during a December meeting.