West Virginia officials are grappling with the cost of insurance for public employees — affecting both the workers themselves and state budgets built on taxpayer dollars — immediately and in anticipation of exponential growth over the next few years.
The five-year outlook for the Public Employees Insurance Agency shows increased overall expense of about 12% year over year over year over year. Over time, that adds up to a 60% cost increase.
The same outlook projects that total expenses for PEIA will rocket from $979 million for fiscal 2024 up and up and up to more than $1.6 billion by 2029.
This fall, increased costs to public employees covered by the plan were the subject of significant statewide attention.
More recently, Gov. Patrick Morrisey’s administration has described the state’s share of insurance costs as a major piece of a $400 million general revenue budget gap that its analysts have identified.
“Another major driver of West Virginia’s budgetary challenges — no surprise to anyone here — is the Public Employees Insurance Agency,” Morrisey said at his State of the State address. “This is a problem, quite frankly, that has been kicked down the road. Now we have to deal with it.”
That night, the new governor asked lawmakers to work with his administration to develop short- and long-term solutions on the insurance costs.
The specifics of PEIA’s financial situation were the focus of a House Finance subcommittee review on Wednesday morning at the state Legislature.
Meanwhile, workers represented by a major labor coalition gathered for a press conference to describe their concern about the rising insurance costs.
In the budget review, Delegate Daniel Linville asked for a straightforward answer about what is driving insurance costs so high for the state and its workers. He alluded to an often-stated plea for the state to come up with a funding source to “fix PEIA.” Right now, the main funding source for the state is general revenue.
“A lot of people reach out to us to ask us to find a way to fix and fully fund PEIA,” said Linville, R-Cabell. “I’ve heard that every term I’ve been here.
“There is no known revenue source that would increase by $600 million between now and 2029. So whose fault is it that healthcare costs are going up 60 percent over the next five years. Congress? Should they be writing their congressman?”
Jason Haught, who was presenting the agency’s financial situation in his role as interim PEIA director, had cited rising pharmaceutical costs as a driver of expense. But he also made reference to the demographics of West Virginia’s population.
“It’s hard to say who’s at fault. It’s all based on each individual’s risk,” Haught said. “The healthier we are, the less healthcare we’re going to use. I think it is incumbent on everybody, and I think our plan does a great job, our members do a great job of trying to be healthy.
“But at the end of the day — you don’t want healthcare costs, you’ve got to have a healthy population. Unfortunately, we’re sick and old. And that does not translate to easily solved healthcare costs. That’s the bottom line. We need to get younger and we need to get healthier.”
Consideration of PEIA’s costs regularly leads to discussion of whether to close out the agency and contract with private insurance carriers. An introduced bill that would do that got significant attention this month, although it’s not clear that bill actually has any momentum.
PEIA already has a fairly moderate level of staffing and exists mainly to oversee private healthcare and pharmaceutical contracts.
That issue of greater privatization was at the center of an exchange between PEIA’s Haught and Delegate Matthew Rohrbach, R-Cabell.
Haught cited the millions of dollars that PEIA is able to keep with West Virginia investment funds to generate interest that can go toward subsidizing healthcare costs. With a more purely private plan, Haught said, the state would lose that kind of control and ability to use state dollars strategically.
“I would find it hard to believe that there could be a savings by giving somebody else that $150 million every year,” Haught said.
“So to me, it would always be an advantage for the state or any employer with the size of 225,000 members to always self- insure simply because of the retainage of the assets that we use to fund this risk.”
Rohrbach responded, “We are a self-insured, non-risk plan and I don’t think you’ll find any plan this size, or even a lot smaller that would not be a self insured plan. So we’ve just got to figure out how to manage it. But I think moving forward if we get somebody else to assume that risk it would cost us 50 percent more than what we’re paying.
“I share your concerns.”
Union leaders who represent public employees had a press conference Wednesday to discuss the Legislature’s responsibility to stabilize the Public Employee Insurance Agency.
Among the speakers were representatives of the United Mine Workers of America, Professional Fire Fighters of West Virginia, the West Virginia Troopers Association, Communication Workers of America, West Virginia School Service Personnel Association, American Federation of Teachers-West Virginia and West Virginia Education Association.
Josh Sword, executive director of West Virginia AFL-CIO, appeared on MetroNews’ “Talkline” to discuss the financial strain of insurance for workers.
“I mean, 211,000 or 215,000 people are impacted by the proposal on the table, and we just want to keep raising awareness in hopes that the Legislature can help us find a way to stabilize this,” Sword said.
“It’s a critically important benefit that has been earned by these folks, and we need to make sure that it remains a good benefit indefinitely.”
He said privatization is not the answer — because the insurance program is already largely privatized.
“If that means the next step is simply handing this over to some conglomerate insurance company so they can make profit, then no, that’s a terrible way to go. PEIA is non profit. Nobody’s getting rich off PEIA within the plan,” Sword said.
“We already privatize claims. We privatize the prescription drug benefit. We privatize some of the health initiatives that are a part of it. If what they’re talking about under ‘privatization’ is just simply giving money to some big insurance conglomerate, then no that will hurt every single person on the plan.”
Sword said the issue should be a legislative priority to identify an adequate level of funding.
“They make it a priority. They can fix this,” he said. “They can do it right.”