By Stephen Smoot
The West Virginia Public Employees Insurance Agency for more than a half century has served as the main insurance provider for state, local, and education workers employed throughout the state.
PEIA’s history since its establishment in 1971 has resembled that of a ship in shallow waters – long periods of quiet punctuated by times where the West Virginia State Legislature and others have worked to guide it past and through obstacles. Prior to 2024, the most recent crisis in part spurred a tension filled strike by state teachers.
As the Legislature approaches its next general session, PEIA problems loom again as one of the biggest issues that the state’s legislative and executive branches must tackle.
This time, a convergence of problems created by the economy of the medical field and the nation at large, federal and state legislation, and the predominant health problems of those covered have combined to create a massive expected shortfall this year and potentially a larger one in 2027.
According to a PEIA presentation on its own challenges, some of the problem stems from common health problems in those covered by their insurance plans.
Prescription drug costs have responded to inflation in similar ways to the rest of the nation, by going up. At the same time, the appetite for some and the need for others for prescription drugs nationwide continues to grow.
For example, the effect of inflation on the prescription drug plan has created a hike in costs. The net plan cost per member, per month, has risen from $113.58 to $137.12, a gain of 20.7 percent over the course of a single fiscal year. GLP-1 drugs, which include injected insulin for diabetics and treatments for obesity, accounted for $52.5 million, or just under 20 percent of the total cost. The same class of drugs accounted for $10.25, or 43.6 percent, of the net per member per month increase.
PEIA did not anticipate the sharp rise in costs for these drugs, which its audit from Ernst and Young called “exponential” in scope. It added that PEIA did not anticipate such a major hike in this class of drugs “and the impact has been staggering.”
“Drug claims expense increased $76,803 million compared to last year,” the report stated, but added that cost saving programs and expirations of prior authorizations for such drugs will help to bring these costs back into line in the future.
Another cost increase came as a result of the federal Inflation Reduction Act passed at the urging of President Joe Biden. According to the Council for Affordable Health Coverage “the IRA’s redesign of (Medicare) Part D is increasing premiums, reducing competition and choice, and raising out-of-pocket costs.”
PEIA blames the Inflation Reduction Act for “substantial increases in Medicare Advantage.”
Another issue comes from Legislature efforts to strengthen PEIA and protect its customers. Senate Bill 268 first created a legal ratio where 80 percent of premium costs are borne by the employer and 20 percent by the insured. While intended to protect both sides, it has prevented the state from having the option to provide premium relief to customers.
Senator Mike Oliverio (R-Monongalia), in a proposal backed by Dale Lee, West Virginia Education Association president, would change the hard and fast ratio to the employer paying no less than 80 percent and customers no more than 20 percent. That would protect the customer while allowing the state flexibility to provide relief if it could and would do so.
SB 268 also increased the minimum level of reimbursement from 59 percent of what Medicare pays to all providers to 110 percent. While this did help to address the previous issue of providers shying away from PEIA, it also “introduced considerable volatility to the accuracy of the estimated cost increase.”
This meant that the estimated medical claims expense budgeted fell short of “actual claims experience” by 55 percent – or $43.8 million.
These, plus other issues, combined to create a $113 million gap for PEIA. The agency proposes to use increases in prices and copays to help make up the difference.
If passed, state employees will see a 14 percent increase, local a 16 percent, and retirees a 12 percent hike in premiums.
Outpatient copays will rise from $100 to $250, emergency room copays from $100 to $300, and prescription drugs from $10 to $20 for generic and $25 to $50 for name brand.
The spousal surcharge for coverage will also increase.
Surpluses in tax revenues over the past year have shrunk considerably and in some cases, disappeared. The timing of this, combined with the unexpected problems faced by PEIA, will force the state Legislature to find relief for those insured by the program while keeping the budget balanced as is required by law.
As for the PEIA, it has pledged “to arrest the trend through cooperative effectiveness initiatives, 340b partnerships, benefit adjustments, and wellness programs.” In essence, better deals with providers, more efficiency, and focusing more on preventative programs for good health serve as much of the cost reduction plan.
