Public insurance agency sees rare budget surplus [Charleston Daily Mail, W.Va.]

July 19--No one is sure how, and no one is sure why, but the Public Employees Insurance Agency was $52.9 million under budget through May.

Most of that surplus was caused by a dramatic drop in health care claims.

While PEIA budgeted for $367.8 million in medical expense claims through May, members submitted only $325 million in claims. That's a savings of $42.8 million.

Prescription drug expenses are also down. PEIA budgeted $115.6 million for drug claims through May but paid out only $108 million.

Chief Financial Officer Jason Haught told PEIA finance board members on Thursday he is not sure why the expenses are coming in so far under budget.

"You might want to keep record of this because it's likely the last time you'll see that happen as a board member," he said. "Eleven months in, and I'm still not used to it."

Haught said he expects the trend to continue through June 30, the end of the 2013 fiscal year. Financial numbers for June will be presented at the board's September meeting.

PEIA actuary Dave Bond said the agency would begin its annual trend analysis for 2013 in a few weeks and hopes to uncover the cause of the budget surplus.

"There's been some assumptions it's due to the sluggish economy," Haught said.

Members could be putting off unnecessary medical services in an attempt to save money.

The state's Retiree Benefit Trust Fund also is performing significantly better than expected.

The fund, which is used to help pay retirees' Other Post Employment Benefits (OPEB) like health insurance, is $82 million ahead of its 2013 budget through May, including a $34.2 million jump in investments.

Officials expected to bring in only $28.9 million in investment income. Through May, the trust fund had earned $63 million in investments.

PEIA director Ted Cheatham told board members the agency would use that surplus money, as well as savings from its general revenue fund, to create a "premium stabilization fund."

PEIA has traditionally kept all interest earned on its investments within the Retiree Benefit Trust Fund. But Cheatham said the state is expected to finish the year with $20 million to $30 million more than its expected $63 million income.

Instead of spending that money or dumping it into the trust fund, Cheatham said PEIA could form a separate fund that would allow the agency to offset future premium or benefit changes.

"This is a very standard practice in the insurance industry," he said. "It's sort of a rainy day fund."

In December 2011, the PEIA finance board voted to cut health benefits by $18.4 million and raise co-payment requirements on certain medical procedures.

The board likely would have had to cut benefits or raise premiums again in December 2012, but Gov. Earl Ray Tomblin pledged the agency an additional $4 million to stave off changes.

Cheatham said the current downward trend for medical and prescription drug charges will not continue. Health care costs generally increase by about 5 percent each year.

By creating the premium stabilization fund, Cheatham said the agency could avoid or at least minimize future changes to members' health care plans.

Contact writer Zack Harold at 304-348-7939 or [email protected]. Follow him at www.twitter.com/ZackHarold.

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