WV lawmakers say they have ‘no great plan’ for PEIA during the 2025 session

As West Virginia Public Employees Insurance Agency members brace for what could be a second year of increased health insurance premiums, state lawmakers say they do not have concrete plans for changes to PEIA during the next legislative session.

"There's no great plan," said Sen. Tom Takubo, R-Kanawha, who chairs the Legislature's Joint Committee on Insurance and PEIA. "I think there's a lot of discussions going on right now. I think [PEIA director] Brian Cunningham is doing a tough job of trying to look at every angle and turn over every stone he can to come up with some good solutions, but it's going to take some time.

"PEIA is one of those things that really people just don't understand the concept. I mean, compared to about any other possible insurance plan, you won't find it cheaper," Takubo said.

The PEIA finance board is proposing $113 million in cost increases. Premiums for state employees would go up by 14% and by 16% for local government employees. Retirees would see their premiums increase by 12%.

Both state and county employees would see an increase of 40% in their deductible and out-of-pocket maximum as well as an increase in co-pays. A monthly spousal surcharge for state employees would more than double, from $147 to $350. The board has been around the state for public hearings this month and is expected to finalize the plan for next fiscal year at its meeting Dec. 5.

Before the public hearing in Charleston on Nov. 21, Dale Lee, president of the West Virginia Education Association, said lawmakers need to "be serious" about funding PEIA.

Legislator pushes back on WVEA

'We know that everybody has to have some skin in the game, so you need to bring all the stakeholders back to the table and be serious this time," Lee said. "[The 2018 PEIA] task force made recommendations and created a bill that's been introduced every year, and it's never seen the light of day. So be serious about going to the table and making recommendations."

Asked for a response to Lee's comments, Sen. Eric Tarr, R-Putnam, chairman of the Senate Finance Committee, wrote in a written statement that he doesn't give much credibility to West Virginia Education Association AFT-WV leaders' rhetoric.

"How many pay raises were given to state employees when Democrats had majority? How many PEIA premium increases? How many income tax cuts?" Tarr wrote.

"If under this Legislature the taxpayers of West Virginia entirely subsidized PEIA and sacrificed their own families' health insurance to do it, which costs about five times the amount of the annual PEIA premium, in order to pay recipients a bonus for taking the 100% subsidy, the 'WVEA and AFT leaders' would complain that taxpayers aren't paying a big enough bonus.

"The reality is that state employees have received annual pay raises for the past five years," Tarr wrote. "For six years, the state employees received no premium increases, while taxpayers' premiums increased over 40%. This past year alone the 5% pay raise for an employee that works 12 months per year was $2,900. That's $241 per month. In addition to that, the taxpayers paid a lump sum of $87 million into a reserve fund to suppress premium increases."

Takubo, a pulmonologist and an executive for WVU Medicine, said health care costs are increasing because people are getting older and sicker and the care is more complicated.

"The vast majority of the health care spending is not from young, healthy people, it's older populations," he said. "And as the United States gets older and sicker and lives longer, it eats up more and more health care costs."

Can we stabilize PEIA costs?

Cunningham has said rising prescription drug costs — particularly GLP-1s that treat diabetes — are a big driver of PEIA's rising costs. The drugs accounted for $53 million in net costs for the agency last year, he said. Earlier this year, the agency suspended a pilot program that covered the cost of the drugs to treat obesity.

"I can tell you with absolute honesty, and I think we speak for all the members of this board, we don't want to raise premiums," Cunningham said at the public hearing in Charleston. "We don't want to change benefits, but unfortunately, health care costs are going up, not just for PEIA, but for all insurance plans around the country. PEIA must generate enough revenue to pay the claims. There is no other money available, and that's why these changes are being proposed."

During interim meetings earlier this month, Cunningham presented lawmakers with a handful of suggestions for stabilizing costs for PEIA, including not paying all health care providers 110% of Medicare costs, clarify the rules around a "gold card provider" program and allowing more non-state employees to join the PEIA insurance pool.

Takubo said PEIA's "uneven" tiered system of rates is unfair. It was set up that way years ago to subsidize workers who didn't make as much, he said. People who make more money are "basically paying private rates" but not getting as robust services. It's great for people who have lower salaries and get a lot for what they pay for, he said.

"Ultimately, the most fair plan would be to just move off into a private insurance, like most states have, but that's going to come with some pain," Takubo said. "There's pluses and minuses to any decision we make, and the goal is to try to help the most and hurt the least."

During the public hearing Thursday, Lee told members to speak against any effort to privatize PEIA, which he said would be the "absolute worst thing" for employees.

"There may be a company that comes in the first year and says, 'We can reduce this premium real quick,' and for the first year they can, and then you're at their mercy," Lee said. "And they are called for-profit companies for reasons they will make money on us. PEIA does not make money on us."

Takubo said lawmakers are working on other angles to help the state lower drug costs, but he said he couldn't go into details because of negotiations that are in process and non-disclosure agreements.

"We're looking to see if we can't do things in a way where we can purchase drugs at a markedly reduced cost," he said.

Tarr said he doesn't have a legislative fix for PEIA during the next session, but in the long-term he would like to change the program into a more traditional, risk-based insurance program.

"Since it's not risk-based, there's no incentive to keep risk down, and the medical inflation kind of compounds in that system," Tarr said.

Such a change would require involvement from Governor-elect Patrick Morrisey's administration, he said.

"If it were a traditional insurance, I think it makes more sense, but I think to get there you have to get to a market-based pay within public employees," Tarr said. In that type of system, a position in the Eastern Panhandle that's competing with salaries in Virginia and Maryland would be paid much differently than one in southern West Virginia that competes with those in eastern Kentucky, he said.

"The way that we have that entire compensation structure set up right now it just doesn't lend to that," Tarr said. "And I don't think you get PEIA truly fixed to a risk-based level until you get it to where you got market-based pay for public employees. So it's a bigger picture. I think that if people want to make it simple, it's not."

Delegate Matthew Rohrbach, R-Cabell, who chairs the joint Committee on Insurance and PEIA, said the problem with PEIA is the rising cost of prescription drugs. "The cost of pharmaceuticals is just — it's out of sight," he said.

Rorhbach said drug costs are something that should be addressed at the federal level.

He added that he knows people are upset about the proposed rate increases. His own health insurance premiums went up, too, he said.

"We're all upset, and I guess it's the job of the Legislature to make sure we're running it as efficiently as possible," Rohrbach said. "But I'm afraid that controlling national health care inflation is a job that's probably a little bit above where the West Virginia Legislature can do."

Tarr: PEIA members shouldn't be surprised by premium increases

Gov. Jim Justice held the premiums flat for six years, Tarr said. Now, PEIA members are seeing the increases that were suppressed in those six years, he said.

"So they're realizing it all at once, when it should have happened all along so it's not such a blow all at once. But the reality is, suppressing it for those six years is what's caused that," he said.

In a statement, Jonathan Ewing, who managed Morrisey's gubernatorial campaign, said Morrisey understands PEIA is one of the issues that must be addressed.

"The governor-elect understands that the state is facing some major challenges, including PEIA, that must be addressed in the upcoming session," Ewing said. "He will be discussing this issue with the public and legislators in the upcoming weeks and months ahead and will want all of the information before he moves forward with his agenda."