CHARLESTON, W.Va. — State and public school employees with health insurance through West Virginia’s Public Employees Insurance Agency could be looking at $25 million in benefit cuts next year, primarily to offset higher prescription drug spending.
The PEIA Finance Board gave preliminary approval Thursday to a 2017-18 plan that cuts benefits to help cover higher-than-projected increases in prescription drug costs for the year, upped from 9 percent to 11 percent, driven primarily by soaring prices for specialty drugs.
“We’re one of two countries in the world that lets the manufacturers set their drug prices,” PEIA Executive Director Ted Cheatham told the board Thursday.
“It’s ludicrous,” Cheatham said. “It’s a very ugly delivery system throughout.”
He said PEIA has negotiated a “best-in-class” pharmacy benefits plan — but as a relatively small insurer with just more than 200,000 insurees, the agency does not have the leverage to hold down drug prices.
“It may be worthwhile to get our next governor on board, to do something on a national front,” Cheatham said. “We need to go forward and say, ‘We can’t take it anymore.’ ”
PEIA will hold public hearings on the proposed 2017-18 plan, which uses a variety of benefit cuts to save the $25 million.
There are no across-the-board premium increases proposed, but the plan does call for setting premiums based on total family income. PEIA is one of the few health insurance plans where premiums are set on a sliding scale based on the employee’s salary.
Cheatham has long advocated using family income to set premiums, saying the existing system subsidizes public employees who have spouses working in the private sector at higher salaries.
He said Thursday that he did not have a precise figure on how much additional revenue that would produce, since the proposal also calls for compressing what is now 10 premium tiers into four, which would reduce premiums for the highest-salaried state and public school employees.
Cheatham said that could save $10 million a year but could get pushback from pharmacies in the state that get more profit from filling three 30-day refills.
Other proposed changes include raising specialty drug copays from $50 to $100, for preferred-list drugs, and from $100 to $150, for drugs not on the preferred list, and raising the prescription drug out-of-pocket maximum from $2,500 to $5,000 per year.
Other plans and their proposed changes include:
Local employees plan, which covers some county, municipal and public agency employees: 4 percent premium increase ($5 million) and $6.6 million in the proposed benefit cuts.
Medicare retirees plan: 4 percent premium increase ($2.8 million), $9.8 million in benefit cuts.
Non-Medicare retirees, made up of retired public employees who have not reached age 65: 4 percent premium increase ($1.69 million), $2.8 million in benefit cuts.
The proposed plan will go out for six public hearings around the state, taking place from Nov. 9 to Nov. 17, with the PEIA Finance Board scheduled to vote on the final plan on Dec. 1.
If the cuts are approved, retirees would see them take effect on Jan. 1, 2017. The cuts would not take effect for active employees until July 1, 2017.
This time last year, the board was proposing $120 million in benefit cuts for active employees, but those cuts, which Cheatham called “draconian,” were mostly offset when the Legislature, in the June special session, approved $66.8 million in funding to increase employer premium payments.
Gov. Earl Ray Tomblin notified the board earlier this year that there is no funding increase for employer premiums included in the proposed 2017-18 state budget.
Reach Phil Kabler at [email protected], 304-348-1220 or follow @PhilKabler on Twitter.