By Matthew Young, RealWV
CHARLESTON, W.Va. – The Senate, on Saturday, passed a bill which will allow for an increase in PEIA premiums for the first time since 2012.
Rate increase notwithstanding, the bill – SB 268, sponsored by Sen. Tom Takubo, R-Kanawha – is intended to “provide stability for the PEIA (Public Employees Insurance Agency).”
As explained by Takubo: “The bill requires all members of the PEIA finance board to have a fiduciary responsibility to protect the plan assets for the benefit of plan participants. The bill provides that all financial plans shall establish that the minimum level of reimbursement is at least 110% of the Medicare amount for all providers, provided that the plan shall reimburse a West Virginia hospital that provides inpatient medical care to a beneficiary covered by the state.”
Takubo further explained that “non-state plans” must be reimbursed at “110% of the Medicare diagnosis-related rate for admission, or the Medicare per diem per day-rate applicable to a critical access hospital.”
The rates do not apply to any Medicare retirement program, Takubo noted.
“In the event that the revenues in a given year exceed the expenses, the amount of revenue in excess of expenses shall be retained by [PEIA] to offset future premium increase surges,” Takubo said.
Under the terms of the bill, PEIA would be required to maintain a minimum of 80% cost-share for in-state members, and 70% for out-of-state members. PEIA would be required to meet this requirement by the start of fiscal year 2024.
Senate Minority Leader Mike Woelfel, D-Cabell requested clarification regarding the “fiduciary responsibilities” of the finance board, asking, “What’s new about that – don’t they already have a fiduciary duty to participants?”
“They do have that (duty),” Takubo replied, before explaining that the bill simply adds training requirements for finance board members to ensure they have the appropriate skill set to meet their responsibilities.
“Well let me ask you this,” Woelfel continued. “How much do you think, based on your experience, this will cost or save the state in a year?”
Takubo advised that projected savings over the first year of implementation would be $76 million, with nearly $550 million in total savings by 2027.
Woelfel expressed concern over Takubo’s estimates, arguing that if PEIA was unable to absorb the cost of the savings, it would be passed on to employers, and ultimately to members.
“For the retirees and all those folks out there who are counting on us, I’m going to have to speak against this bill,” Woelfel said. “There’s just too many variables and too many assumptions in place that may or may not come to pass. At the end of the day, I’m afraid our retirees are going to get left holding the bag.”
Sen. Robert Plymale, D-Wayne, disagreed.
“This is an important bill to be done because you’re saving PEIA,” Plymale said. “You’re not looking at it from the standpoint that you’re offering it as a burden to someone. This is an incremental step, and one that is needed to save the plan. PEIA is the only one (insurance plan) that I know of that bases your premium on your salary. And the steps that the Senate is taking right now with this, and with the salary increases that are coming back, we’re taking care of the middle range and the lower range very well.”
“I’m standing up to say that this is a responsible thing to do, and it’s something I feel very strongly on,” Plymale concluded.
Sen. Mike Caputo, D-Marion, next questioned Takubo regarding rate increases for plan members, to which Takubo replied, “If you’re a higher-salaried employee on a more expensive plan, there is up to about a 26% increase, which is why this is coupled with a $2,300 pay increase (proposed SB 423) to try to buffer that huge jump in premium.”
Caputo then provided an example of a hypothetical family-plan member making $45,000 per year.
“If the premium increased at 26%, with the spousal coverage, the total will come to approximately $2,672,” Caputo said. “That exceeds the pay raise bill (SB 423) by over $300. Is that accurate?”
“That’s incorrect,” Takubo replied. “If an employee goes up to $45,000, and it doesn’t jump him to the next plan, the yearly increase would be $861.41. If their $45,000 does jump them to the next salary brackett plan, the yearly increase would be $1,221.44.”
Takubo added that the hypothetical plan member would then be left with a net pay increase of $1,078.56.
Despite Takubo’s explanation of the rate increase, Caputo still spoke in opposition of the bill, going so far as to read a quote from “his local newspaper.”
“Jeers to the West Virginia Legislature, for again offering a piece of Duct tape to PEIA,” Caputo read. “The state retirement system that fails to address long-term solvency for the system. The financial wellbeing of thousands of families are at stake if PEIA is not made solvent. PEIA should be lawmakers top priority.”
“I’m not sure it was a top priority,” Caputo added. “And I’m not sure we used enough political will to protect the participants.”
Caputo then made reference to Gov. Jim Justice’s previous statements about PEIA rates, and how they would “never be raised on his watch.”
“So Mr. Governor, I hope you’re listening, and I hope you still have the same position that you’ve stated publicly so many times throughout your administration,” Caputo said. “I hope that you maybe will consider vetoing this bill, and bringing the legislature back to try to find a more viable solution.”
SB 268 passed the Senate by a vote of 29 to four, with both Woelfel and Caputo, as well as Sen. Laura Chapman, R-Ohio, and Sen. Mike Stuart, R-Kanawha, voting against. The bill will now be reported to the House of Delegates for their consideration. RealWV will provide updates regarding the status of SB 268 as additional information is made available.