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PEIA board cuts health care benefits for state workers

Members of the Public Employees Insurance Agency's finance board unanimously voted Tuesday to cut health benefits by $18.4 million and take steps that will reduce the plan's long-term liability for retiree premium subsidies by $5 billion. 

Employees will see their co-payments rise for urgent care, emergency room care and specialist visits. New co-payments will be established for gastric bypass surgery, medically necessary dental procedures and physical, occupational, speech and massage therapy services.

With PEIA's coverage costing about $600 million a year, the benefit cuts represent a reduction of about 3 percent. 

The board also voted in favor of an initial cap on retiree premium subsidies of an average $343 per month. The cap could increase over time, but by no more than 3 percent per year.

Finance board members said the cap would cut in half the state's $10 billion liability for so-called Other Post Employment Benefits - basically retiree health insurance premiums. 

They hope to eliminate the liability completely by 2040.

State teachers union representatives asked board members not to approve the contribution cap or the 3 percent increase cap.

Dale Lee, president of the West Virginia Education Association, suggested members wait for state lawmakers to pass a cap in January's legislative session. He said legislators' plan likely would include a funding source to pay down the liability.

The PEIA cap would balance the state budget "on the backs" of retirees, Lee said.

If inflation drove up medical costs by 10 percent and increases in state and local government employer subsidies of retiree premiums were capped at 3 percent, retirees would be left to pay the remaining 7 percent, Lee reasoned.

Judy Hale, president of the state chapter of the American Federation of Teachers, also encouraged board members to wait on the Legislature.

"We all know that 3 percent is not enough. We all know what medical inflation is," she said.

Board member Elaine Harris, who works for the Communication Workers of America union, made a motion to amend the 3 percent limit. Member Joshua Sword, who works for the West Virginia Federation of Teachers, seconded that motion. Harris and Sword were the only board members to vote for that motion, however.

Robert Ferguson, cabinet secretary for the Department of Administration and chairman of the PEIA board, said the move was too important to wait on lawmakers.

"To not act on this today, I don't think it's the prudent thing to do. If the Legislature doesn't do anything, we'd have ourselves a problem," he said.

Board member Mike Smith pointed out the finance board's OPEB caps would become moot if the Legislature passed its own cap next year.

The benefit cuts are not nearly as deep as PEIA officials originally proposed.

The agency released a plan last month calling for $32.6 million in cuts to its health insurance plan.

Those cuts included new $500 co-payments for hip and knee replacements, shoulder surgeries, gastric bypass surgeries, medically necessary dental procedures and spinal surgeries.

PEIA also proposed a new $50 co-pay for CT scans, X-rays, MRIs and other imaging services, as well as increased co-pays for specialist visits, emergency rooms and urgent care visits. The plan also would remove coverage for acupuncture, massage therapy and some "third-tier" brand-name drugs.

PEIA held hearings around the state in November to gather public opinion about the plan.

Following that comment period, officials decided to cut benefits by only $25.6 million.

Their new plan kept massage therapy coverage but added a $10 co-pay; removed proposed co-pays for hip, knee and shoulder surgeries; and maintained coverage on third-tier drugs with a 75 percent co-pay.

Board members made further changes to the plan at Tuesday's meeting, unanimously voting to remove the $50 imaging co-pay and postponing an out-of-pocket cost increase for families covered by PEIA.

That reduced cuts by about $7.2 million to $18.6 million overall.

Sword proposed the amendment, suggesting the board take $7 million in recently discovered surplus funds and put it back into employee benefits.

"We're $7 million better than we thought we were going to be," he said.

Tuesday's benefit changes take effect July 1, 2012. The agency insures 214,000 active employees, retirees and dependents. That's about 11.5 percent of the state's population.

Contact writer Zack Harold at 304-348-7939 or Follow him at


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