The Public Employees Benefits Program board has voted to continue enhanced benefits offered state workers that will consume $6.7 million of the program’s reserves.
But the board balked at making two major reductions that could eat up an additional $14.5 million.
At issue are the enhancements such as reducing the Consumer Driven Health Plan deductible and pumping up contributions to employee Health Savings Accounts. They were put in place at a time when PEBP had huge excess reserves that it needed to spend down. A large number of plan participants have said the changes amount to cuts in their benefits. But according to PEBP Executive Officer Damon Haycock and former PEBP chief, now state Budget Director Jim Wells, they were always intended to be temporary additions to the base plan.
While the board agreed with several plan changes, they put off a decision on reducing the state’s contributions to the HSAs and employee-retiree life insurance.
PEBP has just $25 million in excess reserves to use to support those enhancements. Haycock had recommended using up about half of that total this coming plan year, saving the other half for the 2019 plan year in case there aren’t any excess reserves in the second year of the budget cycle.
“Spending half the available reserves, there would be a higher probability to maintain benefits in the off year,” Haycock said.
If the board refuses to cut back those two items, it would leave the program with just $3.8 million for the second year of the biennium, forcing elimination of practically all of the enhancements put in place in 2012.
“That is driving off a cliff,” said Haycock.
The alternative to spending reserves is reducing or eliminating some of those enhancements and the board agreed to several changes.
They approved raising the health plan deductibles $100 a year to $1,600 for individuals and $200 a year to $3,200 for families. The deductibles were $1,900 and $3,800 before the 2012 enhancements. But they kept the co-insurance at 80 percent instead of cutting it back to 75 percent.
They voted to keep the enhanced annual dental benefit at $1,500.
The board voted to cap the amount it will pay for hearing aids at $1,500 an ear. Haycock told them some providers were marking up the cost of those devices by huge percentages knowing the state would pay the tab.
They took a similar approach in handling major medical issues such as hip and knee replacements after they were told prices for those procedures vary widely among different hospitals and the state was paying far too much in some places. In the future, participants will be directed toward certain providers for those types of procedures.
They rejected funding a new vision hardware benefit — glasses frames — saying they can’t support creating new benefit while having to cut other benefits.
On top of that, they created a $25 co-pay for the annual vision exams covered by the plan.
The only new program they approved was $500,000 of excess reserves for a new preventative drug program so patients with critical health issues don’t have to wait until they reach their deductible to begin getting drugs that can prevent further serious health issues. The plan already does so for diabetes medications. Haycock told members the idea would save PEBP money by preventing chronic conditions from worsening.
The board voted to sweep excess state money above $5,000 in those HRA (Health Reimbursement Arrangements) back into the program. Members reasoned the HRA money, unlike HSA money, belongs to the program, not the employee.
Board members didn’t like cutting back the state-paid employee life insurance from $25,000 to $10,000 and the retiree insurance from $12,500 to $5,000. Keeping that benefit would consume more than $3 million of reserves. They deferred action on that until January.
They did the same with the HSAs. Staff recommended cutting the $400 annual contribution plus up to $300 more for dependents back to just $300 a year. Keeping current funding for that enhancement would cost another $11 million in reserves. Haycock’s recommended changes would reduce the hit to reserves to about half that, leaving the rest for the 2019 plan year.
Members said they want to wait until they see if the Economic Forum projects enough revenue to support enhancements.
Wells, however, told them simply, “That’s not going to happen.”