Hiking PEIA wage tiers helps, but hard work ahead

By Hoppy Kercheval

In February, Gov. Jim Justice issued a freeze on Public Employee Insurance Agency premiums and out-of-pocket costs.

The freeze was in response to pressure from school teachers, service workers and public employees who faced higher healthcare costs in the new fiscal year.

Justice said the state would hold the line on health insurance costs through June 2019.

Just weeks after that announcement, the state’s teachers went on strike over pay and health benefits. The walkout led to a 5 percent pay raise beginning July 1 for teachers, service workers and state employees.

However, the raise created an unintended consequence for thousands of people.  Here’s why:

Most insurance costs for consumers are based on risk — the greater the risk, the higher the premiums.  However, PEIA premiums are based on ability to pay.  The employee costs are like the progressive tax code — the more individuals make, the more they pay. Public employees fall into one of 10 wage categories, with premiums rising as they move up the pay scale.

The upcoming 5 percent pay raises average about $2,020 for public school teachers. Those teachers also get an annual experience incremental increase of $588 (for years one thru 35). The total raise of just over $2,600 would have pushed an estimated 14,000 teachers and public employees into a higher tier, thus raising their premiums.

That would have violated the governor’s promise of a freeze.  Therefore, the governor announced Monday that he’s requesting that PEIA increase each of the tiers by $2,700.  For example, a tier that is currently $42,000 to $50,000 will change to $44,700 to $52,700.

Justice believes that will prevent any of the upcoming pay raise from being eroded by higher PEIA costs.

“I promised these people their costs would not go up,” Justice said at Monday’s news conference. “We think we can do this and not cost us any money at all.”

Well, that’s close to correct. Some state workers who are getting smaller raises will now fall into a lower category, meaning their premiums will drop, so PEIA will take in less money from them.  However, the plan should be able to absorb a loss of a couple million dollars.

The tiers have been the same for years, so it was probably time to adjust them upward anyway.  Additionally, the move avoids enraging teachers and service workers again as they watched their overdue pay raises be diminished by the higher PEIA costs.

The fix means the governor keeps his word and buys himself more time to address the fundamental issues with PEIA.  The health insurance program costs are approaching $1 billion a year, and rising by about $50 million annually.

The PEIA Task Force has just finished a series of public hearings to gather input on solutions going forward.

This is where it gets difficult, but here are some of the options:

The state can raise taxes or spend less elsewhere, putting the additional money into PEIA.

It can raise the premiums and out-of-pocket costs for the 230,000 enrollees.

The state can reduce benefits and coverage.

It can require that plan participants take better care of themselves to hold down costs.

Or do some combination of all those options.

Justice was non-committal Monday to any specific plan, though he provided a hint. “We’re going to have some additional participation from the state, and a little bit from here and a little bit from there, but we can win this battle.”

Of course, little bits add up to big numbers, especially over time. The governor did the right thing by adjusting the tiers to protect the raises.

That will be especially helpful for the lowest paid state workers. However, the real heavy lifting on PEIA is still ahead.

Hoppy Kercheval  is a MetroNews anchor and the longtime host of “Talkline.” Contact him at hoppy.kercheval@wvradio.com.

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