The Public Employees Insurance Agency is seeing a $21 million jump in medical claims, which officials hope is a "run on benefits" by insurees who were uncertain about whether the West Virginia Legislature would fully fund the health insurance program.
"We're hoping we're seeing a blip, and not an emerging trend," Chief Financial Officer Jason Haught told the PEIA Finance Board on Thursday.
Medical claim expenses jumped from a projected 6.5 percent increase to a 10 percent spike between December 2015 and this past June, while PEIA's budget was in doubt for much of that time, he said.
During that period, $120 million of benefit cuts, in the form of sharply higher co-pays and deductibles, were looming for PEIA insurees, as of this July 1, and Haught said he suspects many insurees sought out medical procedures prior to the potential cuts.
"While the state was going through the process of getting its budget passed, we had significant benefit cuts on the table," he noted.
Haught said he suspects that led to a "run on benefits" by members, comparable to a run on banks before an economic depression.
"I'm hoping that's what happened," he said, "that we've seen our membership react to the impending cuts on the table, and that has increased utilization of medical services."
PEIA had projected paying out $401.3 million for medical claims during the period, but the actual claims paid to date are $422.4 million, with an unknown number of claims pending for procedures and services performed during that period but not yet billed to PEIA.
Haught said PEIA is increasing its projected claims payable from $41.5 million to $48.7 million to account for the spike in utilization.
In December, with no new funding for PEIA employer premiums on the horizon, the agency's Finance Board adopted a 2016-17 benefits plan with $120 million of what Executive Director Ted Cheatham called "draconian" cuts in plan benefits.
It called for increasing deductibles by $500 for single coverage and $1,000 for family coverage, raising annual out-of-pocket maximums by $1,500 for single coverage and $3,000 for family plans, as well as increased prescription drug costs, particularly raising the co-pay for preferred brand-name drugs from $25 per prescription to 30 percent of total cost.
From January through mid-June, the Legislature played a cat-and-mouse game with the roughly 230,000 PEIA insurees over whether the cuts would go into effect on July 1.
In his State of the State address, Gov. Earl Ray Tomblin proposed budgeting $43.5 million for increased employer premiums to offset the benefits cuts. However, legislators balked at passing a tobacco tax increase Tomblin had proposed to raise the new funds, and adjourned the regular session in March without passing either the tax hike or the 2016-17 state budget, launching a 92-day budget impasse.
Ultimately, the Legislature took until mid-June to approve a tobacco tax increase and a budget bill that fully funds the employer premium increases. The PEIA Finance Board formally approved a 2016-17 plan that avoided the benefits cuts on June 23, just eight days before the new plan year began.
Reach Phil Kabler at philk@wvgazettemail.com, 304-348-1220, or follow @PhilKabler on Twitter.