PEBB May Dip Into Reserves Next Year

Over the past year, medical costs for state employees grew 12.6 percent
The Lund Report

November 4, 2009 --- Unless medical costs drop by 2.6 percent next year, the Public Employees Benefit Board may be forced to dip into its reserves.

 
Now that the state has shifted gears, moving to a self-insured health plan, it’s responsible for any costs beyond budget projections for its 103,000 employees and their dependents.
 
“Up to this point, if our assumptions were off, the carrier dealt with it,” said Rocky King, a PEBB board member who’s working on healthcare reform for the Insurance Division. “Next year, if we are off by even 2 percent, that’s a big amount for PEBB to take out of any reserves we have.”
   
A dashboard report released by Mercer Consulting revealed that medical costs for state employees grew by 12.6 percent from June 2008 through June 2009. Prescription drugs, meanwhile, only saw a 9.6 percent increase for the statewide PPO plan.
 
Hospital outpatient costs took the biggest jump – 19.1 percent followed closely behind by inpatient expenditures  – 16.3 percent. Lab and radiology also saw significant increases of 12.6 percent.
 
There’s also been a huge surge -– 28.9 percent -- in the number of medical claims reaching over $50,000, which resulted in a 33.5 percent jump in costs -- $105,946,574 for 925 people.
 
In 2010, PEBB is relying on a 10 percent trend for medical costs and 8 percent for pharmaceuticals.
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That’s why King is keeping his eyes on the utilization and cost trends, both generally and for claims over $50,000. “I want to zero in on utilization and cost trends and not just report them but report them against the projections,” he said. “We need to make decisions earlier rather than later if we need to make changes to benefits. Those types of changes can be a challenge administratively and politically.”
 
This dashboard tool, a work in progress, allows PEBB staff and board members to determine what kinds of trends and information to review on a monthly and quarterly basis to stay on track financially.

 

Comments

Let me see if I get this right - when costs went up and Regence wanted to raise premiums accordingly then Regence was evil. When the group is faced with the reality of being self-funded and forced to grapple with the fact that that their own utilization patterns and actual medical expenses are the real driver in their healthcare costs then we're supposed to feel badly for them? Not a chance. It's about time they looked at their overly rich benefits and brought them to being more in line with everyone else out there.

Agree completely. PEBB should have been self funded and float on its own bottom years ago. Next step is to articulate some "critical performance targets" and fair or unfair hold PEBB management responsible for getting results from "hopeful strategies" that frequently fall short. We all have our views as to what the "fix" might be, but the correct approach is to expect management to articulate the fix, and change management if the results are not achieved. And we are to accept 10% trend as o.k.?? Give me a break!

PEBB should've been self-funding their claims long ago, but needed to clear financial and legislative hurdles first. Frankly, their consultants should've pushed for it more but didn't. Catastrophic claims costs have more to do with Regence wellness and case management than the benefit design, although it remains to be seen if anyone else could do better. General utilization is mostly a product of benefit design and falls solely on PEBB. Pharmaceutical costs can be affected through formulary and benefit design, but somehow always get overshadowed by rebate and hidden incentive deals, which might be the dirtiest aspect of the whole healthcare delivery system. Lastly, Rocky King is the only person in Oregon I trust with our public benefits -- wish he’d run for governor.