State Employee Benefit Board Could Reduce Costs by $137.9 Million

May 20, 2011—The Public Employees’ Benefit Board (PEBB) agreed on three scenarios that could save between $46 to $137.9 million at a meeting earlier this week.

 

But they hesitated to make a final decision on the specific plan design changes for state employees since the collective bargaining process is under way between the unions and Governor Kitzhaber, and it’s unknown how much money the legislature will allocate for PEBB next biennium.  

 

“I'm just afraid that people will freak out that we've made plan design changes before the bargaining process,” said Diane Lovell, the Association of Federal, State, County and Municipal Employees council representative.

However, by approving these three scenarios as models, the board can show the unions and the legislature what they want the health plans to look like and the various options, according to Peter Callero, a professor in the Department of Sociology at Western Oregon University who represents AFl-CIO on the board as a member of Local 2278.

 

“This is very, very close what will approximate the final plan design changes,” he said. “People will know with a degree of certainty what we’re working toward.”

 

 “There may be some slight modifications, but we’ve got clear direction at this point,” said Board Chair Rich Peppers, SEIU Local 503’s assistant executive director. “

 

The board, however, cannot add or subtract from the list of 26 potential changes that it’s been considering since March, but will keep “fine tuning,” according to Joan Kapowich, PEBB’s administrator.

 

The three scenarios assume savings from $46 million to $137.9 million by making benefit reductions and adding out-of-pocket costs to members. The board is attempting to close a looming budget gap estimated to be somewhere between $20.5 million and $104.5 million.

 

Mercer, the consulting firm which provides financial services to PEBB, presented the board with these three scenarios March 23. They are: a 5 percent increase in funds for employee healthcare costs (Scenario A), resulting in a $20.5 million deficit; keeping the current funding level (Scenario B) and having a $56.7 million deficit; and Governor Kitzhaber’s proposal to return to the 2010 funding level (Scenario C), which would represent a $104.5 million dollar funding gap.

 

In previous meetings, board members have described the pending cuts to benefit plans as “wholesale slaughter.”

 

“Scenario A is as good as it's going to get,” said Callero. “These are real serious cuts. It’s going to be upsetting to many of our members.”

 

“We can't minimize the changes that are occurring,” Peppers agreed. “This is going to be very significant. I don’t know what the alternatives are. It’s serious stuff.

 

These changes, which will take effect next January, may increase the out-of-pocket expenses from $1,000 to $1,500, increase the employee deductibles from 0 to a $250 deductible for in-network treatment and $500 for out-of-network treatment, reduce chronic care coinsurance, to cover illnesses such as asthma and diabetes, create incentives to choose less-expensive plan options, increase the co-payment for specialty prescription drugs and increase spouse surcharges.

 

At its April 19 meeting, PEBB decided to increase the out-of-pocket maximum from $1,000 to $1,500 because of Paul McKenna's concerns, they decide to make up for the loss in savings by making the following changes to the priority list in Scenario A: increase the spouse/domestic partner surcharge from $35 to $50; establish a monthly $25 tobacco surcharge; reduce chronic care coinsurance, and establish a $50 deductible for prescription drugs (excluding chronic care medication).