Parrish Pitches Plan to Scrap PEBB, OEBB and Move Workers to Exchange

West Linn Republican Rep. Julie Parrish plans to reintroduce legislation that will change the health benefits for public employees from a defined benefit to a defined contribution equal to the cap on health costs for individuals before the federal excise tax kicks on -- $10,200. Employees would be able to purchase a gold plan on the exchange, plus have money leftover for a health savings account. The plan would also likely cost much less than what’s currently provided -- a savings that’s produced by ending much of the generous benefits now given to children and spouses of public employees.

Rep. Julie Parrish, R-West Linn, plans to reintroduce legislation in February that would dramatically change the way the state and local government assists with health coverage for their employees, scrapping the Public Employees Benefit Board, the Oregon Educators Benefit Board and other health plans in favor of a defined contribution that teachers and state workers would use to purchase a health plan off the federal exchange.

Parrish said she’s pushing the legislation due to an impending 2018 excise tax that could force Oregon government and taxpayers to pay a 40 percent tax on any health benefits the federal government has deemed excessive -- over $10,200 for individuals or $27,000 for a family.

Proponents of the tax in Washington, D.C., dubbed the excise tax a “Cadillac tax,” arguing that some health benefits, typically those earned through collective bargaining, are overly rich and drive up the cost of care by encouraging consumers to over-utilize the health system, opting for unnecessary tests, procedures and services.

The excise tax could cost state and local governments millions of dollars unless they cut benefits. OEBB is almost certain to pay some of the tax, although PEBB has come up with a plan that could postpone the tax until 2020 or 2024 --or indefinitely if, as former Gov. Kitzhaber argued, PEBB could keep its inflation below 3.4 percent by forcing health plans and providers to coordinate care.

Parrish said that the 3.4 percent figure was built on magical thinking, given that U.S. health costs can easily grow as much as 8 percent a year. She also feels PEBB’s recent moves are merely kicking the can into the next decade, and eventually the state will have to pay the tax, with money currently used to pay for education and to provide healthcare and social services for poor people.

“I think their plan is just a Band-Aid,” she told The Lund Report.

Her plan would give each state, school or Tri-Met employee $10,200 that they could use to cover their health expenses, including purchasing a plan on the exchange or banking those dollars in a health savings account toward the plan’s deductible or for health services that are not covered.

“We can get out of the Cadillac Tax completely,” Parrish said. Leftover money could also be used toward supplemental retirement income and possibly cash.

The state and school districts would conceivably save money on the plan, but that money must be rolled back into employee benefits -- half of it into a health trust account for future health benefits and half for other negotiable benefits, such as payment of the Public Employee Retirement System liabilities.

The plan would provide a windfall for younger employees without dependents. A 32-year-old could buy a gold plan from Kaiser Permanente on the exchange for $3,500 a year, leaving nearly $7,000 to cover the $1,000 deductible and bank toward other needs.

Even a 64-year-old PEBB member would be able to cover most of her benefits with the Parrish plan -- the total premium cost for a Kaiser gold plan would be $8,800, leaving $1,400 to cover the $1,000 deductible and some copayments from a health savings account.

The savings this plan generates come at the expense of employees with families, sharply culling the current provision of benefits to spouses and dependents. An employee and spouse in their 50s with three children could expect healthcare premiums to wipe out the entire $10,200 benefit, even for a bronze Kaiser plan with a $10,000 deductible. On top of the deductible, this employee would be forced to pay $300 a month in premiums, as well as copayments starting at $60 for primary care visits.

A gold plan for this family would have a premium of $950 a month, which would be less generous than current PEBB offerings, requiring a $2,000 deductible.

Parrish said she designed the benefit as $10,200 for each employee, so that everyone would be treated the same, and those with families would not be perceived as a greater burden to the state. It would be quite the reversal from PEBB’s traditional offerings, which have been more generous to families than individuals.

The West Linn Republican first introduced her concept in June, much too late to be passed in the legislative session, which adjourned just over a month later. She called attention to House Bill 3564 in July by forcing it to the House floor in a parliamentary procedure, where it failed.

It was co-sponsored by Sen. Betsy Johnson, D-Scappoose, who sits on the PEBB board in an ex-officio status but rarely attends. The issue would not likely gain much traction from the governing Democratic establishment or the support of the public employee unions, but does provide for a Republican alternative to the status quo.

Parrish said it needs to pass in 2016 if the state and local governments hope to have enough time to avoid getting clobbered by the federal excise tax in 2018.

Sen. Laurie Monnes Anderson, D-Gresham, the chairwoman of the Senate Health Committee, has been concerned about the excise/Cadillac tax issue, and plans to host a legislative hearing on the subject in mid-November in Salem. That hearing will likely feature testimony from Regence BlueCross BlueShield lobbyist Tom Holt and Stoel Rives attorney Bethany Bacci, whose appearance before her committee in September was postponed.

“I have looked at this idea but it is something the insurance division, insurers, and OHA need to understand,” Monnes Anderson told The Lund Report. “Hopefully Rep Parrish is sharing this with them. I appreciate the time she spent with me on this issue. It will make the informational hearing easier to follow on her concept.”

Chris can be reached at [email protected]

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