After an unprecedented decrease in healthcare costs for state workers in 2013, the inflation rate for the Public Employees Benefit Board was right back up to 7.4 percent per employee in 2014 for those covered by the state’s self-insured health plan administered by Providence.
That worrisome figure, which Mercer consultant Emery Chen said was at par with national trends, threatens to undermine Gov. Kitzhaber’s plan for capping the growth in healthcare costs and potentially wiping out the long-term savings in his budget that he promoted earlier this month to free up money for early childhood education and other items on his wish list.
“I’m a little bit concerned by that,” said PEBB chairman Paul McKenna.
Kitzhaber built his budget on the assumption that Oregon could keep healthcare inflation at one-half the national trend, limiting annual growth at 3.4 percent per employee. That won’t be possible if the state’s self-insured Providence Health Plan -- still the backbone of the public employee benefit system -- has many more years like 2014.
To meet its target for the 2013-2015 budget, PEBB will have to make up $9.3 million by June 30. The budget for core benefits is actually coming in at $9.1 million below budget, but because of other costs such as rebates to employees because of high participation in wellness programs, PEBB is about that same amount over budget.
PEBB Finance Director Ali Hassoun told The Lund Report after Tuesday’s meeting that the public employee benefit plan still had a good chance to come under the 3.4 percent annual spending cap for the current budget because 2015 premiums for fully insured plans from Kaiser, Moda Health and Mid-Rogue are fixed and came in at $9 less than 2014 rates.
The expansion of offerings gives some opportunity for Kitzhaber’s anticipated savings to be realized to get PEBB back on track. The menu of health plans under the new contract to begin in January include more coordinated care models than before, although most public employees had already been given the option of the Providence Choice medical home model.
The overall premium cost for PEBB in 2015 will rise only 0.7 percent from 2014, but there are still risks involved with the self-insured health plan from Providence, which will cover roughly three-quarters of public employees. Since employees also face a new deductible that takes effect in January, that also could keep costs down. “The first six months of a plan year do better than the last six months,” Hassoun explained.
PEBB also benefits from a 1.7 percent decrease in per-employee costs it saw in 2013 compared to 2012 for Providence.
The raw cost of healthcare claims for the Providence self-insured plan has gone from $472 million to $453 million to $481 million in the past three years; the total number of public employees insured by Providence has fallen about 700 since 2012.
The highest cost growth was for prescription drugs, which rose 17 percent from 2013, although the biggest jump in real dollars was for inpatient hospital costs, which rose 12 percent from $2,900 per employee to $3,300.
The claims cost for Kaiser increased 7.8 percent per employee over 2013 after an increase of 4.4 percent from 2012, but Kaiser bears the risk for those increased costs since the state pays a fixed premium for employees insured through Kaiser.
The claims’ costs per employee for Providence are at $13,400 while Kaiser pays about $13,000 for each of its covered employees.
Chris can be reached at [email protected].
