PEBB Makes $9.4 Million in Cuts to Keep Under Budget Cap

The board held off on increasing deductibles, but increased the out-of-pocket maximum for most plans, as well as emergency room fees. The board decided to bring the administration for its Moda Health plans in-house with self-insurance.

The Public Employee Benefit Board voted to hold off on increased deductibles and other unpopular cuts to healthcare benefits for state workers while still trimming $9.4 million from 2019 expenses to keep spending under the inflation cap set by the Legislature.

Instead, PEBB will kick off adult offspring the month they turn 26 rather than let them stay on their public employee parents’ health plan until the end of the year. PEBB also increased the potential amount a person can pay in a year from $1,500 to $1,900 on its standard Providence option. PEBB will also be assuming the risk for Moda Health plan designs, self-insuring them with PEBB’s reserve rather than putting the risk on the insurance provider.

Those three options will save about $2 million each, according to consultants from Mercer. Additionally, PEBB will increase emergency room copayments for Moda Health and Providence Health plans from $75 to $150 -- although not for Kaiser Permanente, under the logic that inflation at Kaiser is lower than at the other two insurance providers.

PEBB saved about a $1 million by raising the copayments for its Willamette Dental plan, which was at risk of a double-digit premium increase for next year.

“I’m disappointed that we’re once again whittling away at the quality of the coverage,” said Mark Perlman, a PEBB board member and the president of the Western Oregon University Federation of Teachers.

Moving the 3,700 employees who elect for Moda Health to a self-insured model was controversial and done over the objections of Rep. Mitch Greenlick, D-Portland, a nonvoting member of the board. Greenlick likened the switch to a one-time gimmick that will not save the board money down the road.

Moda Health has actually taken a loss on its PEBB book of business for the past two years -- paying out about 5 percent more in claims than it takes in with premiums.

Greenlick also objected to curtailing coverage to adult children as soon as they’re 26. “This could impact families in some real ways,” he said.

But other board members said if cuts need to be made, cuts to member benefits should be limited. The self-insured switch will not be noticed by members and most employees do not have 26-year-old children still getting insurance from PEBB. Director Kathy Loretz said that PEBB extends coverage to adult children even when they are married or have another form of insurance.

Kaiser was the least efficient PEBB health insurer of 2017, paying out a smaller percentage of its premiums as claims than Moda or Providence, and it faced pressure from PEBB to hold down its costs. It returned with new rates that are lower than the 3.4 percent cap for next year, staving off the benefit trims that the other two plans faced.

“There’s a case to be made that they’re doing so much more management,” said PEBB board president Shaun Parkman, who insisted that they be rewarded with no reductions in benefits to their plans. “They put a lot of emphasis on incentivizing wellness. They’ve pulled the system together with coordinated care.”

Parkman said Kaiser has had success at tracking diabetes conditions early on, and then working to keep the patient well, rather than waiting for the disease to get more severe.

Critics of Kaiser argue that it doesn’t get as many high-risk patients.

Proposed Legislation

PEBB is likely to seek legislation in 2019 to allow firefighters and local police officers to join PEBB and OEBB, currently barred by state law. A 2013 law expanded coverage in the state-benefit plans to employees of local governments, but an oversight has kept these governments from offering the coverage to their first responders.

Loretz said PEBB would also ask for legislation to allow it to discuss procurements in secret, much as state agencies do. Greenlick said they should expect opposition to this measure. “It’d be nice except for the public interest,” he said.

Greenlick said he believes state agencies should open up their dealing to the public as PEBB does now, not the other way around. Loretz argued that the board could have more candid discussions with their vendors in closed executive session.

Reach Chris Gray at chris@thelundreport.org.

Correction: The original article incorrectly stated that Kaiser Permanente members do not have access to OHSU.

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