PEBB Must Make Deeper Cuts to State Employee Benefits
The full list of health benefit reductions will be decided at the board’s next meeting on April 19
April 12, 2011 -- To stave off financial catastrophe, members of the Public Employees’ Benefit Board realized last Monday that they’d have to make even deeper cuts to the healthcare benefits of state employees and their dependents than they had earlier imagined.
Calling those cuts “wholesale slaughter,” Diane Lovell acknowledged those cuts would undoubtedly be painful. She represents the Association of Federal, State, County and Municipal Employees on the board.
Initially, the board had hoped that changes to the 2012 plan year would lead to more financial stability the following year. However, that apparently won’t happen.
Fariborz Pakseresht, deputy director of the Oregon Youth Authority, posed that question to Mikel Gray, the actuary at Mercer, which provides financial services to PEBB. “Will we have to make more significant plan design changes to continue [to keep our budget] in positive territory?” asked Pakseresht.
Yes, acknowledged Gray, because healthcare costs are expected to continue rising in 2013, and there’s not enough money in state coffers to absorb those increases.
“[The board] should make cuts for 2012 that will cover both years [of the biennium], not just take a one-year approach,” added Gray. At a previous meeting, PEBB had explored tackling the 2012 and 2013 plan years separately.
Paul McKenna, research director at the Service Employees International Union 503, agreed with Gray’s analysis. "It's better to take the bull by the horns," he said.
Mercer presented the board with three funding scenarios similar to those presented at its March 23 meeting. They are: a 5 percent increase in funds for employee healthcare costs; keeping the current funding level; and Governor John Kitzhaber’s proposal to return to the 2010 funding level.
The deficit in the 5 percent increase scenario would be $20.5 million; the status quo scenario would put PEBB $56.7 million in the hole; and the back-to-2010 option would create a $104.5 million dollar funding gap.
The scenarios assume cuts ranging from $51.1 to $149.8 million. Board members have self-imposed a deadline of April 19 by which they must settle on a final slate of cost-saving plan design changes that will help them close PEBB’s gaping budget hole.
The cuts will be implemented next January and be effective for 2012. The board may also increase the out-of-pocket expenses from $1,000 to between $1,500 and $2,000, 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 or diabetes), create incentives for employees to choose less-expensive plan options, increase the co-pay for specialty prescription drugs and increase spouse surcharges.
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Apr 12 2011