The Public Employees Benefit Board is on track to come in below its inflation target for 2017, allowing it to add a small $5.2 million surplus to its reserve.
The news comes a year after PEBB blew through budget caps that limit growth to 3.4 percent a year, per member, per month. PEBB’s inflation from 2015 to 2016 was about 7 percent.
PEBB uses a self-insured health plan administered by Providence Health & Services to cover most public employees, and the cost of this plan is determined by the cost of claims. In other plans, PEBB pays a set premium to either Moda Health or Kaiser Permanente, and the insurer bears the risk.
“Costs are coming in a little below funding,” said Emery Chen, a consultant with actuarial firm Mercer. “We’re going to run a small surplus for ‘17.”
The surplus will pad the total PEBB reserves to $254 million, although that figure is expected to decline over the next few years, as PEBB’s cautious actuaries make projections based on 6 to 7 percent inflation rates that are typical of healthcare costs overall.
Even if PEBB’s costs rise, the Legislature has fixed its funding at 3.4 percent, and the health plan will have to fall back on its reserves to make up any financial needs above that level.
If PEBB reverts to standard healthcare inflation, as it did last year, Chen projects the PEBB reserve will decline to $113 million by 2020. But in most recent years, PEBB has held its cost below the 3.4 percent cap, an achievement that’s largely attributable to increased coordinated care, which gives primary care providers payment incentives to help patients manage chronic conditions.
Coordinated care is not available to every state employee, and public workers willing to pay higher premiums have been allowed to stay in the statewide plan, where healthcare is not coordinated. Inflation has been much higher in the statewide plan than PEBB’s other offerings and the cost divide between the two plans is widening.
The standard statewide plan costs about $17,100 per member a year while the Providence Choice coordinated plan costs $13,300. The coordinated plan from Moda costs $12,900 while the main Kaiser plan is $12,200 a year.
One additional reason for this is that the statewide plan hosts many of the sickest members, who seek its less fettered offerings, while healthier members are more willing to go with the coordinated plans more restrictive networks. The statewide plan has the riskiest members, who are noticeably worse off than the Providence Choice plan.
However, the statewide plan is not significantly riskier than the pool served by Moda Health, despite its cheaper costs. Moda has the easiest access to Oregon Health & Science University and its physicians and clinics.
Chen said that it’s easier for PEBB to keep costs down in the Portland Metro area because of robust competition among providers but that costs have risen in southern, central and eastern Oregon, where Providence, as well as Moda, are at the mercy of single-hospital towns and a scarcity f other providers.
A utilization breakdown also showed that the Oregon State Police, with physically active jobs, are the healthiest state employees, followed by those at state universities, especially the University of Oregon.
Employees of the Department of Consumer & Business Services were the least healthy, along with judges and legislators. DCBS has mostly sedentary office employees while judges and lawmakers are much older than the general population.
Despite having one of the healthiest pool of employees, the Oregon Institute of Technology had higher-than-average health costs, another indicator of the uneven healthcare costs across the state. OIT is in Klamath Falls, an isolated community with just one hospital.
Reach Chris Gray at [email protected].
