Dismantling of PEIA Continues
July 20009
Now PEIA is planning more take aways!!!
1. PEIA Proposed Option D Cuts PEIA Medicare Retiree Benefits 50% up to $1000
2. Board meeting proposed tying premiums to Providing End of Care Directive
3. Failing to have new hires paying into health care retiree benefits undermines funding for whole plan, and will bring it crashing down.
Item 1 of this is a long dicussion,but important, so you might want to skim it, and go to sections 2 through 11. # 8 is a must read
PEIA Proposed Option D Cuts PEIA Medicare Retiree Benefits 50% up to $1000 !!!
1. Optin D There are now more damaging proposals that PEIA somehow didn’t manage to have widely publicized. PEIA has proposed changes for it’s current Medicare retirees that under Option D would reduce it to only a 50% plan with “carve coordination of benefits,” while raising the Out of Pocket to $1000, thus greatly reducing benefits by 50%, and opening door to further reductions. … [more] This in essence would cut benefits in half, as the previous “Traditional Coordination of Benefits” with “Original Medicare” was 100%. In other words on any bills not covered by Medicare and totaling up to $2000 or less you will have to pay 50% until you reach $1000 coinsurance. While everyone will not reach $1000 many will pay $500, $600, $700, $800, and $900+ under Option D.
As Medicare has a deductible, most of us will feel this change immediately each and every year. Medicare A deductible for a hospital stay (say just for a day or two for tests) is $1024, with no coinsurance changes for days 1 to 61, so under PEIA proposed option D you would have to pay $512 instead of the 0 under the traditional plan. In other words PEIA will only pay 1/2 of the residual after Medicare pays. But isn’t this the very bill that a supplementary insurance like PEIA is intended to pay? There is also $135 deductible under Medicare part B which would no longer be covered completely by PEIA. You would pay 50%, or $67.50. Just a few other services after the above day or two in the hospital and you’ll easily end up spending almost $1000 each and every year just on medical. And one still has the deductible on prescriptions and copays. Also not clear in the presentation is the percent covered by PEIA of any items not covered by Medicare. Will this to be reduced to 50 %?
If these expenses are left as a Traditional Coordination of Benefits between PEIA and Medicare, former employer’s premiums will pick up 70% of these costs ( $1400 of the first $2000 in bills), and retirees’ aggregated premiums will pick up 30% of the costs ($600), but under Option D 50% of this $2000 is transferred to the retirees (the $1000 OOPM). So of the first $2000 the retirees pay a total of 65% ($1000 coinsurance, plus $300 in aggregated premiums), while the former employer pays only 35% of the first $2000 not covered by Medicare (through aggregated premiums of $700 through PEIA (which is the $1000 paid by PEIA minus the $300 that is really the 30% retiree premiums)}. This 65/35 split is not the 30/70 split promised, and cost shifts another 35% to the retirees. It is actually taking away 1/2 of what was promised, and retirees really are paying two thirds of the first $2000 as a coinsurance payment of $1000 plus the $300 from their aggregated premiums that are part of the $1000 paid by PEIA.
In summary, on this first $2000 in bills each year, you no longer have the promised 70/30 plan, but a 35/65 plan, and your former employers are only paying 35% on this first $2000 though their premiums rather than the promised 70%, and the retirees as a group are paying 65% through aggregated premiums and aggregated coinsurance, rather than the 30% promised in the 70/30 split. This is cost shifting and is not a 70/30 plan as promised.
Option C- PEIA is also considering an Option C that is 80% coordination of benefits, but that also increases the OOPM to $1000. It too is not a 30/70 split when considering premiums and coinsurance, but a 44/56 split of the first $5000 not covered by Medicare. Retirees pay $2200 ($1000 coinsurance plus $1200 of the next $4000 - their 30% through their premiums) and their former employers pay $2800 (70% of the remaining $4000 through their premiums). Besides this not bing the preomised traditional coordination of benefits promised, it opens the door to further erosion of benefits. And how long until they come back and change Option C to a 70%, 60%, and then 50% plan?
Lastly as Medicare normally covers about 80 to 85% of most bills, so PEIA has only to cover the remaining 10 to 15 %, but under Option D PEIA will then be covering only 5% to7.5 % of bills when considering what Medicare pays in general, or under Option C 12% to 16%. PEIA under options C&D is refusing to do exactly what supplements are intended to do, fill the gap in Medicare!!! Traditional Coordination of Benefits with Medicare had been in the PEIA Employee Plan Summaries for many years, but they are now reneging on their promised benefit. It’s like taking $1000 out of your pension, as health care benefits were part of the promised retirement package. And how long until the raise the OOMP more and more??
2. They also plan to eliminate help with retiree health care coverage for new hires after Jan. 2010. PEIA works much like Social Security as a semi- pyramid set up, as actives pay into a 20/80 match fund from which the state pays a 70/30 match with retirees. Besides the inherent unfairness of some actives earning retiree health care benefits, working beside those who do not, this scheme may affect funding for retiree benefits. Are the new hires not covered in retirement to pay the same premiums as those who will receive this retirement health benefit? Or will they pay lower premiums? Then as more retire and others are hired, fewer will be paying the 80/20 match from which the state takes the 70/30 match. How will the plan survive? This will also apply to those returning a 2 yr. lay off.
3. In a recent board meeting PEIA proposed tying premiums to providing END of Care Directives. This sets a dangerous precedent. Whether this very personal document is stored with PEIA or third party registry with safety issues, it’s financial coercion (through premiums). Will this be like medication, starting with a $5 reduction in copays for generics, which became a $15 copay for brand name, with $50 copays for brand names not on formulary and for so called “specialty drugs,” to a proposal last year not to cover any brand name drugs not on formulary? Can we look forward to ever increasing premiums, or even loss of services or coverage for not providing End of Care Directives? Could they dictate what you have to say in it. Will they pressure physicians and family (or family through physicians) as to how to interpret them PEIA’s way? Will the insurance company not let the family get second opinions, or consult a specialist? This also puts the physician at risk if the insurance company discourages consults. Insurance companies need to quit playing doctor. Once the precedent is set that PEIA can tie Providing insurance company or third party of their choice to Providing End of Care Directive to premiums, where will it end .
4. The Governor failed to budget/request the 51 million needed this year for the retirees heath care unfunded liability fund. This amounts to only about $ 510 per active or retiree this year. Not much, as many state employees earn as little as 17, 20, or 30 thousand per year, with some retirees’ pensions as small as $400 or $500 per month. In comparison, the governor’s $55,000 per year raise (should he complete 30 year of state employment) will net almost 1 million in increased pension (about $990,000), if he lives thirty years past retirement. Adding this much each year, and investing it at a conservative 5% APR compounded daily over 30 years, yields over 3.5 billion.
5. Recently it was reported that apparently there’s about $ 475 million (about half a billion) in 4 state ‘rainy day’ reserve funds. Surely part of this could be used for the PEIA unfunded liability fund, as it would still be saved. (Note it was recently reported that the funds lost 76 million in market meltdown, but in a previous article a few months before it was reported that since WV had little in risky investments like Lehman, that most of the loss would return as the market rebounds.) Also Brick street has since repaid the last 85 million of their low interest 200 million loan (at only 1.5% interest, costing the state millions in lost interest), so this money could now be added to rainy day fund to increase it and used for the PEIA unfunded liability.
6. What the unfunded liability will be is unknown because it is partly dependent upon changes in Medicare and other federal changes. If Medicare just fills the hole in Medicare D prescription plan it could save PEIA millions yearly. Multiply this savings by 30 years, plus the interest that can be earned on the funds saved, as Medicare will be paying more for prescriptions, and it would go a long way to reduce and fund the unfunded liability.
7. The governor, by trade a coal brokerage company owner, gave an out of state Texas/Penn.company, CONSOL, $200 million in tax breaks, for a coal-to-liquid plant that only creates 60 jobs (that’s 3 million a job). That company had/found $600 million elsewhere for the project, so why the tax break? There may be 4 more of these plants later -Will that cost the state another $800 million? That’s a billion in tax breaks. 1 billion X a conservative 5% APR interest compounded daily over 30 yrs. equals about 4.48 billion,& could have met a major potion of the unfunded PEIA liability. (Note since this tax break was arranged, the plant was canceled at least temporarily reportedly due to the drop in oil/gas prices and a subsequent need to find backers. After PEIA benefits are reduced, will the rainy day fund & other state funds be used to loan or give even more to this project or some other scheme for some big business??)
8. In PEIA’s 2007 Comprehensive Annual Financial Report page 51 Schedule C it shows Member and Employer contribution and it appears in 2003, 2004, 2005 & 2006 employer contributions were NOT at an 80/20 ratio and the amount unpaid by employers was under by 35.885, 82.562, 103.133 and 81.937 million respectively for a total of 306.517 million underpaid by employers, while the employers paid an extra 78.299million in 2007, which makes for an employer underpayment for the years 2003 through 2007 of 228.18 million. Had those payments been made each year, (with 80 million taken out in 2007 to avoid the over payment) part of those funds would have begun earning interest in 2003, and at end of 2007 plan year been worth over 267 million and in 30 years with interest as computed at 5% APR compounded daily = $1,198,048,896 or 1.198 billion
9. No worker public or private should have their health care cut or taken. In fact, those who lost their health care or do not have health care through their employer should gain it. The state should be setting a good example for private business, rather than a bad example.
10. They will be paying off benefits in 30 to 50 year in cheaper dollars
If inflation runs about 4% a year, then in 30 years, it will take $3.24 to equal one of today’s dollars. Wage would also be up 324 % over 30 years, and therefore tax revenues will be up 324%. They will be using cheaper dollars to pay benefits in 39 years. But retirees do not have COLA’s. When looking at the unfunded liability it should be discussed in real dollars. Some of the OPEB they discuss in presentation is for mire than 50 years.
$1 today will equal in 21 years $2.28 ,
in 30 years $3.24 a 324% change
in 51 years $7.39
in 57 years $9.35
11. Waste in the form of overpayment to insurance contractors, and drug manufactures etc. should be eliminated. How much did Coventry Advantra make in profit. Was PEIA changed for advertising. What about expense account, were they too big. Where are the funds parked pending distribution to providers. If somewhere with Advantra were they properly earning interest for PEIA, not Coventry. Everything should be checked including Wellness programs like BeBetter. Who owns these companies, runs them, and what companies own them.
Many drugs a 30 to 70% less in Canada often from same manufacture. But using Canada must be optional without penalty to plan members and we must be able to insure country of manufacture and origin.
Someone from an union, not one of ours, gave me the following info “this tentacle of Wells Fargo is” is taking “millions of WV taxpayer money, processing PEIA benefits claims – work previously done by WV state workers. In 2008 alone, Wells Fargo Third Party Administrators received over $23 million from WV taxpayers.” Note you can check this out and Express Scripts, and Coventry etc. at The Auditor’s website and look for the Vista portal here:
https://www.wvsao.gov/vista/login.asp click on Public access, and search for ANY vendor name.
PROBLEMS WITH PEIA PLAN PRESENTATION
You can find it at http://www.westvirginia.com/peia/ Click on download near bottom of page
**NEW** Plan Year 2010 Summary Plan Description
It takes you to http://www.westvirginia.com/peia/content/SPD%202010%206-30-09.pdf
1.Options A & B don’t say if they are for traditional coordination of benefits
2. Options C $ D are a change to “carve out coordination of benefits and needs to say this.(See 1. above concerns.
3. Regarding cost to employees and employers of 72% for retirees, if they weren’t covering the $22 for return to regular Medicare would be more like the 70%. Before employees had premiums, this 70% was covered entirely by employer.
4.The unfunded liability is the employers’ unfunded liability for it’s 70% share, and is not the responsibility of the retirees or actives. Employers should have been setting money aside and earning interest on this for 30+ years***.
5. The 18 billion unfunded liability for FY 2030 would be for benefits through 2060 or for 51 years. The graph goes to 2066 or 57 years. So in 2030 18 billion is only worth 7.89 billion in today’s real dollars. Also this would be the funds needed to cover benefits 30 years forward from 2030, so you’re really talking about benefits to be paid through 2060. By the end of 2060 it is likely that it will take about $9.35 to equal today’s $1.00 and tax revenue will be up 935%.
6. Under item 2 page 14 they talk about costs to actives. but only reason the liability is so high is that they failed to fund it each year, and therefore are not earning interest on the funding. They can not expect employees to cover funds at all (and certainly not in 1 year) they failed to set aside for 30 years and the interest thereby lost. No employee or taxpayer has to pay more, they have the funds in the rainy day funds and the coal-to-liquids tax breaks. If some of this was put in PEIA and earned interest they could solve.
7. Item 2, page 16. Why they singling out 1991. For many, many years we’ve have a 70/30 match for retirees. It was used to recruit and retain employees and was in our PEIA Plan summary books every year. Now they want to change it after we retire!!!
8. Page 17. Non subsidized Premium of $946. Why so high. Inco/Special Metals unsubsidized premium is $600 and the main difference in plan is a 70/30 prescription split rather that 80/20.
9. PEIA Medicare retiree non subsidized premium seems high. Why? As the new administration improves Medicare this will be lower. Just fixing some of the problems with the Medicare prescription plan will same millions.
