PEBB Chairman Optimistic Health Plan Will Meet Budget Targets After All

Despite earlier reports of a rising trend of healthcare spending by the Public Employees Benefit Board, officials are now convinced the health plan for state workers could meet its goal of holding inflation to 3.4 percent without tapping into its reserve fund.

PEBB will benefit from the Legislature’s two-year budget cycle, which will allow them to average their annual increase over two years. Last year, the health plan’s costs only rose 2.6 percent -- allowing them to increase as much as 4.2 percent this year without going over budget.

Second, revised premium increases are lower than previously reported. While the statewide Providence plan is still rising 8 percent, the Providence medical home model will only increase 3.1 percent. Premium rates at Kaiser are set to rise 3.6 percent.

That will leave PEBB with a two-year average that’s 0.3 percent above budget. But if more employees switch from the statewide plan to the more cost effective Providence Choice medical home model -- as they have in previous years, PEBB’s costs will come in lower than the current estimate for 2017, which is a 4.5 percent increase over 2016.

“They have been moving to lower-cost plans from the [statewide] plan,” said PEBB chairman Paul McKenna, who represents SEIU. “That has saved us a lot.”

PEBB has also benefited from low nationwide medical inflation, as well as the coordinated care savings from Providence Choice and other medical home health plan models. McKenna thinks continuing to hold down costs beyond the rest of the market will be difficult.

“My opinion is it’s going to be much harder to maintain that [3.4 percent inflation] target,” McKenna said. “I’m hoping the 2017 Legislature will revisit this 3.4 percent cap and see if that’s realistic. … The commercial medical and pharmaceutical trend is much higher than that.”

Management Wanted to Trim Benefits; Labor Balked

The board reached an impasse between its labor and management representatives over further cost decreases, such as increasing the copayment for emergency room visits above the $100 members currently pay. AllCare, which offers a coordinated model to members in three southern Oregon counties, suggested eliminating the copayment for ambulatory surgery centers while raising it for procedures done at more expensive hospital settings.

“We’re not trying to take anything away from anyone. We’re trying to divert them to the best care,” said Mark Fairbanks, the chief financial officer of the Oregon Health Authority and the vice-chairman of PEBB, who represents management.

If PEBB does exceed its caps, it will be able to tap into its $209 million reserve without needing more money from the state.

“We’re not going to get that [last percentage] by shifting costs to workers,” said McKenna.

In the end, the only idea that passed muster that will increase member costs was a move to raise the monthly cost for expensive speciality drugs for Kaiser members from $15 to $50, with the intention of bringing those plans in line with other plans offered by PEBB, where members pay $100 a month.

The $50 rate was a compromise -- the management representatives wanted it increased to $100 a month, while Stacy Chamberlain, who represents AFSCME members on PEBB, balked at any increase, arguing that the legislative edict that capped inflation at 3.4 percent was not to produce its savings simply by pushing costs onto employees.

On the plus side for members, the board also voted to remove the deductible for mental health services at a cost of $1.3 million. PEBB faced a legal challenge that it might be in violation of the Mental Health Parity Law, which decrees that mental healthcare should not be costlier than physical healthcare.