During the teacher strike a couple weeks ago, West Virginia educators were asking for two main things: a pay raise and for legislators to “fix PEIA.” While the program’s finance board ultimately agreed to freeze proposed changes to the plan that would have increased costs, truly fixing PEIA on the long term might not be that simple.
Watching Premiums Rise
Jennifer McCallister and her husband are both school teachers in Wirt County. Earlier this month, the McCallisters joined thousands of other school employees at the Capitol.
“I didn’t have a huge issue with PEIA before they proposed all the changes in December,” said McCallister.
The change that most alarmed her was one that would calculate her family’s premiums from “total family income” rather than based on the average of her and her husband’s salaries. That shift would mean they would go from paying $189 a month to $517 a month in premiums. Still yet, their premiums and other costs have been on the rise.
“Our premium has gone up about $50 a month from two years ago,” she said. “Just simple visits like when I take my kids to MedExpress because I think they have strep throat or something. Last year, it was a $30 copay. This year it’s a $50 copay. It’s just all those little things that add up throughout the year.”
McCallister said she and her husband knew teaching wasn’t a particularly lucrative career path – but that hasn’t really bothered them because good benefits have traditionally been part of the deal. She says she understands that health care costs as a whole are going up, but feels that the situation is unsustainable.
An Aging, Sick Population
“Health care utilization is going up and when health care utilization goes up, the premiums go up to reflect that,” said Carolyn Long Engelhard, director of the Health Policy Program at the University of Virginia School of Medicine. Engelhard researches health care and the factors that influence costs.
Engelhard said unhealthiness drives up the cost of insurance.
“The more comorbidities you have — maybe diabetes, hypertension and so on — then you’re going to have higher drug costs, which will also drive up the premiums.”
The whole idea behind health insurance is that a big pool of people who don’t use the service very much subsidize a smaller group of those who need it for more serious conditions or more often. The healthier that “pool” is, the costs can be more manageably spread around. But the sicker that population is, the more expensive health insurance becomes for everybody.
Englehard also says that it’s not just premiums on the rise.
West Virginia’s population is aging and sick. According to the Centers for Disease Control and Prevention, we have some of the highest rates of obesity, diabetes, cancer, and hypertension in the country. Those rates mean that more people in the West Virginia health insurance pools are using health care, which makes it more expensive for everyone.
“I’m coming to the realization that we have a population that does not necessarily want to be accountable for their health and wellness and people don’t realize that that impacts the cost that they’re paying,” said PEIA director Ted Cheatham.
“All they know is what they’ve had and what’s coming out of their pay and how they budgeted to live on the money they’re given – which they perceive – and I agree with some of them that it’s not enough,” Cheatham said. “And they don’t want it to be $110 a month.”
At the beginning of this year, PEIA rolled out a wellness program known as Go365 to try and incentivize people to get healthier. The program asked people to fill out a health assessment with questions about weight, eating habits, stress levels and blood pressure, among other things. Each answer awarded participants a certain number of “points.”
Almost immediately, there was a lot of public outcry — with many calling it an invasion of privacy. Vocal opponents to the wellness program criticized the provision that penalized those without enough wellness “points” with an extra $25 a month in premiums and an additional $500 tacked onto their deductible. Less than a month after Go365 was rolled out the penalties were removed. On Monday, PEIA announced they were canceling their contract with Go365.
But experts say the wellbeing of a population isn’t the only thing that impacts the cost of premiums and deductibles. There’s also the actual cost of what it takes facilities and health professionals to treat illnesses.
“The health care you get today is more than it was 10 years ago,” said Gary Claxton, director of the healthcare marketplace project for the Kaiser Family Foundation. “It’s better. It’s more expensive, but it’s also better. Because we can do more things for more people, so that naturally has an effect on the cost.”
The effect means that medical inflation is growing faster than general inflation.
Medical inflation is the rate at which medical prices increase annually. For the past few years, medical inflation has been hovering around 6.5 percent a year (which is good, by the way – in 2007, medical inflation was around 12 percent). Meanwhile, regular inflation has been between 2-3 percent. Cheatham said these are national trends – not something that could be easily or even possibly controlled at the state level.
“There are many, many things that must happen at the federal level – we cannot control them here. Drug spend is an incredibly … complex, convoluted system,” Cheatham said.
In the United States, drug companies can basically charge whatever they want for a product — remember the price hikes on EpiPens in 2016?
Right now, PEIA is funded through a combination of state appropriations and employee contributions. On average, the state pays about 80 percent of the cost of insurance through PEIA and the patient pays roughly 20 percent. With health care becoming more expensive across the board, everyone has been paying more.
Some people want the state to allocate more money to PEIA, but the program struggles to get fully funded as it is. Unless new industry brings money into the state — or the federal government makes major changes that impact drug pricing and inflation — the answer may be: higher taxes or higher premiums.
This story was originally published by West Virginia Public Broadcasting.