One of the most significant pieces of legislation passed in West Virginia this year was SB 268, which overhauled the Public Employees Insurance Agency (PEIA) to address the program’s solvency and preserve the provider network after years of state inaction following the 2018 teachers’ and service personnel strike and Governor Jim Justice’s promise to freeze premiums throughout his term. While the headlines of the legislation largely involved the public employee premium increases that will go into effect later this year, less talked about are the future premium increases for both those insured by PEIA and the state.
Lawmakers touted that SB 268 will “save” the state over $500 million through FY 2027. Those savings are primarily achieved by increasing costs on those insured by PEIA through two main avenues: enrollee premium increases for each of the next four years and a premium surcharge for dependent spouses who are offered health insurance through their own job, regardless of the cost or quality of that coverage. Together, these changes will achieve the legislation’s intent to get PEIA back to a strict 80/20 employer-employee premium split.
The enrollee premium increase of 24.2 percent on average will impact all active employees of state agencies, colleges, universities, and county boards of education effective July 1, 2023. Additionally, in anticipation of costs continuing to go up annually, the PEIA Finance Board projects additional enrollee premium increases in each of the following three years, with an anticipated 10.5 percent premium increase in FY 2025, a 10.4 percent increase in FY 2026, and a 10.3 percent increase in FY 2027. All told, PEIA enrollees impacted are expected to see a cumulative 67 percent increase in their premiums from FY 2023 to FY 2027 before accounting for any spousal surcharges.
The PEIA Finance Board estimates that the spousal surcharge–an additional monthly cost of between $139-147 per month for state agency, board of education, college, or university employees who have a spouse on their PEIA plan that is eligible for another employer’s health insurance–will impact around 14,000 families. The Board estimates that around 9,000 families will pay the surcharge while about 4,800 will drop their dependent PEIA coverage.
Together, these premium changes will have fairly significant impacts on health insurance costs for workers and families this year and in upcoming years as premiums continue to increase. For the approximately 14,000 families who see both the premium increase and the spousal surcharge (or the increased costs of moving to other insurance) the $2,300 public employee raise they will receive later this year via SB 423 could be more than wiped out.
Costlier benefits for public sector workers could have impacts far beyond their own pocketbooks. Across state agencies, public employees are paid less than their peers in neighboring states and in the private sector. The average salary for correctional officers in West Virginia is over $10,000 less per year than the national average, with starting salaries below those in neighboring Ohio, Pennsylvania, and Maryland. The average teacher salary in West Virginia of $50,315 ranks 50th in the nation, while the average starting salary of $38,052 ranks 38th. Our state’s education service personnel salaries rank 26th and higher education faculty salaries rank 47th.
While state employees received pay raises in both 2022 and 2023, those raises combined fall short of inflation in many cases and still leave the West Virginia public sector paying far less than neighboring states across many positions. A public employee making $40,000 in January 2021 would have received a $2,000 raise in July 2022 and will see a $2,300 raise in July 2023, but after adjusting for inflation, both raises are more than canceled out today–and this is before accounting for the impact of increased health insurance premiums.
While the private sector has largely recovered from the pandemic recession, the state has only recovered 90.6 percent of state government jobs. Below-average public sector pay has been a contributing factor to vacancies across state agencies, impacting public services and, often, safety for all West Virginians. Staffing shortages have led to a state of emergency in state correctional facilities, increased classroom sizes and long-term substitutes in schools that cannot fill vacancies, and child welfare crises. With pay continuing to be below-average combined with health benefits becoming more costly via SB 268, the state’s vacancy issues could soon be exacerbated.
As the employer, the state pays 80 percent of PEIA premiums. The freeze on premium increases since 2018 has also shielded the state’s general revenue fund from increased medical costs. While state lawmakers did approve a one-time allotment to the state’s PEIA Rainy Day Fund to offset increased medical costs in 2019, that was funded with state surplus dollars rather than an annual general revenue fund expenditure. Under SB 268, the state will incur an expected additional $108 million in costs in FY 2024 alone, with additional costs of about $62 million in FY 2025, $68 million in FY 2026, and $74 million in FY 2027.
These new costs impacting the annual budget could put a strain on state revenues, particularly in light of the significant tax cuts passed in 2023 and the potential for more automatically-triggered cuts in upcoming years.
PEIA is an incredibly important program for the more than 220,000 West Virginians for whom it provides health coverage, the providers and hospitals it helps support, and all West Virginians. Lawmakers must take a holistic approach to PEIA and state employee wages with an understanding of how the two impact one another and how vacancies impact the well-being of all West Virginians.
