State-Employee Health Premiums Going Up – Nearly 50 Percent in Some Cases

For the Second Year, Workers Will Pay More – But 88-12 Split Remains

The Public Employees Benefits Board adopts rates for 2011.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, July 21.—For the second year in a row, state employees will face big increases in their health-insurance costs.

But they aren’t as dramatic as the hikes that state workers faced last year. And the one big issue in state employee health-insurance that seems to be a flashpoint for political debate – the so-called 88-12 split – remains firmly in place.

The state Public Employees Benefits Board, the agency that oversees health insurance policy for state workers, public employees and retirees, approved new rates for health insurance that will take effect January 1, 2011. At a meeting Wednesday, the agency settled on big increases in premiums for the state uniform medical plan, the plan that covers the vast majority of the workers who are covered by the state insurance program.

In some cases, the increase approaches 50 percent.

But in terms of actual dollars, the increase may not seem so immense – from $41 to $60 a month for an individual employee. Other classes of employees also will see increases.

The premium hike was not such a surprise – state officials have been warning of it for months, because of an unexpected explosion in the number of employees who took advantage of their older, more generous benefits in the last few months of 2009. The Legislature kicked in some money this year to cover part of the problem, but it counted on employees to take care of the rest. Projected inflation in medical costs also was a factor. When utilization and inflation are combined, state officials say the new rates reflect an 8.5 percent increase in costs.

But perhaps more significant is the fact that the state is not changing the structure of its plans as it did last year, when the Legislature shorted inflation costs and the board was forced to impose steep hikes in deductibles and copays, in some cases requiring them for the first time. Coupled with premium increases, state employee groups say workers typically were hit with an additional $1,100 in costs for 2010.

And the controversial 88-12 split – under which public employees pay just 12 percent of the cost of their premiums – remains in place as a condition of the state’s contracts with public-employee unions.

Unions Are Frustrated

The state plans cover 334,000 workers in state government, local government and higher education, as well as children and spouses. About 67 percent are enrolled in the state-managed uniform medical plan, while others are enrolled in plans offered by other providers.

Public-employee unions say they are frustrated by the increases, and the vote for the new rates was a narrow 4-3. Greg Devereux of the Washington Federation of State Employees voted no, as well as representatives of retiree groups.

“It’s inflation, it’s a utilization increase, we understand that,” Devereux said. “But it’s more premium costs for state employees on top of the $1,100 cut from last year. We know everybody is hurting. But state employees are struggling right now, and a lot of people are living hand to mouth, and they could be hurt by these premium increases. This could dampen our economic recovery and we are worried that it could cause a spiral.”

Devereux noted that further state budget cuts are just around the corner. The governor may be forced to order across the board cuts in September if the federal government fails to come through with $480 million in Medicaid money that the state had been expecting, and projections indicate another $3 billion shortfall awaits the state legislature in January. “Are we going to keep trying to cut our way out of this?” he asked.

He said the medical inflation that drives costs up every year is a constant irritation for public employee organizations. Medical providers get a deal that state employees never do, he said. If state workers got an automatic 7.5 percent increase every year, “you wouldn’t hear a peep out of state employees about compensation.”

Big Utilization Increase

One of the factors driving the increase was the big increase in utilization that took place toward the end of 2009.

Because there isn’t a change to copays and deductibles, they don’t expect such a rush this year. But another factor that may have been at work last year – uncertainty about layoffs – remains in play this time around. So there's no telling if the problem will recur in 2010.

Doug Porter, chairman of the board and recently appointed as director of the state Health Care Authority, said, “The governor has really put me on notice that we have got to find a way to make the state and for employees. We’ve got to bend the trend down.”

Changes for 2011

PEBB enrollees will see some changes next year regarding plan availability. Three plans with minimal enrollment or affordability issues will no longer be offered. About six percent of those covered by PEBB are in the plans that will not be offered in 2011: