Interim Report: Joint Committee on Insurance and PEIA

The Joint Standing Committee on Insurance and PEIA met Tuesday afternoon during legislative interim meetings at the Capitol to receive a report from Ben Lewis, managing director of Strategy and Innovation for BDO USA, regarding possible cost savings for the Public Employees Insurance Agency (PEIA).

The firm was commissioned by the Legislature to conduct a study to evaluate the current state of PEIA, using financial analysis comparing the program to other states and to provide recommendations to the Legislature.

Lewis gave lawmakers an extensive list of choices that could improve the finances of the Public Employees Insurance Agency, including possibilities like removing city and county employees from eligibility, ending the spousal option and bolstering fraud detection capabilities.

According to Lewis, the potential result could be annual savings of about $55 million. That accounts for roughly 5 percent of PEIA’s total annual cost of around a billion dollars.

Lewis stated that generally, plan participants appear to be satisfied with the benefits offered by the PEIA, including the relatively low premiums and out of pocket maximums when compared to the private sector.

The report concluded that PEIA’s recent and anticipated annual premium increases of about 14 percent are justified given that costs were frozen for people in the program between 2018 and 2022.

The top reason given for increasing expenses was prescription drug coverage. That’s primarily driven by specialty drugs, especially medications like Ozempic and other similar brands that are prescribed for diabetes and popular for weight loss, according to Lewis.

The report offered lawmakers nine of options for keeping PEIA cost increases at bay. They report’s options with estimated potential savings are as follows:

1. Improvement of Wellness Programs: Doubling investment in wellness programs and targeting chronic conditions could lead to net savings of $1.7 million by increasing participation and reducing claims.
2. Eliminating Spousal Surcharge Participants: Removing policyholders whose spouses have employer-sponsored insurance but opt for PEIA coverage could result in an expense reduction of $15 million.
3. Improved Anti-Fraud Protection: Implementing large anti-fraud team coupled with anti-fraud software could save between $17-$27 million annually through fraud recoveries.
4. Reduction of non-state (county and city) employee members: This could decrease the number of policies by more than 15,000. This would have $1 million in net savings, but local governments would need a full year to begin seeking requests for proposals from private health insurance companies to replace PEIA coverage.
5. Importing Prescription Drugs: The possibility of importing additional drugs from Canada is estimated to generate $5.3 million in annual savings.
6. Supplemental Drug Coverage: Partnering with discount programs like GoodRx and Cost Plus Drugs could save PEIA between $1.1-$3.3 million a year by offering member discounts outside traditional coverage.
7. Specialty Drugs: Hiring staff  to focus on more efficiency for specialty prescription drug use through site-of-care management and annual market checks could save roughly $8 million a year.
8. Incentivizing more use of High-Deductible Health Plans and Health Savings Accounts: Additional people to making modest PEIA contributions for such accounts could save between a half million and $1.6 million annually by creating more consumer-driven healthcare choices.
9. Family Income Rate Tiering: Adjusting premium levels based on total household income (including income from outside PEIA employment) could increase premium revenue by an estimated $20 million, promoting fairer cost sharing.