PEIA a Better Deal Than Most Private Insurance

Part of the statewide discontent this spring centered on the rising premiums borne by state employees who have PEIA as their primary health insurance.

Headlines amplified this sentiment, and ongoing discussions have focused on what should be done to curb these increases. Nonetheless, these are claims that deserve to sink or swim not on their emotional appeal, but on their empirical validity — both in terms of accuracy and prevalence of the belief. Luckily, research can address the accuracy, and the results of a new “State of the Mountain State” poll conducted by the Cardinal Institute for West Virginia Policy can address the prevalence.

According to a study by the Kaiser Family Foundation, for individuals within the private sector who have employee-provided health insurance, average monthly premiums paid by workers for family coverage rose from $344 in 2011 to $476 in 2017. For those of you doing the math at home, that’s slightly more than a 38 percent increase in monthly expenses over six years. Ouch!

As for the monthly out of pocket premiums for PEIA?

Since Plan Year 2011, monthly costs for family premiums have increased $30. Yes, you read that correctly — thirty dollars, not percent. Of course, this doesn’t take into account the increases associated with moving into higher income brackets and thus higher PEIA premiums. Even if we take the salary-premium system of PEIA into account, a roughly equivalent jump in monthly family premiums would be associated with about a $20,000 salary increase over the same period.

I don’t know about you, but I’d happily trade an additional $1,600 in annual insurance premiums for $20,000 more in salary.

However, there’s more to the costs of health insurance and health care than just the monthly premiums. Deductibles and out of pocket maximums are considerations not to be taken lightly. But again, PEIA takes a solid lead along both of those margins when compared to employer-provided health insurance.

Per PEIA’s own publicly available information, for a West Virginia family of median household income they would be looking at an annual deductible of $950, and an out-of-pocket maximum of $5,500 for the top-tier plan with both a deductible and out-of-pocket maximum listed.

But how would those figures compare to the average private plan?

The average American family would face a deductible more than three times that high, at roughly $3,200. Average maximum out of pocket expenditures total roughly $7,700. Again, that’s in addition to rapidly rising monthly premiums.

If we further consider costs for coverage made possible by the Affordable Care Act, PEIA is an increasingly enviable option. Average monthly premiums come to nearly $1,250, average deductibles come to nearly $7,400, and average out-of-pocket maximums come to nearly $12,000.

I repeat, PEIA is a pretty good deal.

In case costs aren’t convincing enough, let’s discuss how these costs are determined. With most insurance plans — not just health — a number of factors are considered in determining how risky of a customer you are. For example, we’re all familiar with how speeding tickets, accidents, DUIs, and car types affect the price paid for auto insurance. Generally speaking, people who exhibit such risky behaviors behind the wheel should be paying more for their insurance because they are also much more likely to need to use it.

Similar examples can be used to illustrate life insurance policies. The older and unhealthier a person is, the higher their life insurance premiums tend to be.

Likewise, employer-provided health insurance and ACA plans do the same. Those insurance companies take into consideration factors including age, tobacco use, gender, body mass index, pre-existing medical conditions (high blood pressure, diabetes, etc.), family history, profession, zip code, marital status, and so on.

But PEIA?

Again, from PEIA’s own information, “premiums are based on the employee’s annual salary.” To the extent that healthy lifestyle choices are even a factor, they extend to a $50 per month discount for families that are tobacco-free.

Diabetes? Vegan? High blood pressure or cholesterol? Run five miles every morning? Family history of congestive heart failure or breast cancer? Yoga instructor? Live in an overwhelmingly statistically unhealthy area?

It doesn’t matter. Just the salary figure, thanks.

Despite these facts, the “State of the Mountain State” poll shows that 57 percent of West Virginians believe that PEIA is the same or worse than health insurance provided by private companies.

Health insurance and health care might be expensive propositions, but the numbers bear it out — PEIA is a sweet deal if you’ve got it.

Jessi Troyan is a Ph.D economist and the development director for the Cardinal Institute for West Virginia Policy, a free-market nonprofit research organization based in Charleston

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