CHARLESTON — “Almost surreal” investment earnings helped offset higher-than-projected medical expenses, allowing the West Virginia Public Employees Insurance Agency to finish the 2020-21 budget year with a relatively small operating deficit of $27 million.
PEIA earned $40.6 million in investment income during the budget year, more than double what it expected to earn.
The state Retiree Health Benefit Trust did even better, producing what PEIA chief financial officer Jason Haught termed “almost surreal” earnings of $360.4 million, or nearly four-times the projected earnings of $95.8 million.
Both funds are managed by the state Investment Management Board, which reported to the Legislature last week that it had a very good year in fiscal 2020-21, growing total fund assets from $20.14 billion on June 30, 2020, to $25.05 billion as of this June 30.
Similarly, state officials last week told legislators that the state’s Rainy Day emergency reserve funds would top $1 billion this week.
That, in large part, is because the portion of Rainy Day funds that the IMB manages grew from $764.97 million on June 30, 2020, to $851 million this June 30.
The IMB earnings went a long way to offset medical expenses that came in about 16% higher than projected for the year, board members learned.
Total medical expenses and drug claims of $641.2 million were $20.3 million higher than estimated.
However, Haught told the Finance Board he feared a combination of elective procedures that PEIA insurees had put off during the 2019-20 budget year, and unanticipated costs of treating COVID-19 cases, could have caused an “unmanageable spike in health care usage.”
“All things considered with the COVID pandemic, we’ve had to endure ... and with all the difficulties we’ve had in the health care industry, its pretty good news,” he said.
Even with the operating shortfall, PEIA finished the budget year on June 30 with $162.37 million in reserve funds.
However, West Virginia Education Association President Dale Lee reminded board members that relying on investment earnings is not a long-term solution for an agency that has expenses of $750 million or more a year.
“The news is good for this year, but we are facing a challenge coming up,” he said.
“We knew in 2018 that just a Band-Aid was not going to be the fix our people want,” Lee said, referring to the statewide teacher strike, which was prompted, in part, by concerns over rising PEIA costs.
As part of the settlement, Gov. Jim Justice agreed to set up a PEIA task force to come up with viable long-term solutions to issues with health insurance for public employees, but as Lee noted, the task force stopped meeting in January 2019 and the Legislature never took up any of its recommendations to control rising employee health care costs.
That has left teachers and school service personnel feeling as if they do not have a seat at the table in working on long-term solutions, he said.
“It makes people leery. It makes people angry,” Lee said.
Release of the financial report for the 2020-21 budget year is a prelude to the unveiling of the 2022-23 PEIA benefits plan, which will be the main topic for the Finance Board’s next meeting, on Oct. 21.
Afterward, Finance Board members will hold six public hearings on the proposed benefits package between Nov. 8 and Nov. 18, with a telephonic town hall scheduled for Nov. 8, and a hearing in Charleston set for Nov. 9.
Final approval of the new plan is expected at the board’s December meeting.
Traditionally, the Finance Board approves the benefits plans six months before they go into effect. This gives state, county and municipal governments and agencies, and school boards, ample time to make budget adjustments needed to cover any premium changes.