Why state worker medical premiums are rising

An earlier version of this article inaccurately stated that premium rates would increase 3.4 percent in 2017. They will increase 3.4 percent for the 2015-2017 biennium. 

State employees will avoid substantial increases to medical plan premiums, for the time being. But rising heath care costs leave benefits administrators with few choices for the future.

The Public Employee Benefit Board, a group of labor and management representatives that runs state worker benefits programs, have effectively locked in premium rate increases at just below 3.4 percent for the 2015-2017 biennium — the maximum increase before state legislative approval is required.

Projections showed that premiums were set to increase an average of 6 or 7 percent in 2017, but migration of state employees to cheaper plans and other revisions to projects allowed premium increases to stay below the 3.4 percent cap.

The cap poses a growing problem for the board: Maintain medical benefits for public employees and keep premiums low, all while costs rise with no end in sight.

PEBB member Shaun Parkman represents the Service Employees International Union Local 503, Oregon's largest union. He says it's getting increasingly tough for the board to stick to the 3.4 percent cap.

A driving factor is the skyrocketing costs of hospitalization and prescription drugs.

"Pharmaceutical costs nationwide are really crazy, and they’re really hurting our ability to pretend that we’ll be able to keep to this cap," Parkman said.

Take specialty drugs as an example. They're prescribed for complex and chronic conditions like hepatitis C, multiple sclerosis, rheumatoid arthritis and hemophilia.

Skyrocketing drug costs stump insurers, Oregon lawmakers

Last year, specialty drugs accounted for 0.6 percent of Kaiser's PEBB prescriptions, but made for 28 percent of total prescription costs, according to SEIU. The price of specialty drugs also increased 27 percent last year.

A result of those price increases? The specialty drugs co-pay for Kaiser PEBB members will go from $15 to $50 in 2017. All other medical plans for SEIU members charge a $100 co-pay for specialty drugs.

PEBB has few options when it comes to pricing, Parkman said.

The free market has allowed pharmaceutical prices to soar, and Medicaid and the Oregon Health Plan have more ways to control the cost of medical plans, according to Parkman. PEBB doesn't have those tools.

One course of action: Make employees pay more for their health care. SEIU 503 members pay either 5 percent or 1 percent of their medical plan premiums, with the rest covered by their employer.

Union representatives on the benefits board would resist shifting increased costs to employees, Parkman said. He added that the state Legislature has made clear they don't want to shift costs to workers.

Another option is to keep people off expensive drugs by pursuing early detection and low-cost and preventative health care. Sometimes that can be as simple as a doctor prescribing a healthy diet and exercise — a lifestyle change — rather than pills.

Some of those programs are already in place. They're having an impact but more can be done, Parkman said

"We are absolutely looking for ways to make nutrition and physical activity more convenient, and encourage people to participate in that," he said. "We do know in a lot of cases that can have more of an effect than some of these pills."

PEBB is expected to finalize 2017 premium rates at its next meeting on June 21.

The board also voted for the following changes during its May meeting:

• The co-pay for Kaiser specialty drugs will go up.
• No change in emergency room visit co-pays.
• The deductible for in-network outpatient mental health treatments will be removed.
• Added coverage for dental night guards and athletic mouth guards.
• Expanded Providence Choice coverage to Tillamook, Grant, Harney, Morrow and Wheeler Counties. Kaiser will expand into Lane County.

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