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For about two hours Tuesday, members of the PEIA Task Force got a crash course in all things PEIA, including how the health care plan provider operates and why, like most health insurance programs, it is seeing its costs increase annually.

“It’s our responsibility to understand this plan,” task force chairman and Justice administration chief of staff Mike Hall told the 29-member panel. “As has been said by many, ‘Fix PEIA.’ Well, you gotta know what you’re fixing.”

PEIA Executive Director Ted Cheatham presented members with an overview of what he called “the wonderful world of PEIA,” encompassing a 100-plus page Powerpoint presentation.

Cheatham went over the basics of the plan, which covers about 230,000 people and pays out more than $900 million a year in claims.

He said prescription drug costs are the primary reason that PEIA claims are increasing in the neighborhood of $50 million a year.

“The biggest driver, by far, right now, is pharmacy expenses,” Cheatham said. “It’s not a state problem. It’s a national problem.”

Dr. Rahul Gupta, commissioner of the Bureau of Public Health, noted that West Virginians lead the nation in total numbers of prescription drugs they take frequently for chronic diseases, such as high blood pressure or diabetes, that can be treated with exercise and lifestyle changes.

“The wellness/preventive medicine strategy has to be a very critical component of this whole discussion,” Gupta said, adding that the state cannot spend its way out of rising health costs.

Cheatham has long advocated for emphasizing wellness programs in PEIA. His most recent proposal was a Go365 plan. That plan rewarded successful participants with gift cards and other prizes but imposed higher premiums and deductibles on those who either did not participate or failed to meet wellness and healthy living goals. It proved so unpopular that it was abandoned at the order of the governor.

Retired American Federation of Teachers/West Virginia president Judy Hale said she believes outrage over Go365 was a contributing factor that led to the nine-day statewide teacher strike.

“I understand your goal, particularly with the state of health in West Virginia, but there’s a difference between incentive to do something and punishment for not doing it,” Hale told Cheatham.

“I believe your punishment for not participating correctly in Go365 caused a nine-day strike,” she said.

Hall, noting that Gov. Jim Justice immediately responded to teachers’ concerns in halting the program, added, “Whatever you call it, some wellness strategy ... to me, is a meritorious goal.”

During his presentation, Cheatham made the argument that PEIA is a relatively efficient health care plan, with administrative costs running at about 3 percent of total plan costs. He said that, even with recent increases in premiums, copays and deductibles, it remains a bargain, compared to private-sector health insurance plans.

However, Cheatham said he realizes that means little to low-paid teachers and public employees who’ve gone years between pay raises.

Speaking as a state employee, Cheatham said, “ ‘Look, I’ve made $30,000 a year for the last 10 years, and you’re raising my premium, and I can’t afford it.’ ”

He said PEIA has kept its costs relatively low by paying rock-bottom reimbursements to health care providers in the state.

“PEIA is the lowest payer in the state of West Virginia,” Cheatham said.

He said PEIA pays hospitals at Medicaid rates, or about 30 percent of what they charge, and 70 percent of their costs.

“I think our rates are as low as we can get to hospitals, and I’m thankful they take our patients,” Cheatham said.

For physicians, payments are at or just above federal Medicare rates, while most private-sector plans pay physicians at 135 percent to 200 percent of Medicare rates, he said.

While there has been talk of privatizing PEIA, Cheatham said he does not believe it would reduce plan costs substantially, since PEIA currently operates with a small core staff of 50 to 55 employees, and contracts out all major services, such as its medical claims administrator and prescription drug administrator.

“All these products are put out to bid, and we’re taking, hopefully, the best in class at the least cost,” he said.

Created by executive order at the height of the teacher strike, the next step for the task force will be to conduct at least 11 public hearings around the state to get feedback on issues with PEIA and suggestions to improve the benefits plan, Hall said. He said one or two of the hearings will be conducted statewide via video internet links.

The task force’s subcommittee on public outreach will meet next week to set up times and locations for those hearings.

Reach Phil Kabler at, 304-348-1220 or follow @PhilKabler on Twitter.