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PEIA finances stable heading into next fiscal year

Members of the PEIA Finance Board received a report Thursday showing that the financial for West Virginia's public employee health benefit program remain stable. (File photo by Steven Allen Adams)

CHARLESTON – The financials of the health insurance benefit for West Virginia public workers appears to stable heading into the next fiscal year.

Members of the Public Employees Insurance Agency (PEIA) Finance Board met Thursday afternoon for its regular meeting, with members attending in person at PEIA’s Kanawha City headquarters and virtually.

The PEIA Finance Board received a report on PEIA’s most recent financial statements as of the end of April, detailing the health of the program over the last 10 months of fiscal year 2026.

PEIA Director Brent Wolfingbarger told board members Thursday that PEIA’s plans for state employees, non-state employees (including local government participants) and retirees are outperforming budget expectations due to strong investment returns and a strategic shift toward lower-cost biosimilar drugs.

Despite this positive trend, Wolfingbarger warned that rising healthcare costs and potential end-of-year claim spikes still necessitate cautious financial monitoring heading into fiscal year 2027 beginning July 1.

“The good news is the plan is performing better than expected during the first 10 months of this fiscal year that began on July 1, 2025,” Wolfingbarger said. “However, our optimism must be guarded by the fact that PEIA has historically experienced higher healthcare expenditures toward the end of the fiscal year, as members exhaust of deductibles and maximum amount-of-pocket costs.”

“Additionally, providers can submit claims for services rendered before June 30th for several months afterwards, and those yet-to-be filed claims could negatively impact the plan’s final fiscal year 2026 financial results,” Wolfingbarger continued. “Healthcare economists continue to predict that medical and prescription expenses will increase steadily and substantially during fiscal year 2027 and future out-years, so PEIA will need to monitor and make adjustments as needed.”

PEIA operating revenues of $926 million are slightly behind the budgeted $978 million, but investment incomes of $19.5 million were ahead of the $7.5 million budget estimate and 64% ahead of the prior fiscal year. Total revenues of $956 million were $19 million ahead of revenues in the prior fiscal year.

Medical claims were $67 million ahead of plan estimates and flat compared to the prior fiscal year. Net prescription drug claims were $17 million below plan estimates and 7% below claims in the prior fiscal year. Total expenses of $832 million were $102.9 million below plan estimates.

A primary driver of the plan’s positive performance is the optimization of the prescription drug spend. Management noted a significant shift in the biosimilar market, particularly regarding high-spend drugs like Tamara. The FDA defines biosimiliars as medications with near-similar characteristics as FDA-approved biological drugs, but less expensive.

“What we’ve preached for years is rebates are fine, but we don’t want rebates; we want lower-cost drugs up front,” said PEIA Chief Financial Officer Jason Hart. “What we’ve seen is there was a huge move in the biosimilar market this year … When the biosimilars came available, we lost rebate revenue, but we also lost the cost of those more expensive drugs. So, our net plan actually had a net savings. They can keep all the rebates if they want as long as we’re getting the best price up front.”

According to Hart, the total gross drug spend is $55 million below budget, confirming that behavioral changes and utilization optimization are contributing to savings beyond simple enrollment fluctuations.

The retiree sector remains financially stable but faces specific external pressures regarding Medicare. The net position for the Retiree Health Benefit Trust was $2.355 billion with $278.7 million in investment revenue, significantly outperforming the $126 million budget. Medical and pharmacy claims are performing $7.5 million and $4.8 million ahead of budget, respectively.

However, changes introduced by the federal Inflation Reduction Act regarding how member out-of-pocket costs are treated have been described as “very detrimental” to plan performance. These federal changes are passing costs on to plan sponsors and non-utilizing members. Currently, the active side’s “pay-go” increases are helping to offset these costs, but it remains a primary area of concern for future years.

PEIA’s five-year financial projection shows that PEIA is currently meeting all required legislative and actuarial reserves. Total PEIA revenue for fiscal year 2027 is projected to be $120 million ahead of previous plans, largely due to investment performance. While state agency pools are within $1 million of their targets, non-state agencies are “hugging” the reserve line. However, no major concerns were raised as these figures align with planned premium changes already passed by the Board.

The PEIA Finance Board approved a motion Thursday to adjust the salary tiers for the fiscal year 2027 financial plan. This adjustment offsets the $1,800 across-the-board pay raise for state employees approved by the Legislature during the recent session. Without this change, many employees would have moved into higher salary tiers, resulting in higher premiums that would effectively negate the pay raise.

“Despite the challenges we face, PEIA’s dedicated employees will continue to work tirelessly to provide high-quality customer service for our members and to conduct our operations as effectively and cost-efficiently as possible for the state’s tax revenue,” Wolfingbarger said.

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