MINUTES OF THE meeting
of the
ASSEMBLY Committee on Ways and Means
Eighteenth Special Session
July 31, 2002
The Committee on Ways and Meanswas called to order at 2:42 p.m., on Wednesday, July 31, 2002. Vice Chairwoman Giunchigliani presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry Jr., Chairman
Ms. Chris Giunchigliani, Vice Chairwoman
Mr. Bob Beers
Mrs. Barbara Cegavske
Mrs. Vonne Chowning
Mrs. Marcia de Braga
Mr. Joseph Dini, Jr.
Mr. David Goldwater
Mr. Lynn Hettrick
Ms. Sheila Leslie
Mr. John Marvel
Mr. David Parks
Ms. Sandra Tiffany
COMMITTEE MEMBERS EXCUSED:
Mr. Richard D. Perkins
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Connie Davis, Committee Secretary
Carol Thomsen, Committee Secretary
Vice Chairwoman Giunchigliani opened the meeting at 2:42 p.m., and, after roll call, advised that a quorum was present. Vice Chairwoman Giunchigliani asked that the record reflect Speaker Perkins was excused.
Vice Chairwoman Giunchigliani asked that the members take a moment to review the Assembly Committee on Ways and Means’ Rules for the 18th Special Session (Exhibit C).
Mark Stevens, Assembly Fiscal Analyst, advised the members that the Committee Rules for the 18th Special Session were adapted from the committee’s adopted rules for the 2001 Legislative Session. Mr. Stevens indicated he had removed references to subcommittees and approval of budgets.
ASSEMBLYWOMAN CHOWNING MOVED APPROVAL OF THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS COMMITTEE RULES FOR THE 18TH SPECIAL SESSION.
MR. MARVEL SECONDED THE MOTION.
THE MOTION WAS UNANIMOUSLY CARRIED. (Mr. Perkins, Mr. Arberry, Ms. Cegavske, Ms. Tiffany were absent for the vote.)
Vice Chairwoman Giunchigliani discussed the Governor’s Proclamation dated July 31, 2002, (Exhibit D) which provided the authority for the committee to address consideration of legislation that would increase the state’s contribution to the Public Employees’ Benefits Program. Increasing the state’s contribution would maintain the historical level of support for participants and retirees.
Mr. P. Forrest Thorne, Executive Officer, Public Employees’ Benefits Program (PEBP), identified himself for the record and discussed the request for an increase in the state subsidy to the PEBP for active state employees and retirees. Mr. Thorne advised that the PEBP had experienced many challenging issues during the past year, foremost of which had been the rising cost of health benefits for the plan’s 31,000 participants. Mr. Thorne indicated the state’s subsidy for active state and retiree costs would have a “significant” influence on decisions the PEBP Board would address in the coming week concerning plan and rate changes for the 2003 plan year.
Mr. Thorne indicated the report (Exhibit E), that had been distributed to the committee, would provide sufficient background information in order to make a determination concerning whether a mid-year adjustment to the state subsidy was warranted.
Mr. Thorne advised that the PEBP staff had projected that in the eighteen-month period from July 1, 2001 through December 31, 2002, the plan’s funded reserve would have eroded $24.6 million (from $20.4 million to -$4.2 million), which represented the equivalent of two months in claims expense for the plan.
In addition, Mr. Thorne advised that in the PEBP self-funded plan, benefit claims represented 80 percent of all expenses, or that the plan was in full control of only 20 percent of its costs. Mr. Thorne explained that the 20 percent costs included preferred provider network fees, third-party administrator fees, eligibility and enrollment system costs, and PEBP staff and supplies costs. For the 2002 plan year, PEBP staff projected a 10 percent increase in medical expenses based on the plan’s historical trends by calendar year. Page 5 of the report (Exhibit E) contained information that showed between 1998 and 2000 the plan experienced a better-cost trend than industry norms (-7 percent and 10 percent respectively). Mr. Thorne explained that history, in addition to the plan’s size, indicated the PEBP could rely more on their own experience than on industry trend as a whole. However, Mr. Thorne indicated the 10 percent increase was inadequate when actual claims paid in the latter part of 2001 and year-to-date in 2002 exceeded the trend by approximately $25 million.
Mr. Thorne summarized claims paid in excess of past trend:
· Fiscal Year 2001 Claims Paid............................. $91.3 million
· Fiscal Year 2002 10 percent Trend................... $100.4 million
· Fiscal Year Actual Claims Paid......................... $125.4 million
· Claims in Excess of Trend.................................... $25.0 million
Breakdown of Claims in Excess of Trend:
o Large Claims in excess of Median$5.3 million 4% of actual claims paid
o Claims Inventory Reduction.... $2.5 million 2% of actual claims paid
o Other Claims in Excess of Trend$17.2 million 14% of actual claims paid
Mr. Thorne further indicated that the 14 percent of actual claims paid in excess of trend could not be identified to any one specific cause.
With the same trend being faced by employers nationwide, Mr. Thorne used the California Public Employees' Retirement System (CalPERS) group insurance plan (1.3 million members) as a point of comparison. Mr. Thorne indicated the CalPERS plan was facing a 25 percent increase in healthcare maintenance organization contracts and a 19 percent to 22 percent increase for preferred provider plans. As California worked to streamline their plans, Mr. Thorne advised that over 120,000 of their 1.3 million members would be forced to change plans on January 1, 2003.
Mr. Thorne pointed out that information on page 6 of the report (Exhibit E) showed that the PEBP’s large claims in excess of $25,000 accounted for those paid for the eighteen-month period between January 2001 and June 2002. Mr. Thorne advised that the cost impact of those claims was not anticipated in the 2002 rate setting process, and the amount of claims in excess of $100,000 more than quadrupled during the same time period.
Mr. Thorne pointed out that the claims inventory was an ongoing problem when he began his tenure at the PEBP a year ago and while the PEBP staff had worked continually with the claims administrator to reduce the backlog, the true volume and valuation of those claims was not incorporated into the 2002 rate setting process.
Vice Chairwoman Giunchigliani questioned what the percent or dollar amount of the rate increase would have been if the rate analysis had included the claims incurred but not paid.
Mr. Thorne responded that when the rate changes for January 1, 2002, were reviewed, the PEBP staff relied “on what was better than expected experience for the plan.” Mr. Thorne added that an accurate accounting of the claims inventory would have increased the rate by several percentage points to 10 or 12 percent rather than the just under 8 percent that was requested for January 2002.
Moving ahead to the coming plan year, Mr. Thorne advised that projections for state participants in the self-funded plan for January 1 through June 30, 2003, resulted in program costs exceeding current premium levels by approximately $19.2 million (15 percent increase for medical claims was incorporated into the projection). Mr. Thorne advised that the $19.2 million projection included staff recommendations that the $4.2 million deficit and a $2.5 million restoration of the reserve would be recovered in plan and rate changes effective January 1, 2003. Additionally, Mr. Thorne said plan changes totaling $2.9 million would be recommended to the PEBP Board on August 8, 2002.
Mr. Thorne explained that current premium rates would generate $59.1 million for the self-funded program during the period from January to June 2003. Mr. Thorne pointed out the report (Exhibit E) provided a breakdown of the plan costs, recovery of the deficit, reserve restoration, and recommended plan modification savings which “netted out” against the current rate structure, and the revenue generated from the current rate structure indicated a $15 million shortfall for state participant coverage. In addressing the funding shortfall, Mr. Thorne indicated an overall 21.1 percent increase in total funding would be required for the six-month period from January to June 2003. Mr. Thorne advised that because of the plan’s current scope of benefits, further plan modifications to offset the funding shortfall would require the “wholesale elimination of benefits” rather than moderate reductions.
Mr. Thorne requested the committee’s favorable consideration of legislation that would increase the state subsidy effective January 2003:
· For each active participant, the subsidy would be increased from $384.50 to $465.78;
· For each retired participant, the subsidy would be increased from $217.84 to $263.89, and
· The 21.1 percent increase would result in a total state subsidy for active employees of $61.8 million and $8 million for retired employees for the six-month period (January to June 2003).
Mr. Thorne indicated that if the subsidy increase was approved, the PEBP Board would determine how to implement the participants’ share of that funding. Additionally, Mr. Thorne indicated that action concerning the legislation would be taken at the PEBP Board meeting next week and in late August concerning the Fiscal Year 2004 and Fiscal Year 2005 budget request for state subsidy.
In reference to changes that had been implemented, or were in the process of implementation to avoid unanticipated changes, Mr. Thorne advised that:
· A new third-party administrator, Benefit Planners, had been implemented effective July 1, 2002. Benefit Planners had an “impeccable reputation” for excellent customer service and were rated by an independent claims audit firm as being first among all finalists. PEBP had already begun to receive more complete reports on claims inventory and dollar value of charges. Benefit Planners was also scheduled to eliminate all backlogs resulting from the transition by the first week in August;
· PEBP staff would recommend to the board that premium updates be implemented on a fiscal-year basis rather than its current calendar-year structure to provide for the coordination of budget requests and legislative consideration of state subsidy amounts with the most recent claims history;
· Requests for proposals (RFPs) would be issued for services in the next few months in anticipation of the Fiscal Year 2004 plan. Those services included:
o Statewide Healthcare Maintenance Organization (HMO);
o Statewide Preferred Provider Organization (PPO);
o Medicare Supplement coverage as an option for Medicare retirees, and
o Vision.
Mrs. de Braga questioned whether there had been a recent increase in premium costs.
Mr. Thorne responded that the last increase in premium rates had taken place on January 1, 2002, and a change in the state subsidy had taken place on July 1, 2002. Mr. Thorne clarified that the revenue required for the next plan year, which would begin January 1, 2003, was under review.
In response to further questions from Mrs. de Braga, Mr. Thorne advised that the additional funding required to get through the six-month period from January 1, 2003 to June 30, 2003 would remain the same whether or not there was an increase in the subsidy. Mr. Thorne explained that the difference was whether the state share of approximately 80 percent was obtained from a state subsidy or from the participants through rate increases or benefit reductions. Mr. Thorne further explained that the proposed legislation would bring the state subsidy amount up to what had been a historical percentage of support for the program for both active employees and retirees, which meant that both participants and the state shared in the increase proportionately.
In response to a question from Mrs. de Braga concerning the shared support, Mr. Thorne advised that for active employees, support was 85 percent from the state and 15 percent from participants. For retirees, support was about 68 percent from the state and 32 percent from retirees.
Mr. Goldwater questioned whether the board had the authority to change the “contribution mix,” particularly for the active participant.
Mr. Thorne advised that the “contribution mix” was a share of funding from the state versus the participants.
It was Mr. Goldwater’s understanding that the state currently paid 100 percent of the contribution for each state employee.
Mr. Thorne responded that currently the state did pay 100 percent of the contribution for each state employee and that a number of options would be presented to the board for their consideration. Mr. Thorne indicated it was his opinion the board did have the authority to change the “contribution mix.” Mr. Thorne indicated he believed it “was within the board’s responsibility to determine how to best allocate the costs obtained from the participants” compared to that funding obtained from the state subsidy.
Mr. Goldwater expressed his disagreement with Mr. Thorne’s opinion concerning the board’s authority.
Vice Chairwoman Giunchigliani advised that in a previous discussion, there had been some uncertainty in reference to the board’s authority; however, the Legislative Counsel Bureau’s legal staff had reviewed the issue and determined the board did have the authority to increase premiums for the sole participant, who normally did not pay more, and those with dependent coverage as well. She noted the Legislature could still take action, however.
Vice Chairwoman Giunchigliani indicated that language could be written into the legislation that would protect the participant.
In response to a question from Mr. Marvel concerning how the cost of the legislation would be funded if approved, Mr. Stevens advised that the proposed legislation increased the state’s share of the cost of premiums applied to each state employee, which would initially be absorbed through each agency’s budget savings. Mr. Stevens indicated there were small budget accounts that could not absorb the cost before the close of the fiscal year, and that problem could be addressed and rectified during the regular session of the Nevada Legislature.
In response to a question from Mr. Marvel concerning the total cost to the state, Mr. Thorne advised that approximately $12 million was required. Of the $15 million needed in increased funding, Mr. Thorne indicated that approximately 80 percent would be subsidized by the state.
Mr. Stevens advised that an analysis by the Fiscal Division indicated that an additional premium increase would generate approximately $2 million a month in state premiums. Additionally, Mr. Stevens indicated discussions had taken place concerning a potential charge to state employees.
Mr. Thorne responded that there was a question concerning whether the 15 percent share of the cost for participants would be dispersed among all employees, or only those who had dependents. Mr. Thorne explained that only 40 percent of participants had dependents, and an increase in the state subsidy produced “a multiplier effect” that would amplify by 2.5 times the increase participants with dependents would face to cover their families.
Vice Chairwoman Giunchigliani reminded the committee that during the 2001 Legislative Session discussion had taken place concerning the fact that participants without dependents subsidized those with dependents. Vice Chairwoman Giunchigliani indicated the equalization issue would have to be addressed during the 2003 Legislative Session.
In response to a question from Vice Chairwoman Giunchigliani, Mr. Thorne advised that options included coverage for the employee and employee plus spouse, employee plus children, or employee plus spouse and children.
In response to an additional question from Vice Chairwoman Giunchigliani concerning coverage if an employee and spouse were both state employees, Mr. Thorne advised that each employee would be covered individually and dependent children would be covered under one or the other employee.
Vice Chairwoman Giunchigliani questioned whether the PEBP had given any consideration to using a different breakdown, such as an employee plus two, or an employee plus four, or six.
Mr. Thorne responded that while the PEBP had investigated other breakdowns, the cost of coverage for a spouse was more than the cost for four children. If not taken into account, in a situation using an employee plus one, or an employee plus two, an overcharge would occur for the children and undercharge for the spouse. Mr. Thorne advised that the four-tier rate structure was generally accepted as the most equitable of the tier structures.
Vice Chairwoman Giunchigliani indicated the committee would review the subsidization issue during the 2003 Legislative Session.
Mr. Thorne advised that the PEBP was currently attempting to address the underpayment-overpayment distortion in the rate structure.
In response to a question from Vice Chairwoman Giunchigliani concerning the January 1, 2003, start date, Mr. Thorne advised that projections indicated cash flow could be managed through the end of the calendar year, and a new plan year would begin on January 1, 2003.
In response to a question from Vice Chairwoman Giunchigliani concerning an earlier start date in an effort to protect state employees from having to fund a portion of the shortfall, Mr. Thorne advised that the dollar amount could not be adjusted because the rating proposals were based on the current subsidy level.
Vice Chairwoman Giunchigliani proposed directing that the board not assess state employees for a share of the costs and to accomplish that by maintaining the subsidy at the $465.78 per month rate, and move the start date for the increase back to October 1 to generate the funding needed for the plan year.
Mr. Thorne advised that moving the date back to October 1 would generate $2 million a month, as previously indicated by Mr. Stevens, which would provide additional funding for the plan. Mr. Thorne suggested that it might be more prudent for that additional funding “to flow down” to the shortfall in the reserve in order to rebuild the reserve more quickly.
In response to a question from Vice Chairwoman Giunchigliani concerning whether “a sweep” of the retired employee group insurance account was contemplated, Mr. Thorne advised that the personnel assessments for active employees that funded the retired employee group insurance budget account would increase. Mr. Thorne explained that funding from the assessment was drawn on each month as the subsidies required for enrolled retired employees were billed. Mr. Thorne anticipated an advance would be drawn on the assessment to ensure a sufficient cash flow through the end of the calendar year, which would then be paid back.
Vice Chairwoman Giunchigliani noted that while it had been indicated the cost of increased premiums could be absorbed through each agency’s budget savings, smaller budget accounts would have some difficulty absorbing the cost before the close of the fiscal year. Vice Chairwoman Giunchigliani questioned how the cost of the increased premiums for those small agencies would be addressed.
Mr. Stevens advised that if the proposed legislation was approved, the Budget Division and the Fiscal Division would review the impact of the increased premiums on each budget. The budgets that could not accommodate the increase would be addressed during the 2003 Legislative Session.
In response to a question from Vice Chairwoman Giunchigliani concerning “elimination or reduction of benefits,” Mr. Thorne responded that “modest changes” were built into the proposal.
In response to Vice Chairwoman Giunchigliani‘s request for a definition of “modest changes,” Mr. Thorne advised that while “nothing as drastic as eliminating a coverage was proposed,” the board would determine the changes from a list of recommendations.
In response to additional questions from Vice Chairwoman Giunchigliani concerning the elimination of benefits, Mr. Thorne advised that the PEBP was reviewing a combination of a subsidy and participant increase in sharing the cost while at the same time reviewing the benefit plan to balance the cost of the plan versus benefits.
Vice Chairwoman Giunchigliani noted a sentence on page 3 of the PEBP report (Exhibit E) that stated, “Plan changes totaling $2.9 million will be recommended to the PEBP Board on August 8, 2002.” Vice Chairwoman Giunchigliani specifically questioned what those plan changes were.
Mr. Thorne indicated his preference not to share that information since the plan changes had not yet been presented to the board.
Vice Chairwoman Giunchigliani informed Mr. Thorne that the committee required the information prior to considering approval of the proposed legislation.
Mr. Thorne responded that recommendations included the elimination of some of the “networks,” reducing the number of health maintenance organizations (HMOs), moving to a “true preferred-provider organization (PPO) in the dental plan,” as well as administrative changes such as moving from a on-site case management firm to a telephonic site that provided the same level of coverage with “more bang for the buck.” Mr. Thorne clarified that the PEBP was looking at changes that did not have a significant impact on the individual participants but would have a reduction to the cost of the plan.
With reference to prior questions from Mrs. de Braga and Mr. Goldwater, Vice Chairwoman Giunchigliani suggested that perhaps the committee should consider proposing additional language in the legislation that would protect state employees from a reduction in benefits during the interim. Vice Chairwoman Giunchigliani expressed concern in reference to the recommendations as outlined and requested some assurance that the employees would not be impacted.
Mr. Thorne responded that the criterion the PEBP used for the plan changes was one with minimal impact to the participants but would generate a significant amount of dollars to be worthwhile. Mr. Thorne explained that a dental preferred provider organization, for example, would be set up with incentives to use the PPO because it was more cost effective as was the medical preferred provider organization.
In reference to questions from Vice Chairwoman Giunchigliani concerning a dental PPO, Mr. Thorne advised that a dental PPO had existed in the PEBP for the last several years, but there was no distinction between going to a dentist in the PPO or a dentist outside of the organization. Mr. Thorne explained that a benefit differential would be added as had been done on the medical side.
In response to questions from Vice Chairwoman Giunchigliani concerning requests for proposals (RFPs) for preferred providers, Mr. Thorne advised that responses to the RFPs for both a statewide medical preferred provider organization and a healthcare maintenance organization had not addressed important issues. Mr. Thorne stated that the RFP had been withdrawn and a request for information (RFI) had been initiated to determine what providers were available and the kind of solutions they could offer. Mr. Thorne further advised that after a review of the RFI responses, a new RFP would be tailored to determine what the marketplace had to offer. Mr. Thorne discussed the fact that there were no responses to the first RFP that included an HMO in the north, and he pointed out that there were border areas, i.e., Utah where services were rendered. Mr. Thorne indicated that the PPO coverage in that border area was limited because one provider network had 85 percent of the business in Utah and not dealing with them meant a lack of providers in Nevada’s network. Mr. Thorne indicated that over the next 6 to 12 months a number of issues would be reviewed in an effort to provide better coverage and benefits for all of the participants.
Vice Chairwoman Giunchigliani expressed satisfaction that an RFI had been initiated and indicated she looked forward to reviewing documentation concerning the benefit plan during the 2003 Legislative Session.
Chairman Arberry questioned whether the RFP would be initiated for the entire benefit plan.
Mr. Thorne indicated the new RFP would encompass the entire benefit plan. He reiterated that when the first RFP was initiated for the PPO and the HMO, proposals were requested that provided both a fully insured or a fully self‑funded program, and not one proposal that offered a fully insured program for the state.
In response to a question from Chairman Arberry concerning administration of the PEBP, Mr. Thorne advised that employer functions, i.e., enrollment, payroll deduction, and communication efforts, performed by the PEBP staff, would need to be continued whether or not a privatized plan came into existence.
In response to questions from Mr. Marvel concerning current claims, Mr. Thorne advised that an increase in the claims backlog had developed as the transition was made from UICI to the new third-party provider, Benefit Planners. However, Mr. Thorne indicated that currently the state’s claim levels were lower than when UICI stopped paying claims in mid-June. Mr. Thorne expressed confidence that the claims inventory going forward would be maintained “at a fairly consistent level” although what constituted a normal level of claims received was an unknown. However, Mr. Thorne anticipated the trend that had been seen over the last 18 months would be a foundation on which to build. If a reduction was seen in the volume of claims received, Mr. Thorne indicated a leveling off would most likely also be seen in the dollars paid out.
Ms. Tiffany expressed her understanding that there had been an unusually high number of liver transplants that contributed to large claim costs.
Mr. Thorne responded that over the past 18 months, Intracorp, a company that provided large case-management services for the state, oversaw the case management of 22 liver transplant operations for the state plan. Those 22 transplant cases came from a total of only 55,000 “lives” covered in the state plan, which he indicated was “a very high ratio.”
In response to a question from Ms. Tiffany concerning whether a group profile for the liver transplant claims had been conducted, Mr. Thorne advised that all of the large claims were being reviewed and were associated with the demographics of the group. Mr. Thorne explained that the average age of active state employees was just over 45 while 52 percent of the entire covered population were in the 40 to 59 year-old age bracket, the period when serious illnesses occurred that required expensive treatment. Mr. Thorne pointed out that the claims payout fit the demographic pattern of the group and that no one particular area had been identified that stood out as an area on which to focus.
In response to a question from Ms. Tiffany concerning claims for non-state enrollees, Mr. Thorne advised that active and retired employees from the non-state group were not included in the state pool, but were in a separate rate pool. Mr. Thorne indicated the rates for the non-state enrollees were adjusted each year to make them self‑sufficient and because they were a smaller group relative to the total, their more volatile experience did not impact the state plan.
Vice Chairwoman Giunchigliani discussed a possible bill draft request to provide legislation for the 2003 Legislative Session that would pool all public employee retirees in an insurance plan that could possibly be invested by the Public Employees’ Retirement System. Vice Chairwoman Giunchigliani indicated that perhaps it was time the state started a fund that at some point in the future could be invested to offset the cost for retirees.
Ms. Tiffany inquired as to whether other states’ self-insured programs had been reviewed to determine the cost impact of an aging population.
Mr. Thorne advised that many of the other states, as well as local government entities, were facing the same issues Nevada faced. Mr. Thorne addressed a recent news article concerning large increases during the last two years for the City of Sparks’ benefit program, which was fully funded by the City of Sparks. Mr. Thorne indicated that in a recent comparison to five other western states and six local Nevada entities, the PEBP compared “generally” in the middle concerning “coverage” and in the middle to upper end concerning coverage within the state. Mr. Thorne advised that the PEBP premiums rates, in total, compared again to the middle while lagging behind in the contribution percentages between the employer and the employee.
In response to a question from Ms. Tiffany, Mr. Thorne indicated the comparison to other western states and local entities did not reveal anything that was better or significantly different than Nevada’s healthcare plan.
In a restatement of issues for the committee’s consideration, Vice Chairwoman Giunchigliani stated:
· The individual state employee would have no out‑of‑pocket costs;
· The date for the increased subsidy should begin October 1, which would provide additional revenue and assist the PEBP in avoiding further “plan” reductions; and,
· Direct the PEBP to initiate an RFP for the total plan and provide documentation to the members of the 2003 legislature for review.
In order to move the process along, Vice Chairwoman Giunchigliani requested that public testimony focus on the stated issues. Vice Chairwoman Giunchigliani indicated the members should keep in mind that the suggested recommendations were a “short-term fix” and asked Mr. Stevens to address the committee.
Mr. Stevens reported that if the bill was approved as currently written, a $2.5 million balance was projected in the fund for June 30, 2003. However, Mr. Stevens pointed out that those claims reported but not yet paid would be in the $24 to $25 million range on June 30, 2003, and if the plan were to be closed down for any reason, money to pay for those claims would have to be found.
In response to questions from Mr. Goldwater concerning the reliability of projections, Mr. Thorne responded that projections by an insurance company or a self‑funded plan, based on their own experience or industry norms, was a “best guess.” Mr. Thorne expressed confidence that their vendors were experts in their field and that any of a dozen different vendors could have been used with the end result being the same. Additionally, Mr. Thorne indicated the PEBP was more current on claims being paid. Mr. Thorne also pointed out that medical costs during the 1990s were brought under control through the managed care efforts of the HMOs and preferred provider organizations, and by the end of the 1990s, a limit was reached on what the providers could charge. Mr. Thorne added that the medical malpractice crisis added another external factor to the pricing issue.
In response to a question from Mr. Goldwater concerning reinsurance, Mr. Thorne advised that reinsurance was “priced out of reach.” While the plan had tested the reinsurance market several times over the last half dozen years, Mr. Thorne indicated that in every case, the premiums exceeded the expected claims. Since the September 11, 2001, terrorist attack in New York City, Mr. Thorne advised that the reinsurance market had been “nervous” and the premiums had increased accordingly.
Vice Chairwoman Giunchigliani questioned whether the dollar amount requested would be sufficient to get the PEBP through the plan year to July 1, 2003, if the committee approved a start date of October 1, 2002, with no costs passed on to the employee.
Mr. Thorne responded that based on their current, best-available information, the funding would be sufficient.
Vice Chairwoman Giunchigliani noted that while $15 million had been requested, the committee’s proposal would generate about $16 million.
Mr. Thorne indicated he would be pleased to have the PEBP receive the funding, which he said would be very beneficial and would provide an additional $4 million to the reserve.
Vice Chairwoman Giunchigliani indicated for the record she wanted to ensure the funding was sufficient so that the PEBP would not have to return to the committee.
Chairman Arberry assumed the duties of the chairman and asked if there was any public testimony.
Jim Richardson, a lobbyist for the Nevada Faculty Alliance, reported that the Senate had approved a similar action as was being considered by the Assembly.
Vice Chairwoman Giunchigliani indicated she was aware that the Senate’s action was in line with one of the amendments being proposed by the Assembly.
It was Mr. Richardson’s understanding that the Senate’s action would generate an additional $3 million. For the record, Mr. Richardson indicated that, as a representative of the Nevada Faculty Alliance, he was pleased with the Governor’s recommendation and any legislative action that would rebuild the reserve or relieve employees of the responsibility of increased premium costs. Mr. Richardson discussed the problems coupled with the “huge spike in utilization” that led to the plan’s current financial problems. On behalf of the Nevada Faculty Alliance, Mr. Richardson urged the committee to enact the Governor’s recommendations and to support the Senate’s version of the bill.
In response to a question from Chairman Arberry concerning the recommendations to amend the bill, Mr. Richardson indicated he did not have a clear understanding of the implications of the request for proposal. Additionally, Mr. Richardson indicated the starting date appeared to be a problem as it appeared the Senate’s version of the bill generated an additional $3 million, and the amendment proposed by Vice Chairwoman Giunchigliani would generate up to another $6 million if the start date was moved to October 1. While Mr. Richardson advised that he would not take a firm position on those matters, he addressed the issue of how to pay for the proposed funding. As a professional employee of the University and Community College System (UCCSN), Mr. Richardson discussed the possibility that generating the needed revenue would mean more vacant positions as well as possible other far‑reaching implications. Mr. Richardson indicated the UCCSN was “strapped for money” and that the system could take a “potential budget hit” of $4.5 million. For the record, Mr. Richardson requested that the Assembly consider “making whole those agencies” that had a desperate problem dealing with trying to re-fund the state health plan.
Marty Bibb, a lobbyist representing the Retired Public Employees of Nevada (PERS), identified himself for the record. Mr. Bibb also expressed his support for the Senate’s version of the bill and his appreciation for the Assembly’s discussion relative to an earlier start date. While Mr. Bibb addressed the problems that led up to the present crisis, he indicated that, despite the challenges, it appeared there was a bright future. Mr. Bibb addressed the Medicare Supplement coverage option for retirees, previously discussed by Mr. Thorne, as a positive change that would better match coverage with the medical needs of retirees. Additionally, Mr. Bibb expressed support for the new third-party administrator, Benefit Planners, whose program to authorize Medicare to notify Benefit Planners of a claim would result in more current and accurate claims data, as well as timely payments for retirees with Medicare coverage. In closing, Mr. Bibb acknowledged the ongoing efforts of the committee and staff in resolving the issue and indicated the changes taking place appeared to be positive for the program.
Gary Wolff, a lobbyist for the Nevada Highway Patrol Association, Teamsters Local 14, Las Vegas, identified himself for the record. Mr. Wolff acknowledged the committee’s support and expressed his appreciation to Mr. Thorne for his work in developing the proposed recommendations. Mr. Wolff indicated he had the privilege of being a member of a small committee that had worked with other employee groups to develop the recommendations. Mr. Wolff pointed out that the premium increase from $384.50 to $465.78, if approved, would pay 100 percent of the coverage for single employees as well as employees with dependents. In closing, Mr. Wolff again thanked the committee for their support.
John Papageorge, a lobbyist representing the University and Community College System of Nevada (UCCSN), identified himself for the record. Mr. Papageorge advised the members of the committee that the UCCSN supported Senate Bill 3 and questioned whether the Senate’s amendment would be addressed during the meeting.
Chairman Arberry indicated some difficulty in addressing the Senate’s amendment, which had not yet been seen by members of the committee.
Steven Barr, representing the Nevada Corrections Association, identified himself for the record. Mr. Barr advised the members of the committee that the amendment approved in the Senate proposed that the state pay 100 percent of any premium increase that would necessitate $15 million, to become effective in January.
In response to a question from Chairman Arberry, Mr. Barr advised that the Senate’s version of the bill did not increase the premium.
Mr. Papageorge indicated he preferred not to address the Senate’s amendment until he could see the details and speak to committee members individually. However, as previously testified, Mr. Papageorge also acknowledged that the UCCSN would take a “big hit” in absorbing the cost of the increase. Mr. Papageorge indicated that funding the increase would be a problem for the UCCSN and although they did not object, they would welcome any relief that could be offered.
Vice Chairwoman Giunchigliani suggested the committee provide a recommendation for “an amend and do pass” to bring to the floor of the Assembly, and further indicated that there appeared to be agreement to ensure employees were not subjected to bearing the responsibility of the premium increase. The Vice Chairwoman also indicated that language concerning consideration of how some budgets would be impacted would have to be developed. Vice Chairwoman Giunchigliani expressed uncertainty concerning the Senate’s amended proposal if premiums had not been increased. Additionally, the Vice Chairwoman indicated she had misspoken in stating the committee’s proposal would generate $16 million by changing the start date and should have indicated the amount as $18 million.
VICE CHAIRWOMAN GIUNCHIGLIANI MOVED THAT THE COMMITTEE RECOMMEND “AN AMEND AND DO PASS” TO INCREASE THE STATE’S CONTRIBUTION TO THE PUBLIC EMPLOYEES’ BENEFITS PROGRAM (PEBP), THAT INDIVIDUAL STATE EMPLOYEES WOULD HAVE NO OUT‑OF‑POCKET COSTS AND THAT THE DATE FOR THE INCREASED SUBSIDY BEGIN OCTOBER 1 TO PROVIDE ADDITIONAL REVENUE AND ASSIST THE PEBP IN AVOIDING FURTHER “PLAN” REDUCTIONS. ADDITIONALLY, THE PEBP BE DIRECTED TO INITIATE AN RFP FOR THE TOTAL PLAN AND PROVIDE DOCUMENTATION TO THE MEMBERS OF THE 2003 LEGISLATURE FOR REVIEW.
MR. MARVEL SECONDED THE MOTION.
THE MOTION WAS CARRIED. (Speaker Perkins was absent for the vote).
Chairman Arberry recessed the meeting at 3:45 p.m.
The Committee met behind the Bar of the Assembly at 8:06 p.m. and adjourned the meeting at 8:12 p.m.
RESPECTFULLY SUBMITTED:
Connie Davis
Committee Secretary
APPROVED BY:
Assemblywoman Chris Giunchigliani, Vice Chairwoman
DATE: