The Committee on Ways and Means was called to order at 3:30 PM, on Tuesday, February 16, 1999. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Mrs. Jan Evans, Vice Chair

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia de Braga

Mr. Joseph Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Parks

Mr. Richard Perkins

Mr. Robert Price

COMMITTEE MEMBERS ABSENT:

Mr. John Marvel (Excused)

STAFF MEMBERS PRESENT:

Vice Chair Jan Evans called the meeting to order. A quorum was present.

The Vice Chair opened the hearing on Assembly Bill (A.B.) 176

Mr. Perry Comeaux, Director, Department of Administration, stated A.B. 176 was designed to bail out the state employees group insurance program. It provided for an appropriation from the General Fund of $15,963,440 and an appropriation from the Highway Fund of $2,334,472 and provided the Department of Administration the authority to assess an amount not to exceed $7,700,932 from the agencies funded from other sources including federal funds. The grand total of all appropriations and assessments totaled approximately $26 million.

Mr. Comeaux stated the $26 million figure represented a combination of
$15 million which was the agencies best estimate of the accumulated deficit within the state employees health plan by the end of the current fiscal year plus $11 million to restore an adequate level of reserve funds. The reserve was the Incurred But Not Reported (IBNR) reserve. Both amounts represented an estimate of outstanding claims by the Committee on Benefits actuary. The actuary estimated the accumulated estimate at the end of the fiscal year would be between $12 million and $15 million so the Department of Administration used the higher figure. Mr. Comeaux explained the $11 million reserve represented roughly 1.75 months worth of claims.

Mr. Comeaux noted a part of the issue of state employee health benefits not included in the bill was accounted for in part in The Executive Budget. The Department of Administration proposed that the bailout of the program be funded the same way the insurance program had traditionally been funded. He explained the funding historically was through a combination of state contribution and employee dependent premiums. The state funding was provided at 80 to 81 percent and 19 to 20 percent was funded from employees who insured dependents.

Mr. Comeaux stated it was impractical to ask employees with dependents to fund their 19 to 20 percent of the bailout costs all at once since the amount was calculated at $600 per employee with a dependent. The Department of Administration was asking the legislature through A.B. 176 to provide the funds up front and then receive over a 4-year period of time beginning
January 1, 2000, the 19 to 20 percent needed from employees with dependents. On January 1, 1999 employee dependent premiums were increased 23.7 percent in recognition of the increased costs for the program. Another increase would be necessary on January 1, 2000, of approximately
4.7 percent for inflation and to effect the payback that increase would be raised to 9.7 percent. The revenues were reflected in the budget revision, which has been submitted for review by the money committees.

Speaker Dini stated the opinion of the committee was that they might not wish to appropriate the entire $26 million at this time. The committee was considering an appropriation that would fund the Committee on Benefits through May 1999 while considerations of how to structure or re-structure the committee were undertaken. The committee was considering an appropriation of perhaps$10 million, suspension of the Committee on Benefits, and empowering the Governor to operate the group health insurance program until recommendations to re-structure the program were developed.

Mr. Comeaux agreed with the proposal. He responded that in spite of the fact the Committee on Benefits had already received advance payment of premiums from Central Payroll for a minimum of two months, and the university system pay center and Nevada Department of Transportation had paid their premiums in advance to the end of the fiscal year, the plan would be out of funds within just a few weeks. A $10 million appropriation would fund the plan through May which would work. No one would be comfortable with appropriating funds to the plan until a long-term solution was in sight.

Speaker Dini stated the committee had great concern about the meeting of the Committee on Benefits, scheduled for February 24, which included an item on the agenda "to terminate the contract between the Risk Management Division, and the Committee on Benefits and to enact a contract between the Committee on Benefits and UICI to assume duties and responsibilities currently performed by the Risk Management Division and to consider enactment of a contract between William M. Mercer Incorporated and the Committee on Benefits to assume duties and responsibilities currently performed by the Risk Management Division."

Speaker Dini stated the agenda items did not show good fiscal responsibility or concern for state employees who would not be able to pay their bills or care for themselves or their families.

Vice Chair Evans noted the bill indicated the appropriations would be directed to the Benefit Services Fund and asked if that was the correct title and
Mr. Comeaux agreed. Vice Chair Evans asked who had oversight of that fund and Mr. Comeaux replied the budgetary authority for the fund rested with the Risk Management Division of the Department of Administration.

Assemblyman Hettrick said he agreed with the amendments proposed by Speaker Dini but suggested the time frame for funding be moved back to
May 10 because that assured the issue would be dealt with during the 1999 Legislative Session and moving the date assured the issue would be considered early enough so everyone was aware of what was happening. May 10 would be about 9 days after the Economic Forum released their updated revenue projections which might make some difference in how the matter was handled.

Assemblywoman de Braga asked if the proposed amendments were adopted was there a danger the fund would completely run out of money again before the legislature adjourned. Mr. Comeaux replied the one entity that had not advanced premiums through the end of the year was Central Payroll. Their premiums amounted to about $3 million per month so if it became necessary Central Payroll could be directed to make their payment in advance. He added if claims arrived as anticipated the $10 million should be enough to last through May 1999. Assemblywoman de Braga stated she was still concerned because it was unknown how much money was still owed through claims that were protested or stale claims. She had been assured it was not a large sum of money but it was not known for sure.

Mr. Comeaux added there was still no handle on the amount of funds which had been overpaid or underpaid by UICI. He did not know when the electronic comparison of the previous third party administrator (TPA) and the current TPA would be available. The amount of funding required would be unknown until that comparison was made.

Assemblywoman de Braga related a personal experience that her doctor had just received payment on a bill from UICI that was already paid in full well over
6 months previously.

Mark Stevens stated he had provided committee members with a cash projection statement based on information received from the Risk Management Division. The projected deficit at the end of April was $4.1 million and at the end of May it was projected at $9.4 million. To fund the projected shortfall through any date in between those dates a figure between those two numbers could be determined.

Speaker Dini referred to section 3 of A.B. 176 and asked if it would be better to appropriate the $2.3 million from the Highway Fund and add to section 3 the ability to access the other pay centers amounting to $10 million and delete section 1 of the bill appropriating the $15 million. Mr. Comeaux stated that should work. His agency had looked at the budgets of all the affected entities and with one possible exception the agencies would have the funds to pay the assessment. The only area to be checked out was the federal cost allocation plan to ensure there would be no conflicts. Vice Chair Evans stated the committee was also concerned about possible problems relating to the cost allocation plan. Mr. Comeaux added his office had been assured that as long as the per-employee amount remained the same there should be no problem. The assessment was $1208 per employee.

Mr. Stevens suggested if the federal and fee funded agencies were assessed in section 3 and for some reason the Highway Fund appropriation was not provided at a later date, the federal government would basically be paying part of the state’s share which would create a problem with the cost allocation plan. If section 3 was just approved, the state was obligated for the $1208 per employee for the Highway Fund and the General Fund. Mr. Comeaux agreed.

Assemblyman Goldwater stated he would be more comfortable voting on the motion if he understood none of the administrative contractors would receive funds from the appropriation. He asked if the funds would go directly to benefits and providers. Mr. Comeaux stated funding would go to both. When the committee ran out of funds medical and dental claims could no longer be paid. The administrative fees the Committee on Benefits was contractually obligated to pay could not be paid either.

Vice Chair Evans said an issue not resolved was Mr. Hettrick’s suggestion that the plan be funded through May 10. She asked if it was Mr. Hettrick’s wish that the earlier date become a part of the bill. Mr. Hettrick replied if it became a part of the record that the issue be dealt with by May 10 that would be sufficient. He felt the Governor would want some input.

Assemblywoman Giunchigliani asked for clarification of the proposed amendment to A.B. 176 which would fund $9 million in section 1, $1 million in section 2, and section 3 would be struck and replaced with a new section to suspend the Committee on Benefits and allow the Governor to assume control of the state employees health plan. She asked if there was some way to pursue the issue of whether William M. Mercer had complied with the contract and whether their payments could be suspended. Vice Chair Evans suggested the issue could be resolved by the Assembly Ways and Means Committee Chairman issuing a Letter of Intent. Assemblyman Goldwater said he would be satisfied with whatever got the process going, but it should be perfectly clear that the state had contracted with William M. Mercer and if the firm had not provided information that was contractually required and any funds not specifically earmarked should be withheld if that was the case.

Assemblywoman Giunchigliani requested a letter from the committee be developed in conjunction with the legislation requesting the Governor and his staff look at the Mercer contract and determine if all the requirements outlined in the contract had been fulfilled.

Vice Chair Evans asked if anyone in the audience wished to speak to the motion and seeing none, called for the vote.

THE MOTION PASSED UNANIMOUSLY.

Vice Chair Evans confirmed A.B. 176 was passed from committee Amend and Do Pass.

Chairman Arberry opened the hearing A.B. 175.

Mr. Perry Comeaux testified A.B. 175 was a bill to restore the balance in the reserve for the Statutory Contingency Account. The Statutory Contingency Account had been restored in past legislative sessions to a level of $1.7 million. The Department of Administration recommended in the bill that it be restored to a level of $1.5 million. The appropriation needed to restore the account to a level of $1.3 million was $752,114.

Chairman Arberry asked if there was anyone present to speak for or against A.B.175 and seeing none, stated the bill would be held due to time constraints.

No action was taken on A.B. 175.

Mr. Comeaux requested A.B. 177 be expedited as much as possible. The bill would restore the balance in the stale claims account. The account would be restored to a level of $1.5 million which required an appropriation of $1,491,065. Slightly under $9,000 was left in the account and there was approximately $400,000 in stale claims waiting to be paid.

Chairman Arberry asked if there were any further issues concerning the bill and Mr. Comeaux stated the figures were accurate and the issues were covered.

Chairman Arberry asked if there was anyone in the audience present to speak for or against A.B. 177.

SPEAKER DINI MOVED DO PASS ON A.B. 177.

SECONDED BY ASSEMBLYWOMAN de BRAGA.

THE MOTION PASSED UNANIMOUSLY.

There being no further business before the committee, the meeting was adjourned at 4:17 p.m.

RESPECTFULLY SUBMITTED:

Cindy Clampitt,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

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