The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 5:40 p.m., on Thursday, April 1, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Ann O'Connell, Chairman

Senator William R. O’Donnell

Senator Jon C. Porter

Senator Joseph M. Neal, Jr.

Senator Dina Titus

Senator Terry Care

COMMITTEE MEMBERS ABSENT:

Senator William J. Raggio, Vice Chairman

STAFF MEMBERS PRESENT:

Julie Burdette, Committee Secretary

OTHERS PRESENT:

Randy Waterman, Acting Chief, Risk Management Division, Department of Administration, testified several events over the past few years dictate that the state group health insurance program must be restructured. Mr. Waterman indicated Core Source was acquired by L&H Administrators (L&H) in June 1996, and the Committee on Benefits did not receive sufficient notice to review the credentials and capabilities of L&H before that company assumed the third-party administrator (TPA) contract. He suggested if the Core Source contract had included an appropriate assumption clause, L&H might not have been allowed to assume the contract. In that case, he asserted, Core Source would have had to "play out" its contract, at least until there was time to produce a request for proposal (RFP) and recruit another TPA. Mr. Waterman continued that contract deficiency has been corrected in the TPA contract and in all new risk-management contracts with critical vendors.

Mr. Waterman stated that before UICI Administrators (UICI) could "get up and running," as many as 140,000 unpaid claims had accumulated, due to the bankruptcy of L&H Administrators in June 1997, subsequent problems with data tapes on L&H claims, and UICI’s difficulty in loading preferred provider organization (PPO) network information into their system. Mr. Waterman maintained the backlog has now been reduced to a normal level, and UICI is currently operating with a 10- to 15-day turnaround. He contended L&H Administrators’ problems with processing claims would likely have been discovered and corrected, had there been adequate oversight of that organization.

Chairman O’Connell asked who requested S.B. 544. Mr. Waterman replied the bill draft request was originally "a composite of effort" by the attorney general’s office, the Risk Management Division of the Department of Administration, and the prior Governor’s Office. Mr. Waterman noted the present Governor’s Office has reviewed the bill, which has been "reworked a little bit." He mentioned the current version of S.B. 544 is "the Governor’s and the attorney general’s bill."

Chairman O’Connell stated it is important to know whether S.B. 544 is the last bill the committee will receive on the group health insurance issue.

Jon Hansen, Tort Claims Administrator, Litigation Division, Office of the Attorney General, reiterated S.B. 544 was drafted in conjunction with the Governor’s Office, and the bill is supported by both the attorney general’s office and the Governor’s Office. Mr. Waterman added the Governor’s Office asked him to present S.B. 544.

Mr. Waterman continued the Legislative Counsel Bureau’s 1998 audit of the state group health insurance program recommended various changes to improve the plan and to reduce the probability of similar problems occurring in the future. He explained the recommendations fell into three categories: structural, administrative, and technical. Mr. Waterman asserted the attorney general’s office and the administration considered many of the audit recommendations, as well as the experiences of the last few years, when drafting S.B. 544. He noted some changes relating to the administration of the state group health insurance program are not reflected in S.B. 544, but have been incorporated in the program’s policies and procedures.

Mr. Waterman stated S.B. 544 attempts to provide a framework upon which to build an improved public employees benefits program. He said the bill would establish the benefits operation as a stand-alone program, separate from the Risk Management Division. He elaborated the benefits program would be administered by a chief executive officer and overseen by a Governor-appointed board. Mr. Waterman explained this proposal is modeled after the structure of the Public Employees’ Retirement System (PERS), which has proven to "work quite well." He expressed S.B. 544 would not "fix the problem" by itself, but would establish accountability, provide for a professional staff, and implement a management structure to effectively administer the program.

Mr. Hansen distributed a handout outlining S.B. 544 (Exhibit C) and pointed out the proposed name of the program is the Public Employees’ Benefits Program. He stated the program would involve a board with seven members, one of whom would have an advanced degree in business administration, economics, accounting, insurance, risk management, or health care administration. Mr. Hansen indicated that member would be appointed from a list of nominees submitted by organizations that represent the University and Community College System of Nevada. He asserted the higher-education system would be "a real [really] good place" to look for someone with the necessary expertise.

Mr. Hansen noted another member of the board would be a retired state employee. He said a representative of the Retired Public Employees of Nevada has proposed to change that provision so that the board member could also be a retired employee of Clark County or of other entities that participate in the state group health insurance system. Mr. Hansen indicated the attorney general’s office does not oppose such a change.

Mr. Hansen noted one board member would be a classified state employee who is not represented by any employee associations, and another member would be appointed from a list compiled by associations that represent state employees. Mr. Hansen explained another board member would be appointed from a list of nominees who represent local governments, and yet another would have "substantial and demonstrated experience" in risk management, portfolio investment strategies, or employee benefits programs. Mr. Hansen mentioned the Governor could consider the director of PERS for the latter appointment. Mr. Hansen concluded the board would include the director of the Department of Administration, or his or her designee.

Mr. Hansen pointed out board members would serve 4-year terms, at the pleasure of the Governor, who would have the right to remove members from the board.

Chairman O’Connell asked if S.B. 544 reflects the Governor’s suggestions for the board. Mr. Hansen answered the bill proposes a board, as well as a "management layer." He added S.B. 544 would clarify reporting relationships and give the Governor the ultimate authority to remove people from the board. Mr. Hansen indicated the bill’s proposals for reporting relationships address the Legislative Counsel Bureau’s findings that the lines of authority and communication were unclear in the previous Committee on Benefits structure.

Senator O’Connell stressed the executive officer would be hired by the board, not by the Governor. Mr. Hansen agreed and noted the executive officer would serve at the board’s pleasure.

Chairman O’Connell asked if the risk manager’s job would be "folded into" the executive officer’s position. Mr. Waterman responded no and explained the risk manager would become a "traditional risk manager" who would handle property and casualty risk management. Mr. Waterman further expressed the executive officer position would be "entirely new" and would be separate from risk management. He elaborated the executive officer would be dedicated to benefits.

Chairman O’Connell asked if the executive officer would serve in an advisory capacity to the board. Mr. Waterman answered the person in question would be the administrator of the program and would act as, "really, the chief executive officer."

Mr. Waterman continued S.B. 544, unlike other bills that address the same subject, would provide professional staff to administer the program. He contended many recent problems have occurred because the state group health insurance program has not had sufficient professional staff to perform auditing and oversight functions. He suggested the issue would not be so problematic if the appropriate oversight controls had been in place a few years ago.

Chairman O’Connell asked if the funds to pay the executive officer would come from the state’s and the state employees’ contributions to the insurance program. She further asked if that provision is included in the Governor’s budget. Mr. Waterman answered affirmatively and elaborated funds for that purpose have been "built into" the 2000 – 2001 budget.

Chairman O’Connell commented S.B. 544 would go into effect on July 1, 1999. Mr. Waterman clarified the funding has been requested in the 2000 budget, which would begin on July 1, 1999. He noted the language regarding effective dates is in section 49 of the bill.

Referring to line 32 on page 4 of S.B. 544, Senator Neal asked for an example of a time when the board would be in a closed session. Mr. Waterman replied the existing board has a process by which participants can come before the board to appeal claims determinations. He stated appeal hearings are conducted at closed meetings so that participants do not have to discuss their medical conditions in a public hearing. Mr. Waterman indicated very few hearings are closed, and he noted S.B. 544 refers to situations that are specified in the open-meeting law.

Senator Neal asked what the relationship would be between the executive officer and the risk manager. Mr. Waterman responded there would be no relationship between those persons. He explained the risk manager would report to the director of the Department of Administration, while the executive officer would report to the board of directors for the employees health plan.

In response to another question from Senator Neal, Mr. Waterman asserted the risk manager’s responsibilities would involve the oversight of various self-funded programs that are currently run by the risk management department. He noted these programs would include state property, workers’ compensation for state employees, self-funded automobile, and commercial lines that protect the state’s assets.

Senator Neal commented, "So you would no longer be involved." Mr. Waterman agreed.

In response to a question from Senator Neal, Mr. Hansen stated S.B. 544 would make a "clean split" between the benefits function and the property and casualty functions. He added those functions would be handled by two different departments, both of which would be represented by the attorney general’s office.

Senator Neal referred to line 14 on page 12 of S.B. 544. Mr. Hansen responded benefits law and federal-tax law are "very specialized" and complicated. He maintained it would not make sense for the attorney general’s office to hire someone to gain expertise in those areas, so S.B. 544 proposes contracting with an expert who would review the program on a biennial basis. Mr. Hansen commented this person would ensure its compliance with federal tax law and applicable federal statutes. Mr. Hansen mentioned counsel from the attorney general’s office would continue to sit in on board meetings and provide advice regarding compliance with Nevada statutes.

Senator Neal asked, "[Did] the lack of this person being with the old system cause … part of the problem that was generated here?" Mr. Hansen answered, "Absolutely not."

Mr. Waterman commented, "The purpose of this position would be to keep the program out of trouble on a forward-going basis, as opposed to correcting problems that they had in the past."

In response to a question from Senator Neal, Mr. Hansen indicated the person in question would report to the executive director, who would report to the board.

Senator Neal requested a diagram of the proposed structure of the program. Mr. Waterman responded he has such a diagram, though he did not bring it with him to the hearing. He offered to provide the diagram to Senator Neal at a later time.

Senator Neal asserted he thinks some changes have been made to the proposed structure since the budget hearings. Mr. Waterman responded the change in line 14 on page 12 of S.B. 544 involves a contract position, not a full-time position. He reiterated that person would come in once every 2 years to conduct a benefits audit of the program.

Senator Neal referred to a brochure distributed by Mr. Hansen regarding the Shared Health Information Network of Nevada (SHINN) (Exhibit D). Mr. Hansen noted the brochure contains information on the electronic transfer of health data. He indicated the State of Utah has a successful program through which health data is transferred electronically between entities. He added 100 percent of hospitals and over 90 percent of physicians in Utah are involved in the process, which saves money and time. Mr. Hansen said the State of Utah’s overhead costs are about 1/3 of such costs in Nevada, partly due to Utah’s use of electronic data transfers. He stated SHINN, a public-private partnership, is working toward implementing a system similar to Utah’s, in Nevada. He indicated a "small piece of enabling legislation" would facilitate the implementation of such a program. Mr. Hansen suggested federal guidelines on the issue will be forthcoming.

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry, testified the requirements for electronic transmission of claims payment for uniform claims forms are a part of the Health Insurance Reportability and Accountability Act of 1996. However, Ms. Molasky-Arman expressed, detailed guidelines have not yet been provided. She asserted the rules pertaining to uniformity are to be established by the U.S. Congress, not later than the end of 1999. She continued if Congress does not create such rules, the responsibility to do so would fall upon the U.S. Department of Health and Human Services. Ms. Molasky-Arman mentioned a time period for implementation would occur after establishment of the rules. She maintained it would be premature to establish standards and guidelines in Nevada until the federal standards are established.

Chairman O’Connell commented this issue has been discussed in the Senate Committee on Commerce and Labor. She recalled that committee raised concern regarding a section of S.B. 544 which would "give every person an I.D. [identification] number." Ms. Molasky-Arman responded she believes that provision is covered in section 41 of the bill.

Mr. Hansen clarified S.B. 544 would not give everybody identification numbers. He contended, "I think that’s [that is] a major issue with the federal government, with the Senate, and I don’t [do not] know how they’re [they are] going to overcome that hurdle. But there’s [there is] no intent, I think, on our part, to give everybody I.D. [identification] numbers."

Chairman O’Connell expressed her aforementioned concern involves whether or not the federal government will establish regulations regarding identification numbers. She indicated the Senate Committee on Commerce and Labor was told that a provision in S.B. 544 would allow such identification numbers.

Mr. Hansen reiterated he does not think S.B. 544 contains a provision that would give everybody an identification number. He stated:

Senator Care noted the Senate Committee on Government Affairs has heard various bills concerning the composition of entities similar to the former Committee on Benefits. He asked how proponents of S.B. 544 came up with the composition of the board proposed in the bill. He recalled testimony on similar bills involved allocation of seats to various participants in the state group health insurance system.

Mr. Hansen replied a couple of criteria were used to create the proposed composition of the board. He elaborated he believes the problem with the program, in the past, has been a lack of expertise. Thus, he asserted, proponents of the bill attempted to ensure that people with expertise would serve on the board. Mr. Hansen explained the budget director, the PERS director, and people from the university system could add the necessary expertise.

Mr. Hansen continued proponents of S.B. 544 also considered who has traditionally served on the board and who should be on the board, in terms of interest. He maintained, "Frankly, I don’t [do not] see that any of the employees are differently situated than any of the other employees," and he pointed out all employees want "good benefits at a reasonable price." Mr. Hansen noted some employee groups, such as the university system and PERS, have traditionally had a seat on the board. He also acknowledged retired employees have different interests than active employees. Mr. Hansen explained, "The largest segment of people are employees that [who] are not represented by anybody, so we put somebody on there from that." He continued:

Mr. Hansen stressed members of the proposed board must have the level of expertise necessary to evaluate an executive director. Conversely, Mr. Hansen pointed out, the executive director would need to be able to recognize whether the people working for him or her are performing their jobs successfully. Mr. Hansen added the executive director would have to put controls in place for the management of the system.

Mr. Hansen commented he does not think the attorney general’s office "has a stake in" the membership of the proposed board, as long as the membership is spread "reasonably equitably" across all employees.

Senator Titus raised concern regarding the interim benefits committee of the Legislature proposed in S.B. 544. She noted the committee would include three members of the Senate, one of whom would be appointed by the chairman of the Senate Committee on Finance, and two of whom would be appointed by the Senate majority leader. She pointed out all three members would be appointed by the same party, and, under current leadership, they would even be appointed by the same person. Senator Titus commented, "That doesn’t [does not] strike me as being a real [really] balanced, nonpolitical approach to this."

Mr. Hansen responded PERS was consulted in the initial stages of drafting S.B. 544. He indicated PERS has a committee such as the one proposed in the bill, and PERS believes such a committee is beneficial because it allows interaction with the Legislature and facilitates progress. For S.B. 544, Mr. Hansen said he used the language from the pertinent statute regarding PERS. He suggested he is open to changes on the issue, and he clarified the idea behind creating an interim legislative committee was to "facilitate a comfort" and to "get this out from in front of IFC [the Interim Finance Committee] and, perhaps, in front of somebody who can deal with it at more time [times] and more aggressively."

Chairman O’Connell distributed a chart comparing three bills that address the state group health insurance system (Exhibit E).

Senator Neal stated the interim committee proposed in S.B. 544 would consist of six legislators. He added the Governor would appoint a board, which would be in place by July 1, 1999. Mr. Hansen agreed.

Senator Neal continued the board would then hire an executive director and fix a salary for that position, with the approval of the interim legislative committee. Senator Neal noted the executive director would then have the authority to appoint officers for quality control, operations, accounting, and information technology systems, as well as an executive assistant. Senator Neal asked if the salaries for those positions would have to be approved by the interim legislative committee. Mr. Waterman answered affirmatively and pointed out all of the positions Senator Neal listed would be in the unclassified service of the state.

Senator Neal stated:

Mr. Waterman replied he thinks the problems will be solved. He indicated S.B. 544 would not "fix the problem" by itself, but the problem would be fixed by getting the correct people and systems in place. Mr. Waterman maintained many of the problems that occurred during the last few years have been corrected, but the Risk Management Division is "not doing as good a job as we need to do for this program and for the people that we serve." He contended S.B. 544 would allow the system to improve, and he said the proposed executive director could come back to the Seventy-first Legislature with requests for adjustments. Mr. Waterman concluded, "We have to start someplace, and we think this is a good place to start."

In response to a question from Senator Neal, Mr. Waterman clarified the risk manager would not have an advisory capacity to the proposed board. He elaborated that function would be served by the executive director.

Senator Neal commented the proposed board would actually make all of the decisions involving the program. Mr. Waterman responded the executive director would administer the program, and the board of directors would set the overall policy.

Senator Neal pointed out the Governor could remove members from the board. Mr. Waterman agreed and added the former Committee on Benefits lacked direct accountability to any one person. Therefore, he indicated, it was difficult to identify the causes of problems. Mr. Waterman noted S.B. 544 would ensure that if something went wrong with the state group health insurance program, the Governor would be held accountable. Mr. Waterman expressed he thinks the Governor wants that responsibility.

Mr. Hansen reiterated S.B. 544 would "put management in place" but would not "solve the problem" by itself. He indicated various processes need to be studied, and many possibilities exist for the system. He cautioned the committee against a "quick fix" of the state group health insurance system, noting such an approach would likely be expensive and temporary. Mr. Hansen suggested equity of participants in the system should also be examined.

James Richardson, Lobbyist, Nevada Faculty Alliance, testified that organization is "vitally interested" in solving the problems of the state group health insurance program. He indicated S.B. 544 has been "circulating in one version or another" for some time, and he stated the bill is "a fine piece of work." However, he commented, he has some questions and suggestions.

Referring to pages 9 and 10 of S.B. 544, Mr. Richardson addressed the composition of the proposed board. He noted a couple of university representatives with expertise in insurance matters attempted to serve on the former Committee on Benefits, but they had to withdraw because of conflicts of interest. Mr. Richardson expressed parties must be aware of that potential difficulty with the board representation set forth in S.B. 544. He commented many representatives from the University and Community College System of Nevada successfully served on the former Committee on Benefits, though they might not have been experts in health insurance.

Regarding page 10 of S.B. 544, Mr. Richardson raised concern with emulating PERS to the extent that the head of the PERS board would serve on the proposed state group health insurance board. Mr. Richardson asserted the head of the PERS board already has many responsibilities, and his or her expertise might not cover risk management and employee benefits. Mr. Richardson maintained the head of the PERS board might have expertise in portfolio investment. However, Mr. Richardson questioned that criterion for a member of the proposed board, since that board would not invest money, but would only spend money that has been invested by the state treasurer.

Mr. Richardson referred to section 49 of S.B. 544, which would provide that sections 44, 45, and 46 of the bill would become effective on July 1, 2001. He asked if that provision means the relevant people would not be hired until that date. He contended those people need to be hired sooner.

Mr. Hansen commented the current head of the PERS board indicated he would be interested in serving on the board proposed in S.B. 544, or in appointing a designee for that purpose. Mr. Hansen explained the inclusion of the head of the PERS board was based on the assumptions that he or she can read actuarial reports and financial statements, that he or she understands accounting, and that he or she has knowledge of successful internal controls. Mr. Hansen concluded the head of the PERS board was included on the proposed board for his or her management expertise.

In response to Mr. Richardson’s questions regarding the effective dates of the bill, Mr. Hansen stated:

Chairman O’Connell asked when the relevant positions would be filled. Mr. Hansen answered people would be hired as soon after July 1, 1999, as would be "reasonably possible." Also, he suggested the Governor would likely establish the board as soon after July 1, 1999, as possible.

Mr. Richardson reiterated section 49 of S.B. 544 addresses when certain sections of the bill would become effective. He asserted, "Those sections, where those three people are listed, become effective on July 1, 2001."

Mr. Hansen responded, "But the sections 1 through 40 are the same sections, and … they are the sections that read, ‘with the assent of the committee.’ These sections that kick in down here are without the assent of the committee." He contended one section of the bill addresses the role of the interim committee of the legislature in making decisions. He noted another section does not have that committee included in the process. Mr. Hansen maintained, "The ones that have them included kick in for 2 years, and then the new sections kick in after that. And that just makes them all go away." He stressed the Legislative Counsel Bureau suggested drafting the bill in that manner.

Mr. Richardson suggested Kim Marsh Guinasso, Committee Counsel, Legal Division, Legislative Counsel Bureau, could consider the relevant language. Mr. Richardson asserted he does not think the bill reads the way Mr. Hansen indicated.

Regarding sections 44, 45, 46, and 47 of S.B. 544, Ms. Guinasso testified, "The only [thing] that’s [that is] becoming effective in those sections are the changes to those sections. And that’s [that is] the only way that we can do those, to make the staggered effective dates that were being discussed." For example, she explained, only the deletion included in section 44 of the bill would become effective on July 1, 2001.

Mr. Richardson noted the Senate Committee on Government Affairs would have to address certain policy issues pertaining to S.B. 544. He pointed out many supporters of S.B. 544 also testified in favor of S.B. 79 and S.B. 223, both of which deal with the state group health insurance program.

Mr. Richardson stated the bills addressing the state group health insurance program contain significant differences. He indicated supporters of the bills have testified in favor of all of them because they "want to get this problem fixed."

Mr. Richardson commented S.B. 223 does not designate any seats on the proposed board to specific groups of participants in the state group health insurance program. He added the bill also suggests that members from the general public serve on the proposed board. Mr. Richardson expressed that situation brings up a policy question regarding whether or not members of the board should be participants in the system. He recalled he previously testified the Nevada Faculty Alliance would not oppose having public members on the board, but he urged that the majority of the board should be participants in the state group health insurance system. Mr. Richardson further mentioned that if there is no specific designation of seats on the board, an appropriate process should be implemented for nominating board members so that everyone has a "fair shake." He added S.B. 223 would also require an informal process whereby the Governor, the Senate majority leader, and the speaker of the Assembly would have to discuss the representation issue before they appointed members to the board.

Mr. Richardson concluded, "I’m [I am] happy with what 544 [S.B. 544] does, if that’s [that is] the way you want to go."

Gary H. Wolff, Lobbyist, Nevada Highway Patrol Association, testified he also represents "the coalition to fix our plan." He stated S.B. 544 would "[fix], for the most part, our concerns," but he indicated some areas of the bill are confusing. He said he has discussed the state group health insurance plan with Senator Raggio and with the Governor.

Mr. Wolff expressed the board dealing with the state group health insurance program should be governed by participants in that program. He further asserted the Governor should make all the appointments to such a board, and the Governor should be held accountable.

Mr. Wolff maintained S.B. 544 "works just fine on a conceptual basis," and he commented he would like to ensure that the bill contains "an even balance." He stated the problems with the former Committee on Benefits have been identified, and it will take some time to fix the state group health insurance program.

Mr. Wolff continued, "I did bring up the issue of S.B. 316."

Mr. Wolff indicated:

Mr. Wolff asserted he has no problem with S.B. 544, though he prefers the makeup of the board proposed in S.B. 79 because it is simpler. He noted S.B. 79 would provide a seat on the board to a member of the Nevada Highway Patrol Association. Mr. Wolff explained that seat was granted because, in the past, the only unions that have been "really … recognized" by the Legislature are the State of Nevada Employees Association (SNEA) and the Nevada Highway Patrol Association. He commented those organizations have always been allowed to participate in the political process.

Mr. Wolff contended it would be unfair for any one organization to hold more than one seat on the board that deals with the state group health insurance program. He emphasized a "broad spectrum" of groups should be represented, and he added, "We were adamant … that everybody that sat on this committee had knowledge about this, and we did need some experts on here."

Mr. Wolff asserted he does not think Senator Raggio would have a problem with S.B. 544. Mr. Wolff indicated the provisions of S.B. 316 would be permissive, at the discretion of the proposed board, if they were added into S.B. 544. He concluded S.B. 316 and S.B. 544 would make a "good combination."

Martin Bibb, Lobbyist, Retired Public Employees of Nevada, suggested S.B. 544 could be changed to be more equitable with regard to the retiree who would sit on the proposed board. He distributed a related handout (Exhibit F) and asserted lines 30 through 33, on page 9 of the bill, indicate that an individual who is retired from state employment would be appointed to the board by the Governor, "upon consideration of any recommendations of organizations that represent retired public employees." Mr. Bibb contended that provision would eliminate from consideration retirees who are covered by the state group health insurance program, but who are not retired from state employment. He elaborated such persons could be retired from other areas of public employment, such as education or city or county government. Mr. Bibb emphasized the bill should enable such people to be considered for the retiree position on the proposed board.

Mr. Bibb further pointed out lines 14 through 16, on page 10 of S.B. 544, would provide that members of the proposed board must be current employees of the State of Nevada or another public employer that participates in the program, or retired public employees of the State of Nevada. Mr. Bibb stated that language indicates active employees of public employers other than the state could serve on the board. However, he noted, only retirees of the State of Nevada could serve in that capacity. Mr. Bibb contended that language should be changed to include retirees from other public employers. He commented, "We think it would be more inclusive, and we believe that we wouldn’t [would not] be disenfranchising anyone from potentially serving on the committee, if that … change were to be made."

Mr. Hansen asserted the attorney general has no problem with the changes suggested by Mr. Bibb.

Wm. Gary Crews, CPA, Legislative Auditor, Audit Division, Legislative Counsel Bureau, indicated Rocky J. Cooper, CPA, Audit Supervisor, Audit Division, Legislative Counsel Bureau, supervised the audit of the former Committee on Benefits. Mr. Crews stated S.B. 544 addresses the concerns raised in the audit report regarding "aligning" responsibility and authority so that the responsible parties can carry out the program in an appropriate manner.

Mr. Crews continued the Audit Division would like to bring certain items to the attention of the Senate Committee on Government Affairs. For example, he noted, the aforementioned audit identified a possible conflict of interest between serving as budget director and sitting on a board that deals with state group health insurance. Mr. Crews expressed, "I think a lot of that [concern] has been eliminated … since we’re [we are] separating the function of risk management from this." However, he suggested, the Senate Committee on Government Affairs might want to consider the budget director or the director of the Department of Administration as an ex officio officer on the proposed board. Mr. Crews contended that situation would eliminate possible conflicts with reviewing budgets and contracts.

Mr. Crews addressed lines 14 through 18, on page 12 of S.B. 544, noting those lines would require the proposed board to contract with an attorney who has experience with laws relating to employee benefits. Mr. Crews pointed out that attorney would conduct a biennial audit of the state group health insurance program. Mr. Crews raised concern regarding the necessity for such a provision, and he asserted a requirement already exists for an annual audit by a public accounting firm. He maintained, "We feel, if you’re [you are] dealing with tax laws and so on, that’s [that is] something that’s [that is] probably appropriate to be carried out by your existing contract public accountant." Mr. Crews added he is unsure whether attorneys in Nevada are licensed to practice public accounting.

Robert J. Gagnier, Lobbyist, State of Nevada Employees’ Association, testified he neither supports nor opposes S.B. 544. He elaborated the bill contains some good features, but also presents some problems.

Mr. Gagnier asserted SNEA maintains its philosophical position that state employees should have a group health insurance program that does not include any employees of local governments. He clarified, "Therefore, it should not be a public employee plan; it should be a state employee plan."

Mr. Gagnier raised concern regarding lines 34 and 35 on page 4 of S.B. 544. He indicated SNEA objects to allowing the proposed board to hold closed sessions for discussion of RFPs. He noted meetings regarding appeals of medical issues have traditionally been closed, and SNEA does not object to that practice.

Mr. Gagnier commented SNEA supports employing professional staff for the state group health insurance program, as proposed in S.B. 544. However, Mr. Gagnier asserted, SNEA believes the words "or risk management" should be deleted from line 12 of page 5 of S.B. 544. He explained some of the past problems have occurred because the risk manager has been, in effect, running the state group health insurance plan. Mr. Gagnier argued the proposed executive officer needs experience in medical insurance or a similar field, not in risk management.

Mr. Gagnier pointed out the proposed legislative oversight committee would be temporary, according to S.B. 544, but he suggested perhaps that committee should be permanent. He stated, "[S.B. 544] would say that, after the first 2 years, this board would set the salary of the executive officer and the other unclassified employees, as opposed to those salaries coming forth in the unclassified pay bill."

Chairman O’Connell requested that Mr. Gagnier submit a written copy of his proposed changes to S.B. 544. He agreed to do so.

Mr. Gagnier continued section 11 of S.B. 544 presents a problem, though he asserted that section presents "something that is probably a good idea." He noted line 25 on page 5 states that "each member of the board and the executive officer shall complete at least 16 hours of continuing education relating to the administration of group benefits for public employees each year." Mr. Gagnier offered his support for that concept, but he questioned who would determine events that would qualify as continuing education.

Mr. Hansen responded he assumes the board members would have the expertise to determine the terms of their continuing education. Otherwise, he surmised, the Governor would have the responsibility for determining what qualified as continuing education. Mr. Hansen suggested the Governor probably would not want to specify seminars or other events for the board members to attend. Mr. Hansen mentioned many organizations put on seminars on relevant topics.

Mr. Gagnier indicated the situation could be clarified by adding the words "as determined by the board" to the end of line 27 on page 5 of S.B. 544.

Mr. Gagnier continued lines 32 through 35, on page 5 of the bill, would provide that when board members attend courses of continuing education, those who are not public employees would receive the per diem allowance and travel expenses usually provided for state officers and employees. Mr. Gagnier asked why board members who are public employees would not receive the same. He expressed, "I think this is borrowed from other language which says, normally, members of boards are paid $80 a day, except for those who are public employees. But that’s [that is] not what this says. I think this language needs to be looked at."

Mr. Hansen responded:

Mr. Gagnier expressed he would like a chance, in the future, to talk about "the philosophy of the [board]" proposed in S.B. 544. He indicated SNEA does not believe the director of the Department of Administration should be a voting member of the proposed board, and he suggested S.B. 544 should contain specific language to clarify that no member of the proposed board could have a conflict of interest, directly or indirectly.

Mr. Gagnier stated lines 27 and 28, on page 10 of S.B. 544, refer to the "appointed members of the board." He maintained that language is redundant, since all the board members are appointed. He further noted those lines provide that board members would "serve at the pleasure of the appointing authority in each case." Mr. Gagnier pointed out the Governor would appoint all the board members, and he asked why the language does not reflect that board members would serve at the pleasure of the Governor.

Mr. Gagnier raised concern regarding the contract attorney referenced on page 12 of S.B. 544. However, he asserted, "It’s [It is] no big deal."

Mr. Gagnier maintained various portions of S.B. 544, such as the language beginning on line 25 of page 12, appear to eliminate the alternative of a self-funded plan. For example, he indicated, terms such as "self-insurance" have been stricken throughout the bill. He questioned the intent of the bill regarding this issue and contended the intent should be clearly stated.

Chairman O’Connell commented she does not believe the bill’s intent is to eliminate the self-funded alternative.

Mr. Gagnier stated page 14 of S.B. 544 addresses staff members, and he expressed SNEA would like one of the appointed staff members to be a certified public accountant (CPA). He elaborated the quality control officer should probably be a CPA, and he suggested that qualification should be reflected in the legislation.

Mr. Gagnier commented several of SNEA’s concerns were addressed in earlier testimony. He emphasized SNEA supports section 41 of S.B. 544, which addresses the insurance commissioner’s role in uniform electronic billing.

Mr. Gagnier reiterated SNEA believes "this plan should go back to its original intent of being a state employee plan." He stated perhaps the entire program should be reconsidered, now that no Committee on Benefits exists.

Mr. Gagnier noted the board proposed in S.B. 544 is supposedly modeled after the PERS board. However, he pointed out, the S.B. 544 board would serve at the pleasure of the Governor, while the PERS board does not. Mr. Gagnier contended:

Mr. Gagnier emphasized many philosophical issues need to be considered with regard to the proposed board. He asserted there are many differences between that board and the PERS board. For example, he noted, PERS benefits are set by the Legislature, not by PERS itself. Mr. Gagnier added the Legislature requires everyone who participates in the PERS plan to contribute the same amount. He maintained that situation differs from the state group health insurance plan, in which the state pays a certain amount for state employees and a certain amount for retired state employees. Mr. Gagnier stated the local governments that participate in the state group health insurance program may or may not contribute to the plan, and the Legislature has not mandated them to do so. He concluded, "So we have a real [really] big difference, here, in trying to draw any comparison between PERS and this health plan."

Mr. Gagnier stressed SNEA is opposed to S.B. 316, at this time. He elaborated:

Danny N. Coyle, Lobbyist, State of Nevada Employees’ Association, testified he represents the retiree chapter of that organization. He indicated he agrees with Mr. Gagnier’s comments, and Mr. Coyle further stated S.B. 544 "has not really gone underneath the budget process." Mr. Coyle asserted:

Mr. Gagnier clarified Mr. Coyle had incorrectly referenced S.B. 223, when he meant A.B. 176. Mr. Coyle agreed.

Mr. Gagnier indicated he would provide a written copy of his suggestions regarding S.B. 544, on April 2, 1999.

Senator Neal suggested the Senate Committee on Government Affairs should "accept" one bill dealing with the state group health insurance program, in order to "get this issue down to where we know where we’re [we are] going." He noted parts of the other relevant bills could then be incorporated into the remaining bill, if desired.

Senator Porter commented, "I may agree with my colleague prior to the 8th [April 8, 1999], but I don’t [do not] know that we’re [we are] finished, as a subcommittee, with some suggestions that may come in the next week. And … I would ask the maker of the motion if he’d [he would] wait one more week."

Senator Neal responded his motion would allow the committee to deal with the state group health insurance program in future meetings, and he noted S.B. 544 would provide the "vehicle" for addressing the issue.

*****

Chairman O’Connell adjourned the meeting at 7:20 p.m.

RESPECTFULLY SUBMITTED:

Amelie Welden,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: