MINUTES OF THE meeting
of the
ASSEMBLY Committee on Government Affairs
Seventy-First Session
February 9, 2001
The Committee on Government Affairswas called to order at 8:08 a.m., on Friday, February 9, 2001. Chairman Douglas Bache presided in Room 3143 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. Douglas Bache, Chairman
Mr. John J. Lee, Vice Chairman
Ms. Merle Berman
Mr. David Brown
Mrs. Vivian Freeman
Ms. Dawn Gibbons
Mr. David Humke
Mr. Harry Mortenson
Mr. Roy Neighbors
Ms. Bonnie Parnell
Mr. Bob Price
Ms. Debbie Smith
Ms. Kathy Von Tobel
Mr. Wendell Williams
STAFF MEMBERS PRESENT:
Eileen O’Grady, Committee Counsel
Dave Ziegler, Committee Policy Analyst
Glenda Jacques, Committee Secretary
OTHERS PRESENT:
Jan Marie Reed, Executive Officer, Public Employees’ Benefits Program
Laurie England, Board President, Public Employees’ Benefits Program
Larry Hogan, Las Vegas via videoconference
Jan Marie Reed, Executive Officer of Public Employee’s Benefit Program, presented an overview of the program. She was appointed to the position in October of 2000. The mission of the program has five major goals. These goals are to provide the best delivery system, plan design, develop rate and contribution structures, and run in a financially sound manner that contributes to the financial solvency of the program.
Ms. Reed stated that the average age of the workforce has been established at 46 years. An aging population is looking forward to retirement. Medical costs are increasing as well as longevity. National medical costs are increasing at 10 to 14 percent. Pharmacy costs have increased 21 percent and are projected to continue. Rates and rate structure with fiscal responsibility were the focus of this program.
Ms. Reed outlined key accomplishments of the program that had improved benefits. The board lowered the individual deductible to $250, the family deductible to $500, and the out-of-pocket maximum was lowered to $2,000. The wellness benefit was increased to $300, and was not subject to the deductible. Significant cost savings were generated through the rate for proposal process (RFP), plan design and rate structure. Because the board and the actuary were both new, the process of rate structure had been difficult. The statistical data used to project future rates was not reliable. Data is being collected in a more reliable and usable manner. Because of that problem open enrollment had to be delayed. Consequently, open enrollment was extended so that necessary forms could be submitted. The program ended the year with approximately $2 million more than expected. The program was fully funded for incurred but not reported claims. The program projected an operating gain of $13.5 million for fiscal year 2001. That savings was primarily through the RFP and rate structure programs. Another $1.5 million savings was projected through plan design and the discouragement of out-of-network benefits.
Ms. Reed stated that the plan has joined a national PPO network that covered people who traveled or lived outside of the plan area. That resulted in a savings to the insured, as well as to the program, through significant discounts.
Ms. Reed explained that town hall meetings were held to hear concerns of participants and what types of things they would like to see in health benefits. Deductibles and thresholds were topics that were discussed in length. Participants also expressed concern that the database did not have their addresses and personal information correct. The program implemented new software during open enrollment to help collect correct information. The old software had been in place for eight years, and was flawed and inadequate for the program’s needs. Positive open enrollment resulted in 26,000 new forms that were entered into the new database system. Three thousand participants had not submitted forms and were rolled over into their existing plans.
Scanning technology was introduced so forms could be received via the web. Updates could also be received and transmitted to the pay center through this technology. Continuing education and information to participants is very important and is being expanded. The phone system was changed to the capitol complex system in order to improve service. There was more than 50 percent turnover of customer service people; therefore, training has been made a priority. A new web page was created for those who wanted to use it. New summary plan descriptions were developed and printed in booklet form to replace the large three-ring binders. Seminars are conducted throughout the state to inform the consumer of the choices available to them, and what changes have been made to the program.
Ms. Reed reiterated that the largest cost to the plan was the pharmacy cost. Pharmacy costs have replaced hospital costs and run $15 million annually. Current data was evaluated to provide the best benefit possible. Mail order pharmacy co-pay doubled because pharmacy costs had increased by 50 percent over the past year, with an additional projected inflationary increase of 20 percent. The program covers about 63 percent of pharmacy costs for mail order or retail customers. The national average is 60 percent. Pharmacy benefits are constantly being analyzed and negotiated to improve coverage and cost savings.
The program ended the fiscal year with $12 million cash reserve. Reserves were projected at $13.6 million for 2001 and $18.3 million for 2002. Claims administration remains current and consistent with no quarterly penalties applied for over a year. The third-party administrator, UICI, reports quarterly and reports are available upon request. The Segal Company is the actuary used. Conservative budget reserves are currently set at 11 percent, with the national average being 10-14 percent.
A study has been recommended that would review the program’s focus on federal and state regulation compliance as well as internal operations. It has been estimated at $70,000 for the biennium and would address IRS, Department of Labor, HIPAA, ADA, COBRA and Family Medical Leave regulations. The board has also recommended a retiree health study. The study would explore solutions for delivering funding for future health coverage. The program has already initiated phase one of this study. Phase one has measured the current and future exposure of the program. The results of phase one would be available later in February 2001. Phase two would address types of coverage and eligibility provisions that are appropriate, and possible funding and pre-funding sources. Phase three is pre-funding design and implementation. The cost of phases two and three has been set at $60,000 for the biennium. Additional funding was requested for updated software implementation, computer replacement and other office upgrades as needed.
Ms. Reed concluded her presentation and said she would answer questions.
Ms. Berman wanted a clarification of the phrase “discouragement of out-of- network benefits.” Ms. Reed explained that the plan design discouraged out-of- network usage. When participants chose to go out-of-network their deductibles were higher, out-of-pocket maximum was higher, and there was no wellness benefit.
Mrs. Gibbons wanted to know if hospital costs had decreased because pharmaceutical costs had increased. She also wanted to know if pharmacy had a cap or maximum threshold like hospital costs do, and why there was a 50 percent turnover in the program’s personnel.
Ms. Reed stated the turnover rate was directly affected by the new expectations established by the board. Some of the personnel had been there a long time and did not want to change how they were doing things. They chose to transfer to other departments. Ms. Reed said that the new people they hired had vast background experience in claims, benefits and eligibility and would be able to provide the kind of customer service that the board wanted to give.
Ms. Reed explained that, although pharmacy costs were increasing and more people were using pharmaceuticals to stay healthy, hospital costs had not decreased. Statistical data had been requested so an analysis could be performed concerning whether actual hospital usage had decreased or not. That information should be available in a couple of weeks. The pharmacy program has been designed as an HMO versus a PPO. The design of that program was in line with what was done nationally. Per participant request, the board had structured the program with an open formulary.
Chairman Bache asked Ms. Reed to explain problems that had occurred with the pharmacy bid.
Ms. Reed stated the pharmacy bid increased to 15 RFPs. The evaluation sheet had not matched the proposal that had been sent out by purchasing. Due to that technical mistake, the pharmacy bid was withdrawn. Because of the lateness in the year the board chose to stay with the current pharmacy vendor. Negotiations have been ongoing with the vendor to modify and improve coverage. The board would meet next week to determine if negotiations had been satisfactory or if re-bidding would be necessary.
Chairman Bache wanted to know why re-bidding hadn’t been done. A technical problem in the bid should not stop a new bid process from going on and giving a fair opportunity to other vendors. He encouraged Ms. Reed to continue the bid process.
Ms. Reed said they knew how important the bid process was and it was a priority for the board.
Mr. Humke explained he had inadvertently left out a dependent during open enrollment and had a pleasant experience with the office staff when he worked with them to correct his enrollment. Mr. Humke wanted to know if new regulations had been passed to implement the legislation from 1999.
Ms. Reed stated they had proposed new regulations. Regulations dealing with day-to-day operations had passed. Regulations concerning groups of 300 leaving the program and the statute that created Ms. Reed’s position and executive staff had not been approved. The board was working on revising those regulations for commission approval.
Mr. Humke wanted to know if the error in the bid process was due to the new or the old regulations. Ms. Reed explained the bid process was not affected by the board’s regulations. The bid process went through state purchasing and was regulated by them.
Mr. Humke wanted to know if negotiations with the current pharmacy vendor and extension of their contract were pursuant to regulations.
Ms. Reed stated that this RFP contract would not expire until December. Currently they were acting within the contract’s boundaries and bidding was done early solely for cost and plan comparisons.
Mr. Humke wanted to know if more regulations were being drafted that would fully implement the 1999 legislation.
Ms. Reed stated that they were working on them. The board was currently working on the regulations concerning groups of 300 leaving the plan.
Mr. Humke wanted to know whether that regulation was a number one priority of the board. Ms. Reed responded it was, because it impacted all retirees tremendously. In a group plan there was a mathematical equation that spread risks over the active employees and retirees while it continued to maintain the best possible coverage for the population that was insured. The current regulation had an open back door that allowed high-risk people to join while new statutes from 1999 opened the front door allowing low risk to exit the program. The goal of the new regulation was to keep the percentage of active participants and retirees balanced so that both groups were protected and the risk factor was spread evenly. That was an ongoing challenge because of the program’s obligation to the increasing retiree population.
Mr. Humke inquired about the number of participants covered on this plan and how many of those were active.
Ms. Reed stated that currently 29,000 participants were insured and about 22 percent of those were retired.
Mr. Humke wanted to know if the 22 percent retiree group had grown over the last ten years.
Ms. Reed explained that the 22 percent had been growing at an annual rate of 6 to 7 percent per annum. Future retiree growth and associated cost projections will be available in February of 2001.
Mr. Humke inquired if the board’s policy was to close the open doors as much possible.
Ms. Reed explained the board’s policy was not to close doors, but to protect the entire base when the door was opened. Regulations needed to make sense so that when doors were opened it was a controlled and logical business way to do things.
Laurie England, Chairman of the Board of the Public Employee Benefits Program, explained that the board was appointed in October of 1999. They were faced with a new legislative mandate that stated they were to run a benefits program as set by the legislature. The program was to be run in a financially sound and business-like manner, and actuarially determined. Ms. England stated the task has not been an easy one. Board meetings were held in public forums that were often volatile and emotionally charged. The previous plan had many problems that had been inherited by the new board. Special interest groups and individuals constantly lobby for what they feel are the important benefits issues. The plan had a specific amount of money allocated by the legislature to be used for all 55,000 people who were insured.
Ms. England explained that she endorsed the gathering of pertinent statistical information so the board could make factual decisions concerning retiree issues. Because it was an emotional issue, decisions needed to be made logically, factually and based upon fiscally sound principles. Ms. England wanted the board to look at the whole picture and discuss why certain groups were not covered under the plan. There might be legislative or programmatic solutions available.
Ms. England concluded that the board has had a difficult job. The board was mandated to run a sound, whole program and to pass regulations to allow groups to leave. The board took its responsibility seriously and felt strongly they were accountable for the decisions that they made.
Mr. Humke wanted to know if the board had a BDR in the system for fine-tuning of the 1999 legislation. Ms. Reed answered they did.
Mr. Humke asked if the board was anticipating amendments to the BDR after the current studies were completed. Ms. Reed explained the BDR was strictly fine-tuning, and the regulations they were currently focusing on would not be affected by the BDR.
Mr. Humke stated he was concerned about regulations that were passed with the force of law that bypassed the legislative process. He would like to see the regulations finalized and passed before the session was finished.
Ms. England responded that the board had put hours of time into developing and finalizing the regulations. Due process was followed with input from the public, the board’s legal counsel and the Legislative Counsel Bureau legal counsel. The board had listened to the commission’s recommendations and concerns that would be addressed in their entirety before the board next week.
Ms. Parnell thanked Ms. Reed and her committee for reversing the Medicare carve-out. She also was pleased to see a much more fiscally sound program than it was in 1999.
Ms. Parnell stated in her Assembly District 40 there were many state employees that had expressed concerns to her regarding their health benefits. Her constituents have felt frustrated because they did not feel their questions or concerns were being answered. She had some concern over the apparent lack of customer service and was particularly upset with the late mailing of the open enrollment package. Ms. Parnell had personally attended the Health Benefits fair at the Nevada State Library and felt she had not been given answers concerning the various plans. When her constituents called customer service for help they were told it could take up to five days before they received an answer to their questions. That lack of customer service support concerned Ms. Parnell. She also expressed concern over the types of internal quality control measures that were in place when the identification cards were distributed with incorrect information on them.
Ms. Reed explained that customer service had been understaffed at the time of open enrollment and that staff had worked weekends and extended hours for several weeks to accommodate the increased call volume. Although customer service had improved since that time, cross training and specific customer service training were ongoing. The error in the identification cards was a result of one vendor, Merck Medco, making a mistake. Once the mistake was identified, every effort was made to correct the cards as soon as possible. The quality staff officer who performed routine internal quality checks was not responsible to check outside vendor’s work. The vendor had promised to honor the old identification cards and, when they did not, customer service was flooded with additional calls.
Ms. Reed explained that the late enrollment package was due to the large task the board had in restructuring the program. Open enrollment was extended to accommodate that. At the health fair the board had expected a turnout of about 200 people and received over 450 the first day in Carson City. Because there was such an interest in the fairs, formal presentations were added to help answer questions. Additional education seminars, videotapes and other presentations have been planned throughout the state to help educate people concerning their benefits.
Ms. England stated that the board takes sole responsibility for the lateness of the enrollment package. When the original quote went before the board the cost of the retiree package was too high. Premium blending was done by the consultant to make the rate increases more acceptable. The requested study will provide more factual data in order to determine if future rate increases would be in line with what was financially mandated by the legislature.
Ms. Parnell further stressed the quality of customer service. A question was raised concerning St. Mary’s Hospital as the only HMO selection for northern Nevada. Because St. Mary’s was a Catholic hospital, concern was raised on how that fact would affect reproductive health issues. Ms. Parnell asked if either Ms. Reed or Ms. England could explain St. Mary’s policy on those issues.
Ms. Reed stated she was not qualified to state what St. Mary’s policies were. The board had not intended to have St. Mary’s as the only HMO in the area but the other HMO made a business decision not to offer service in northern Nevada. At the benefit fairs and during open enrollment St. Mary’s made it very clear what they would not cover. Those participants who were dissatisfied with St. Mary’s coverage were given the opportunity to change plans. The median age of plan participants was 46 and hormone replacement therapy drugs cost more than birth control.
Ms. Parnell wanted to know if Ms. Reed was confident that the participants who picked St. Mary’s were well informed of their options concerning reproductive health issues.
Ms. Reed outlined that all of St. Mary’s policies were clearly stated in their flyer that was included in the enrollment package. She reiterated that during the benefit fairs, St. Mary’s representatives were very clear about what they would and would not cover under their plan.
Ms. Parnell commented that her constituents had expressed concern whether their St. Mary’s HMO card would be honored at Washoe Medical Trauma Center if they were sent there. Maybe additional information could be provided outlining Washoe Med’s policies concerning that.
Ms. Reed stated she has seen correspondence addressing that issue. A quarterly newsletter had been proposed to help provide information and answer participants concerns. Washoe Med was the designated trauma center and medically necessary service provided there would be covered.
Mrs. Freeman commented that health care issues were very complex. Because we were subjective about our own health needs it became difficult to be objective about general health issues. Mrs. Freeman seconded Mr. Humke’s concerns regarding the regulations and wanted to know what the plans were for the session. She further stressed the need for open communication and being informed. Mrs. Freeman thanked Chairman Bache for bringing the issue to the committee so that it could be better understood.
Mr. Neighbors wanted to know what percent of retirees carry the plan as their secondary health insurance, and were their rates different than those who carried it as their primary insurance.
Ms. Reed said she did not know the percentage of retirees that were over 65 and used Medicare as their primary insurance. Those over 65 cost the plan 60 percent more than when they were under 65. Even though Medicare did not totally cover those people, their premiums were reduced because Medicare was the primary carrier.
Mr. Neighbors stated his Medicare health coverage would often cover all of his expenses, resulting in savings to his secondary carrier. He wanted to know how long a person had to join the health plan at the time of retirement. Ms. Reed answered that it was 60 days.
Mr. Neighbors asked if there were occasions that people could join the plan beyond the 60 days. Ms. Reed stated there was a limited group of people who had an open window to join. They were called the biannual open enrollment folks, those who had not previously been given the opportunity to join.
Ms. Von Tobel stated that in the previous session she was opposed to groups of 300 being allowed to leave. Her concern was that two years later the plan has not determined how to allow that to happen and how it would affect retirees. She wanted to know if any groups of 300 had left yet.
Ms. England explained the regulations were voted on by the board and submitted, but not passed yet. The regulations needed to address the legal statues and fiscal ramifications of any group of 300 leaving the plan. Currently one group was looking to leave the plan and have regulations customized for them.
Ms. Von Tobel stated she has received correspondence from the Teamster’s Union expressing their desire to drop out of the plan. Ms. Von Tobel wanted to know when the regulations would be adopted so the group could pull out.
Ms. Reed explained that the regulations had been written and approved by the board. When the regulations were submitted to the commission they were not approved. The board had been working on modifying the regulations so they could be approved by the commission. No application could take place until regulations were approved by the Legislative Commission.
Ms. Von Tobel wanted to know what the time frame would be. Ms. Reed stated that her board would approve the updated regulations in the next week, and it would then be up to the Legislative Commission to review them for approval.
Ms. England explained that, per the legislative initiative, the new regulations were to become effective January 1, 2001. The board had approved and submitted them to the commission prior to that date.
Ms. Von Tobel expressed continued concern that it has been two years and the issue still had not been resolved. She wanted to know what the board had accomplished. Ms. Reed reiterated that the effective date of the regulations was January 1, 2001. Between the 1999 session and the 2001 session the statutes stated the board was to write regulations, establish the board and Ms. Reed’s position.
Ms. Von Tobel wanted to know if there was access to the regulations. Ms. Reed stated the regulations were in a public forum and were posted. The board had rescheduled another meeting on February 21, 2001.
Ms. Von Tobel wanted to know if a retiree on Medicare used the state’s plan as supplemental insurance. Ms. Reed responded the state’s plan was a secondary plan, not a supplemental plan, to Medicare recipients.
Ms. Von Tobel wanted to know what the rates would be for retirees with Medicare. Ms. Reed replied she did not know what the rates were off-hand, but she would get a rate sheet to Ms. Von Tobel.
Ms. Von Tobel explained she had lost her health insurance and was eligible to join the state’s health plan. When she realized how much the premium was, she found a private plan for herself at considerable savings. She wanted to know if employees knew they had an option to get coverage for themselves and would not have to use the state’s health plan.
Ms. Reed explained that all employees of the state have the option to buy insurance for themselves. She also was interested in seeing Ms. Von Tobel’s health plan. Ms. Reed clarified that the state’s plan was a group plan and was affected by many variables that affected the rates. Dependents and retirees were part of the mix that helped to drive risk factors and premiums. A single person could buy an individual policy at a reduced rate. She also explained that the state’s health plan was not solely health coverage. It included life, travel accident, accidental death & dismemberment, vision, dental, and other benefits. If employees opted to waive state coverage they would not be reimbursed or be entitled to the subsidy the state pays for their health coverage.
Ms. Smith was concerned over the level of customer service and wanted to know if the board had customer service specialists. Ms. Reed stated the agency’s real job was the administration of eligibility. All claims and customer service questions went to the 800 number at the third-party administrator. There was a staff of 22 customer service representatives specializing in answering those types of questions.
Ms. Smith wanted to know if training was being provided so that calls to the agency would be answered in a compassionate, professional manner. Ms. Reed explained there was in-house training and they were looking to have additional professional training.
Ms. Smith wanted to know if the mail-in pharmacy company was the same as the retail company, and if there was a cost savings in using the mail-in pharmacy plan. Ms. Reed explained there was a cost savings with the mail-in pharmacy plan, which was passed on to the agency as well as the participant.
Ms. Smith asked whether there was a generic versus name brand pharmaceutical benefit. Ms. Reed explained there was a generic versus name brand savings benefit, as well as a preferred list of clinically evaluated best drugs. Often times those drugs cost less.
Ms. Smith stated that providers have told her the name brand drugs were becoming a problem because participants wanted to use them more and more. She wanted to know if there had been increased usage of those drugs. Ms. Reed clarified that pharmacy rates had increased almost 50 percent since September due in part to the increased usage of name brand pharmaceuticals.
Ms. Smith wanted to know if there was a study available showing the correlation of pharmacy costs and name brand drug usage. Ms. England said the program’s number one utilized drug was Premarin. The number one and number two pharmacy costs to the program were Prozac and Paxcell respectively. Any additional information that the committee was interested in Ms. England would assist them in obtaining.
Ms. Smith wanted clarification on what retail and mail-in pharmacy costs were. Ms. Reed explained that the co-pay for mail order was $25 for generic 90-day supply and $50 for brand name 90-day supply. Retail co-pay was $9-$18 for a 30-day supply.
Ms. Smith expressed her appreciation for the change in the vision plan that gave participants a choice to use local providers. She wanted to know if a discount was still provided to participants if they chose local providers.
Ms. Reed explained that the vision plan had been changed to a reimbursement benefit and an outlook card that gave a discount at the point of purchase. Different providers had different discount rates. Once the discount was applied to the purchase, the plan would reimburse the participant up to the plan’s established amount.
Ms. Smith wanted to know what the claim turn-around time was. Ms. Reed stated the goal was to have the third-party administrator pay 85 percent of claims submitted within ten working days. During the last three years that goal had been consistently met. Currently this goal was slightly lower than the national average. The third-party administrator would go to bid in 2001 and the new RFP would bring the turn-around time up to the national standard.
Ms. Smith stated her concern that those not choosing the St. Mary’s HMO would have no other HMO choice. She also wondered who would cover services that St. Mary’s would not, i.e. pre-natal, radiation, etc. Ms. Reed clarified that the self-funded plan was available to those who did not want to choose St. Mary’s. The self-funded plan had been restructured to be comparable to an HMO plan. During open enrollment each participant had a choice of the plan they wanted and were bound by the limits of that plan.
Ms. Smith expressed concern that participants needed to be made aware of what was and what was not covered under each plan. Ms. Reed stated there were very detailed brochures describing what services were available through each plan. The brochures were available at the enrollment fairs and were given to each participant for review. The plan was to continually work to have well-informed consumers.
Mrs. Gibbons recognized there might be a problem because the previous session’s regulations had not defined what a group was.
Mr. Price wanted to know who the two groups were that reviewed the regulations. Ms. Reed stated the plan’s board of directors approved the regulations and forwarded them to the Legislative Commission during their November meeting.
Mr. Price stated his favorite pharmacy had been dropped from the plan and wanted to know if the choice of pharmacies on the plan was the responsibility of the provider, Merck Medco.
Ms. Reed explained that Merck Medco had the sole responsibility for choosing the participating pharmacies and for negotiating the lowest rate available. The plan currently used two consultants in its goal to get the best service and rates available through continued negotiations.
Ms. Parnell relayed the committee’s frustration last session with the third-party administrator, UICI. Her concern was the board was not only continuing its relationship with UICI, but also strengthening it. Segments of the plan had not gone to bid but had gone directly to UICI for service.
Ms. Reed clarified the plan’s consultants recommended that UICI be used as the third-party administrator on the addition to the plan of the behavioral health carve-out. Estimates were obtained from other third-party administrators on the payment of those additional claims, but their costs were significantly higher. Roughly a million dollar savings was realized by having UICI process those additional claims. When the vision carve-out was added back into the plan UICI was able to process those additional claims at a cost of six cents per claim.
Eligibility and billing was a separate bid that was done through purchasing. The two top bids were from a Canadian company and the sister company of UICI, Health Access. The RFP evaluation committee visited both companies and then selected Health Access.
Ms. Parnell wanted to know how often these bids were sent out. Ms. Reed stated that the insurance board of examiners’ policy was every three to four years, depending on the size of the contract. UICI’s contract would be up for bid with an effective date of January 1, 2002.
Ms. Parnell wanted to know if the board had chosen to re-bid rather than have Merck Medco complete the term of their contract. Ms. Reed explained that, even though Merck Medco’s contract was not up until December 2001, the board recommended doing a bid to determine if the existing contract was a good one. Because of the technical problem with purchasing, the bid was withdrawn and a new one was not initiated because of the lateness in the year and the closeness of open enrollment. The board would meet next week and decide whether continued negotiations with Merck Medco were acceptable or whether a bid would be initiated for January 1, 2002.
Ms. Parnell wanted to know why all participants on the plan were not rated as one group. The active-retired before 1994 and those retired after 1994 were being rated separately. That had resulted in a rate increase of 4 percent for active employees and a 24 percent rate increase for retirees on Medicare.
Ms. Reed stated that retirees had not had a 24 percent rate increase. The board had originally asked the actuary to look at the expenditures versus monies collected to see what each group was actually costing the plan. This report indicated that retirees should have a 24 percent rate increase to offset their costs. The board felt that rate was not appropriate so open enrollment was delayed so the actuary could adjust the rates more reasonably. The actives had a 4 percent increase because of the dental plan costs. The plan had chosen to subsidize retirees so a 24 percent rate increase was not realized.
Ms. Parnell asked for a copy of the breakdown of the rate sheet for all on the plan. Ms. Reed clarified that non-state actives and non-state retirees were in a separate group from state employees and state retirees. The state subsidizes state employees so, per statute, those groups could not be pooled. The board was evaluating how much the plan could continue to subsidize retirees.
Ms. Von Tobel stated she had gone to her office and got her insurance plan card for Ms. Reed to review it. She wanted employees to be shown different rate plans and alternatives to state health insurance. Ms. Von Tobel suggested the state should get out of the health benefit business because they appeared to not be doing a very good job. State employees could be given the premium the state pays for their plans and purchase their own insurance. Those who did not need life insurance or IRA benefits should be able to purchase health benefits without those extra attachments.
Ms. Reed stated there was a box on the enrollment form that employee’s could check to decline coverage. The state’s plan was more expensive than an individual program because of the additional expense of subsidizing retirees. The plan had a commitment to continue to insure state retirees.
Ms. Von Tobel stated her concerns over the previous plan’s carve-out of state retirees and the exorbitant cost of their health benefits. Ms. England explained that the previous board had created that carve-out and the current board had inherited the problems that went with that.
Mrs. Gibbons wanted to know if a group of 300 or more wanted to leave the program would they be allowed to return.
Chairman Bache referred to the Segal report stating the state’s retirees’ experience for FY2000 resulted in a paid loss ratio of 109 percent. Non-state retirees reflected a favorable paid loss rate of 93 percent for the same period. In a memo from the board to Senator O’Connell the board stated that the non-state retirees had a paid loss rate of 111 percent for the first nine months of 2000. Chairman Bache wanted clarification of these figures.
Ms. Reed explained the 93 percent loss ratio was from the prior year’s experience and that data from those previous years was not reliable. New data in 2001 resulted in the 111 percent loss ratio.
Chairman Bache wanted to know if FY2000 was from July 1, 1999, to June 30, 2000, and to what period of time the 111 percent referred.
Ms. Reed clarified that the plan was run on both a fiscal and a plan year. The fiscal year was from July 1 to June 30 and the plan year was from January to December. When the Segal Company made its report in August it reflected data from January to December 1999. By October 2000, the board had collected nine months of data reflecting the 111 percent experience.
Chairman Bache stated the Segal report was for FY2000 and not plan year 2000.
Ms. Reed stated that her data was collected from January to September 2000 and, if the Segal Company had used fiscal year data, it would have been from July to July. Although this was not normally done, it could be done that way.
Chairman Bache stated that if the Segal Company had used fiscal year data then it would have overlapped six months with the board’s plan year data.
Ms. Reed reiterated that their confidence level in data collected from prior years was very low. Mr. Segal had stated in a board meeting that there was no confidence in their projections because the data provided wasn’t reliable. Mr. Segal had suggested that the board should focus on collecting reliable data for future reports.
Chairman Bache wanted to know how the 28 percent increase scheduled for the retirees was reduced to 11 to 12 percent.
Ms. Reed stated that the retiree rate was subsidized by the plan. Money that would have gone into reserves or into benefit enhancement went to buy down the retiree rate increase.
Ms. Freeman commented she appreciated that the report had been presented to the committee. She wanted to know if the federal government was going to help pay for the ever-growing pharmaceutical costs. Ms. Reed stated she had no knowledge of any such plan.
Mr. Humke wanted to know if the board rated retirees in separate groups as the Segal report had. Ms. Reed explained that the Segal report separated retirees for information purposes only. By statute, non-state retirees must be looked at separately.
Mr. Humke wanted to know if the recommendation of the Segal report regarding the consolidation of state and non-state retirees had been looked at. Ms. Reed stated that the board had looked at this recommendation but because of the existing statute they could not blend state and non-state retirees. Depending on the data that would be collected over the next two years, there might be a possibility of that in future. That would also affect how non-state retirees and non-state employees would join the plan and how the balance would shift. The goal and need of the plan was to build the plan in size so the retiree risk was disbursed. Because non-state employees could enter the plan as retirees, only the addition of non-state actives would help strengthen the plan.
Mr. Humke wanted to know whether the board wished to amend any of its bills to consolidate retirees. Ms. England stated they didn’t want to do anything to the retiree groups until the current study could be completed. The many variables involved in this decision would require knowledge and education of all factors involved. Although retirees were concerned about continued subsidization of their policies, the actives have a large group of dependents that want their premiums subsidized as well. The board wrestles constantly with the demands of both groups.
Chairman Bache commented that state employees who contributed to insurance plans realized that part of their premium went to support state retirees. When those working employees retire they expect the system to help support them. It seems the current system was changing for those future retirees.
Ms. England explained there is no policy or law that provided for that. The legislature gave the plan a certain amount of money for participants and that money was to be distributed among them. Because many participants do not care about helping other people in the group, the study would provide the board with the necessary information to make factual decisions concerning future types of coverage. The board could not make decisions that would impact so many people without accurate information. The decisions that were made have the potential to affect out-of-pocket expenses, cost sharing and reduction or minimization of benefits. Contributions that people made in their twenties and thirties were only 50 percent on the dollar compared to what was being used currently.
Mrs. Gibbons wanted to know if groups leaving could return to the program. Ms. Reed stated that regulations state that groups could return per specific parameters that were outlined. Many hours had been spent on writing regulations and analyzing all the ramifications of participants leaving, retirees returning, and so on.
Ms. England clarified that all of the regulations were developed within the law, common sense and good fiscal policy. Those regulations were not ambiguous, discriminatory, or prejudicial. Legislative mandate stated that the board was to run the program to the benefit of all participants. The major responsibility of the board was to run a fiscally sound program and take care of the needs of the many. All other jobs were secondary.
Ms. Gibbons reminded all to be careful of discrimination concerning groups wanting to return to the plan.
Ms. England stated there were many scenarios concerning the regulations regarding groups leaving or returning to the program. All scenarios had the possibility of being litigated and could be emotional and financially draining on the program.
Chairman Bache thanked committee members for their comments and recognized Mr. Larry Hogan from Las Vegas via teleconferencing.
Mr. Hogan, State Welfare Department retiree, stated that the Medicare carve-out had not gone away but has just been renamed. The cost was now greater than it was a few years ago. The cost of mail-order prescription drugs had increased 400 percent. If pharmaceuticals were expected to increase 15 to 20 percent in the next year, Mr. Hogan wanted to know why the cost of mail-order drugs had increased so much. He had left many messages at the office in Carson City and had not had his calls returned. The meeting held in Las Vegas a year ago was almost a lynch mob because people were so disgruntled with their health benefits. The plan continued to get worse. Two years ago the maximum annual threshold for a person/family was $7,500/$15,000. This year it had increased to $15,000/$30,000 respectfully. Those on Medicare have an annual $75,000 per person and $100,000 per family threshold amount. Mr. Hogan felt his questions were not being answered and was frustrated with the plan’s secondary participation with Medicare. He wanted information about wellness benefits, co-pays and deductibles. The rate increase was 23 percent across the board two years ago and 12 percent last year. This year the rate increase was supposed to be 8 percent. Mr. Hogan wanted to know if the active rate increase of 4 percent had been subsidized by the other groups who had higher rate increases of 8 to 12 percent. Continued frustration was expressed over the lack of knowledge about who was and who was not a PPO provider.
Mr. Hogan stated that the federal government and the military take better care of its retirees than the state of Nevada. The state of Nevada health benefits were far more expensive than other plans.
Mr. Hogan expressed concern that the board did not meet in Las Vegas. Three board members reside in the south; therefore, there should be more meetings in the south. Participants wanted to attend the meetings and hear what was going on.
Ms. Von Tobel wanted to know what Mr. Hogan’s monthly out-of-pocket premium was. Mr. Hogan replied that before he was 65 he paid around $250 a month for his wife and himself. After turning 65 he had no premium but his wife paid $167 a month.
Ms. Von Tobel thanked him and said she would get answers to his many concerns.
Chairman Bache thanked Mr. Hogan for his testimony and said due to the lateness of the hour he would reschedule a continuance of the meeting.
Chairman Bache stated there were several bills on which he wanted to take action.
Assembly Bill No. 9: Authorizes use of arbitration for adjustment of certain grievances of state employees. (BDR 23-439)
MR. NEIGHBORS MOVED TO DO PASS.
MS. GIBBONS SECONDED THE MOTION.
Ms. Von Tobel expressed because she had not been given answers to her questions concerning the costs of A.B. 9 she would vote “no”. She reserved the right to change her vote on the floor if she received the information requested.
Mr. Brown stated that although he felt the goal of the bill was noble, he would abstain from the vote and reserve the right for later consideration.
Chairman Bache asked Ms. Parnell if she would like to hold A.B. 9 until the questions expressed could be answered. Ms. Parnell stated she would go ahead and take the vote and answer the questions of Ms. Von Tobel and Mr. Brown before it went to the floor.
Mr. Humke said he would vote “no” at this time and reserve the right to change his vote on the floor.
Ms. Berman said she would also be voting “no” reserving her right to change her vote on the floor.
Ms. Gibbons stated she would be supporting the bill because its efficiency would save the taxpayer money.
THE MOTION CARRIED. MR. BROWN ABSTAINED. MS. VON TOBEL, MR. HUMKE, AND MS. BERMAN VOTED NO.
Assembly Bill No. 11: Revises charter of City of Elko. (BDR S-805)
MR. LEE MOVED TO AMEND AND DO PASS.
MS. VON TOBEL SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
Assembly Bill No. 22: Amends charter of City of Las Vegas to authorize city council to extend terms of municipal judges. (BDR S-858)
MS. VON TOBEL MOVED TO DO PASS.
Chairman Bache questioned whether the bill had an amendment.
Mr. Lee explained there was a redundancy in the bill and that Ms. O’Grady would clarify.
Chairman Bache remembered the proposed amendment and asked Ms. Von Tobel if she would like to change her “do pass” to “amend and do pass”.
MS. VON TOBEL WITHDREW HER MOTION OF DO PASS AND MOVED TO AMEND AND DO PASS.
MS. GIBBONS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
As there was no additional business, Chairman Bache adjourned the meeting at 10:52 a.m.
RESPECTFULLY SUBMITTED:
Glenda Jacques
Committee Secretary
APPROVED BY:
Assemblyman Douglas Bache, Chairman
DATE: