MINUTES OF THE meeting

of the

ASSEMBLY Committee on Government Affairs

 

Seventy-First Session

February 14, 2001

 

 

The Committee on Government Affairswas called to order at 8:14 a.m., on Wednesday, February 14, 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

Ms.                     Debbie Smith

Ms.                     Kathy Von Tobel

Mr.                     Wendell Williams

 

COMMITTEE MEMBERS ABSENT:

 

            Mr. Bob Price

 

 

STAFF MEMBERS PRESENT:

 

Eileen O’Grady, Committee Counsel

Dave Ziegler, Committee Policy Analyst

Cheryl Meyers, Committee Secretary

 

OTHERS PRESENT:

 

Richard Snyder, State Secretary, Nevada Corrections Association

Gary Wolff, Business Agent, Nevada Highway Patrol Association

Garth Doll, Member, Board, Public Employees Benefit Program

Danny Coyle, President, Retiree Chapter, State of Nevada Employees Association

Larry Hogan, Retired Nevada State Employee

Kathy Naumann, Business Agent, Teamsters 14

Dr. Jim Richardson, Nevada Faculty Alliance

Martin Bibb, Executive Director, Retired Public Employees of Nevada

Robert Gagnier, Executive Director, State of Nevada Employees Association

Ruth Hart, Retired Nevada State Employee

 

 

Chairman Bache announced the committee would continue hearing testimony on the Public Employees Benefit Program (PEBP).  He acknowledged testimony would be heard from Las Vegas.

 

Mr. Richard Snyder, State Secretary for the Nevada Corrections Association, read from Exhibit C, acknowledging the group he represented voted for the right of 300 or more employees to seek their own insurance. He stated his group recognized the need for regulations that would protect employees, retirees, and the integrity of the state health plan. His group also recognized the correction of the benefits plan would be a long process.

 

Gary Wolff, Business Agent for Nevada Highway Patrol Association and also the representative for Teamsters Local 14 and 533, testified to the hours spent in 1999 to pass S.B. 544 of the Seventieth Session. He stated Section 12.5 of S.B. 544 was a controversial issue that originally was intended to be a separate bill.  The Nevada Highway Patrol Association had tried to change the health plan in the past 20 years due to the lack of accountability.  Lack of accountability was evident in a lawsuit that was brought before the board of the Public Employees Benefit Program several years ago, he recalled.  The Supreme Court concurred in rendering a decision at the time that stated there was no one accountable. He suggested the benefits program could lose $40 million dollars and no one would be held accountable because the fund was not regulated under the Department of Labor and the Taft-Hartley laws. 

 

The main area of concern, according to Mr. Wolfe, was Section 12.5 of S.B. 544 that allowed groups of 300 or more employees to leave the state’s health plan after January 1, 2001.  The law stated the employees have the right to seek a better system, he declared.  The PEBP board tried to extend the date that allowed the 300 or more employees to leave the system.  He stated nothing had been done for the employee except to reinstate $100 towards the deductible.  He related a story to indicate that the employees benefits program was solvent due to the increases that have been paid by the employees and retirees of the state.  The regulations state the employees were allowed to leave the plan if the benefits program did not help the members. 

 

Mr. Wolfe testified the materials presented to the committee reflect what his organization, the Legislative Council Bureau, and various attorneys have expressed to the PEBP board:  the board did not meet regulations and legislative intent.  He believed the board had written regulations that were overly cumbersome to force groups to stay within the current system.  He stated the board believed that allowing groups of employees to contract with private providers would be catastrophic to the whole system of the state’s health plan.  He suggested the board would write regulations based on this belief.  He claimed the PEBP board believed the system would collapse if a portion of employees sought a better health plan. He remarked the retirees in the state were upset with the idea of not being included in the groups that would remain with the state’s benefit plan. 

 

Mr. Wolfe suggested the state’s health plan would try to regulate groups after they left the plan.  He noted the Public Employees Benefits Program had no regulations and wants to impose stringent regulations on the groups that propose to leave the program.  Mr. Wolfe stated his organization would be able to give some members of the Nevada Highway Patrol Association a $200 raise to help with their families if they removed themselves from the benefits plan.  He denied any action on the part of his organization to select and choose only “good” members to leave the state’s health plan.  He complained the only HMO available to members in northern Nevada was St. Mary’s. The single members of the group were paying $75 in addition to the $368 paid by the state.  As a state retiree, he received $287 from the state and his premium for St. Mary’s HMO was only $259.  He questioned how a retiree could have premiums lower than an active 25 year-old in good condition.  He submitted there was a law in place and suggested the committee insist the board of the state’s health plan be instructed to enforce it.

 

Mr. Garth Dull, Member, Public Employees Benefit Program, spoke about the difficult job the staff and the board members had to perform.  He stated retirees had voiced many complaints to him.  The retirees had a very difficult time paying the premiums due to their low retirement benefits.  The cost of prescription drugs had been a major concern to a number of retirees.  He had notified the board of his strong concern regarding retirees surviving without being grouped with the rest of the employees.  Another area of concern, he mentioned, was that the rate of increases in premiums for retirees elevated 12 percent and only 3 percent for active employees. He stated an affordable retirement with a reasonable cost for insurance was something looked forward to by most state employees. He related he did not note any statement in the regulations prohibiting a group of 300 or more employees to leave the plan.  He strongly believed that groups of 300 or more should be representative of the whole group with retirees included.  Mr. Dull suggested there should be a homogeneous group of individuals exiting the program to help keep the state’s program stable and affordable. 

 

Assemblywoman Gibbons stated that the legislative intent in S.B. 544, Section 12.5, allowed groups of 300 or more to leave the benefits system; however, it left out the definition of a group in regard to a homogeneous number of retirees and active employees.  She questioned the legal staff as to whether we needed to rewrite Section 12.5 or delete the complete section.

 

Ms. O’Grady, Committee Counsel, stated the statute does not specify any mix of employees, retirees or officers.  She indicated the statute could be rewritten to be more specific.

 

Ms. Gibbons was still concerned with the group that wanted to leave, and wondered if the state was legally bound to let them leave with no other language in the statue.

 

Ms. O’Grady stated the committee was legally bound to let the groups leave the benefit plan by how the statute reads at this time.

 

Ms. Gibbons felt that if the committee allowed the board of the PEBP program to pass regulations that would determine the employee group configuration, a court case could ensue.  She indicated she thought that the committee should change Section 12.5 to clarify the language and regulations.

 

Ms. O’Grady could not give an opinion on a matter of legislative policy.

 

Ms. Gibbons reiterated she felt the committee should rewrite the law this session as the regulation was problematic as read.

 

Ms. Berman questioned Mr. Dull on the issue of the 300 or more employees “out” group. She asked Mr. Dull if the problem would be solved if the committee changed the group to a larger minimum number, such as 500, and changed the premium from five percent to eight percent. 

 

Mr. Dull could not evaluate the issue but stressed his concern over allowing groups of 300 people to leave the program and not being proportionate.  He wondered what would happen when a retiree wanted to return to the program.

 

Mr. Humke stated the issue was the regulation that the board of the PEBP voted on November 29, 2000.  The regulation was subsequently declined by the Legislative Counsel Bureau.  He wondered if the board was in the process of rewriting the particular regulation.

 

Mr. Dull answered he was not aware of the standing of that issue.  He stressed his primary concern was protection of the program when the group left.  He assumed there was a middle ground to accomplish both tasks.

 

Mr. Humke determined the regulation the board attempted was a good faith attempt to reach a suitable solution.

 

Mr. Dull concurred and stated he read the regulations several times. He noted the effort required by the regulation in order for a group to leave the state’s health plan and stated the complexities in the regulations were necessary in order to protect the current program. 

 

Assemblyman Humke surmised Mr. Dull’s vote, as a member of the board, would be to insure the overall strength of the program by keeping up enrollment numbers.

 

Mr. Dull suggested the state’s benefits plan owed the active members who are part of the plan to have the plan remain strong. He suggested the program should be compared to other retirement systems and programs to remain competitive.

 

Assemblywoman Von Tobel referred to the second paragraph in a letter to Jan Marie Reed from Brenda Erdoes, Legislative Counsel.  She read the paragraph that indicated the board of the Public Employees Benefit Program wrote regulations that did not follow the legislative intent.  She strongly expressed her concern that the board would have written very restrictive regulations.  She felt the legislature had made it clear groups of 300 would be allowed to leave the plan.  The statement made by Mr. Dull that asked what would happen if a retiree had left the plan and wanted to return, she considered would be a compliment to indicate our state plan was wonderful.  She asked for an explanation of the board’s restrictive regulations.

 

Mr. Dull stated he did not look at the regulations as being too restrictive when passed; however, if the regulations make it too difficult for the groups of 300 to leave, then the regulations were too restrictive.

 

Ms. Von Tobel replied regulations needed to be changed in a very timely fashion. She stated the legislators owed it to the employees.  The employees fought for S.B. 544; however, the plan did not meet the satisfaction of many employees.  She stated she would like a timeline for when the regulations could be fixed.

 

Mr. Dull could not state a timeline for new regulations. He stated he hoped the board would change the regulations very soon.

 

Ms. Gibbons stated the legislators were at fault for not being more specific in the legislative intent.  She felt the legislators needed to rewrite the regulations in order to be more specific so the board could focus on running a sound program.

 

Chairman Bache referred to a witness in Las Vegas.

 

Mr. Larry Hogan wished to speak on the issue of retired seniors.  He stated a retired senior needed a Medicare booklet, a Medigap policies and protection booklet that outlines supplemental insurance for Medicare, and a Medicare supplemental insurance premium comparison guide.  The state’s program had been increased 4 percent and that amounts to approximately $2,000 per person and $4,000 per family. He stated retirees have 6 months to apply for a Medigap policy and the policies do not cover existing illnesses if a retiree waited for more than 6 months after turning age 65.

 

Mr. Hogan stated there were only two people in charge of the benefits program whose total experience in the state of Nevada was less than three years.  He felt those people should not be representing retirees who had worked for the State for over 30 years.  He felt their only concern was to make the program solvent and in doing so had taken benefits away from retirees.  He believed the Governor was not aware of the problems of the benefits program. The senior population would continue to complain until the problems were solved within the system. 

 

Assemblywoman Gibbons expressed empathy for Mr. Hogan’s situation.  She inquired if Mr. Hogan’s ideas for a better system for retirees could be expressed so the concerns could be relayed to the Executive Branch.

 

Mr. Hogan suggested the state should perhaps adopt a plan for retirees similar to the military.  Military insurance paid for whatever Medicare did not pay.  The military plan for mail order drugs would start in April of this year and out-of-pocket costs for prescriptions would be $3 and $9. The state’s medical plan charged $25 and $50.  He questioned what the state could do to help control the money that comes into the benefit plan. He stated Ms. Reed indicated to him that the PEBP had a surplus of $25 million.

 

Assemblywoman Gibbons clarified for Mr. Hogan the last fiscal year surplus for the plan was $2 million.  Ms. Gibbons reiterated to Mr. Hogan the committee would be very interested in hearing his ideas and suggestions.

 

Chairman Bache called on Kathy Naumann, business agent for Teamsters Local 14 in southern Nevada.

 

Ms. Naumann testified the Teamsters 14 “995” trust was the group who wished to depart from the state’s plan as soon as possible.  She stated she had worked on the project for her union for the last three years.  She was concerned regulations were being written that strayed from the original intent of the law. She believed the solution to fixing the benefits program would be a ten-year project.  She testified she had been told in November 2000 at a board meeting that the program had operated at a deficit.  She heard the same statement in December at the Legislative Commission.  State workers were still paying more and getting less regardless of a surplus in the plan.  She testified Teamsters 14 wanted to work towards solutions for all state workers. Teamsters 14 was very concerned about retirees and had made suggestions to co-sponsor legislation to bring their subsidies up to parity.  Ms. Naumann observed that at the cost of insuring retirees, the employees were not insuring children.  State workers, she indicated, have to make the choice between paying their mortgage and paying for their children’s insurance.  The state of Nevada would pay for not insuring children in other ways.  Ms. Naumann wanted to know the statistics of uninsured children in the state whose parent was an employee of the state. 

 

Ms. Naumann indicated the rate structure in the current plan had created problems for all state employees, including rural employees who were not able to find a doctor who would accept the state’s benefit plan, single northern Nevada participants who had to pay $75 out-of-pocket, and southern employees whose rates were higher with the state’s plan than what the employees could get as an individual citizen.

 

She indicated the state employees in southern Nevada feel they have no voice.  There had only been one meeting in southern Nevada with the board of the Public Employees Benefit fund.  She stated with 65 percent of the population living in southern Nevada, there needed to be a representative of the plan available to help those employees with their problems.  She called attention to open meeting laws, which she felt had been ignored by the board of the benefit plan. There had been a meeting of the board on January 21, 2001, and she stated she never received a notice until it had been posted on the board’s website two days after the meeting.  Her organization felt they were being left out of notification of meetings and the ability to offer solutions.  Ms. Naumann stated she had six employees who were ready to give up their time to attend the meeting to lend support and ask questions.

 

Ms. Naumann felt the plan needed to address customer service issues with representation.  She stated S.B. 544 was about a vision and part of that vision was the “300 out” section.  She does not believe the section should be altered or cut out.  She mentioned the mission of the legislature was vision. However, there were parties that were causing people to believe the retirees were causing the plan’s problem.  The legislature, she stated, should address the funding for retirees because the cost was not as much as for active employees.  She mentioned problems concerning new employees not receiving their insurance cards for 90 days and not being notified of deductibles.  The “300 out” plan would provide competition among providers and ultimately provide a better plan for everyone in the state. Because the regulations were not in place, Ms. Naumann stated the Teamsters had been misquoted in regard to their position on allowing retirees into their trust. The Teamsters’ trust allows retirees who were active to move into the trust plan.  She stated the legislators needed to know the Teamsters were not hand-picking members of the “300 out,” but rather building homogenous groups that have a relationship of interest that will satisfy the Labor Department and the Taft-Hartley regulations. She was concerned there was not a spirit of cooperation between the board of the Public Employees Benefit Program and the Teamsters 14 leadership.

 

Assemblywoman Gibbons queried what the procedure would be to become a member of the Teamsters Union and what occupations would be involved.

 

Ms. Naumann replied the Teamsters 14 currently had jurisdiction over public employees, including the city of Henderson, city of North Las Vegas, city of Mesquite, city of Boulder City, the Las Vegas library district and several others that were represented.  She stated the Teamsters determined they could make things better for state employees and consequently supported the “300 out” portion of S.B. 544.  She reiterated the benefits that would apply to an employee who had elected to quit the state’s benefit plan. She remarked an employee who could save $266 per month on a health plan would effectively receive a 15 percent raise in salary.  The increase in salary effectively would entice the employee to stay with state employment versus private industry. 

 

Ms. Gibbons wondered how the Teamsters could offer better benefits to employees than the state’s health plan.

 

Ms. Naumann stated the Teamsters had the ability to negotiate through the trust with a collective bargaining agreement that supplements the insurance.  With the plan from the Teamsters in place, the employee would pay $56 out-of-pocket monthly for a family, versus $356 for a family with the state’s health plan.  

 

Ms. Gibbons stated she would be calling Ms. Naumann’s office to continue her questions.

 

Assemblywoman Smith queried Ms. Naumann about the number of uninsured children in the state of Nevada. Ms. Naumann stated she did not have the actual number; however, she would be very interested in receiving a copy of the statistics.  She believed the number was hidden in the numbers somewhere.  She stated the legislature intended to cover children and therefore she felt the number of uninsured children needed to be compiled.

 

Ms. Smith asked why the Teamsters could negotiate contracts that the state could not begin to negotiate.

 

Ms. Naumann stated in the rural areas the problem had not been the HMOs, but rather the state does not pay its bills. As a result, doctors in the rural areas do not want to handle state employees.  Employees have trouble finding medical personnel to use the state plan.  The Teamsters’ trust had been in the area since 1945 with a long-term relationship among doctors and medical personnel.  The Teamsters had been able to provide a far superior medical plan to the state employees based on their long-term relationship and record of paying their employees’ medical plan claims. Respectfully, she stated the state would take years to get to the same position as the Teamsters. 

 

Assemblywoman Parnell would not fault the state’s health plan with the overwhelming cost of insurance that was evident in all areas of employment, not specifically a state employee.  Ms. Parnell echoed the serious concern of all who note that children were not being insured.  The issue of health insurance, she believed, was so serious that we need attention from the federal level to begin to solve the problem.  She stated the issue should be taken from a personal level and examined in a global level in order to work on the problems more effectively.

 

Chairman Bache turned the meeting back to Carson City for additional testimony.

 

Dr. Jim Richardson of the Nevada Faculty Alliance (NFA) stated he believed the plan organizers deserved a congratulatory statement.  He also believed Chairman Bache, Governor Guinn, Ms. Reed and her staff had done a good job of saving the plan and brought it from bankruptcy to a working state.  The NFA, however, had some concerns with the plan.  There were major concerns of the members of NFA especially in the area of pharmacy costs and the out-of-pocket expenses.  He echoed Ms. Parnell’s comments regarding seeking help from the federal level. The NFA was seriously concerned with the possibility of retirees being rated differently or increased payments in the plan could be higher than active employees.  He believed the state of Nevada had to realize adequate health care for retirees was going to take a substantial sum of money.  The NFA members in northern Nevada were very concerned about the lack of competition in the HMO market.  Dr. Richardson stated the NFA members did not want to pay $75 per month, in addition to what the state contributed, to participate in the HMO. Dr. Richardson stated it was also clear that the members wanted an HMO plan by virtue of the number of members who signed up for the St. Mary’s HMO.  The north did not have the choices available to the southern part of the state.  He suggested the northern part of the state might need a supplement to the plan to help offset the costs produced by lack of competition. 

 

Dr. Richardson stated the real problem was money.  The state of Nevada, per the current budget, was dropping its contribution $11.25 per employee per month by the next biennium.  The contribution from the state in the future would not be enough to cover the cost of insurance for a state employee.  The budget, if approved, would not allow the state benefit plan to be competitive. He challenged the committee to deal with the budget issue to try to find financing to do the state’s business and cover the costs.

 

Dr. Richardson commented on the “300-plus” groups that were leaving the state’s health plan.  He had expressed clear reservations about including Section 12.5 in S.B. 544.  He believed the plan must be on steady ground before people were allowed to exit the plan.  Dr. Richardson stated the rest of the members enrolled in the state plan would receive a 5 percent increase in medical payments if a 300 group left the plan.  He inquired how that could be fair and had asked to have that portion removed from S.B. 544, or for legislators to reduce the rate of increase down to 2 or 3 percent.  However, he stated, it was passed into law and now legislators had to find that 5 percent somewhere in the budget when groups left the state’s plan. 

 

Dr. Richardson continued by stating that in past discussions on Section 12.5 the assumption was retirees would leave with the groups who wanted to leave the plan.  He agreed with Assemblywoman Gibbons on the issue of clarifying the language in Section 12.5 with respect to retirees and groups leaving the plan.  He believed the first group leaving the plan would set a precedent for other groups following.  The regulations for groups leaving the plan should be very tough in order to protect the overall plan and the employees in the plan.  He urged the committee to work on the issue.  Dr. Richardson commented on the issue of letting people back into the plan once they have left.  He felt the state should have regulations that cover the cost of the employees coming back into the plan.  He urged legislators to find more money for the state health plan and to rewrite the regulations to make the protection for the plan clear. 

 

Assemblywoman Freeman voiced her concerns over the problems of insurance for health care.  Ms. Freeman requested the Chair continue the hearings on the issue of the state health plan asking the Governor’s Office to participate. She also requested the budget issues be heard in the Committee on Government Affairs as well as the Committee on Ways and Means.  She questioned why the state health plan only had the St. Mary’s HMO on the plan.  She mentioned HMOs would not come to an area without enough population.  The guarantees have to be in the plan to protect the employees’ benefits if an HMO goes bankrupt. Ms. Freeman again requested of the Chairman that the committee continue the hearings and communicate with the financing committees to bring some common sense to the process.

 

Chairman Bache indicated it was his intention to have additional hearings on the issue.

 

Assemblywoman Gibbons acknowledged the duty the legislators have in saving the plan.  In the short-term, she stated, the legislators and regulators were correct to not allow the “300 opt-out;” however, the long-term problem was the money to allow the employees to insure their children.  The state would pay for the problems one way or the other in the future.

 

Dr. Richardson stated he believed the regulations were a good faith effort to try to resolve the intent of Section 12.5.  The commission meeting on the regulations pointed out some areas where an argument could ensue about the regulations following the clear statement of the law.  He stated he did not feel the regulations were made to be destructive nor trying to circumvent the law.  The issue, he stated, was not groups leaving the plan, but rather the amount of money the plan had to work with to pay the exorbitant health care costs.  Nevada was a very small state and the issue was nationwide.  Dr. Richardson observed the committee should examine the benefits and salary levels of other groups of public employees in this state.  The state, he related, looks fundamentally very poor in the benefits and salaries provided to their employees. 

 

Assemblywoman Gibbons reiterated the state has been very neglectful in providing for its employees.

 

Ms. Smith stated her concern about the groups leaving the plan and the statement that if the group returned it would be considered good.  She noted the state would carry the liability as well as the income if a group returned to the plan.  She also noted the issues that were mentioned during the hearing — the 300 and out, the premiums, the money issues, policy decisions, etc. — that were issues just as important as the 300 and out.

 

Assemblymen Humke asked Dr. Richardson to speak, considering his experience, on the issue of groups leaving the plan, providing for their retirees, or effectively abandoning the retirees to use Medicare as the primary insurance.

 

Dr. Richardson stated the regulations have provisions included that would make any group leaving the plan continue to offer to retirees the same benefits that any active employee would have.  He stated there was a problem of some employees not being able to participate in a union plan unless they were members of that union.  This problem was not discovered two years ago when the committee discussed the regulations. This situation contradicts the policy the legislators intended in the Seventieth Session.  He indicated no one understood the complications involved and suggested the committee or a subcommittee might want to clarify some of the issues that had not yet been discovered when the issue was discussed two years ago.

 

Mr. Humke agreed, based on the experience of the committee two years ago.  He especially did not recall the issues on retirees being discussed in detail two years ago.  He quizzed Dr. Richardson’s opinion on the issue of allowing retirees to leave the plan and return within 18 months.

 

Dr. Richardson suggested there be a time period in the regulations to settle things and help the administrative costs involved in returning employees or retirees.  He remarked if a group was serious about leaving a plan, then they should stay with their new plan for a while.  If, however, their new plan collapsed, the group would have to recognize the choice they made and take responsibility for the choice.  Waiting periods were there, he stated, to protect the plan and the state employees who remain in the plan.

 

Assemblyman Humke asked if there had been any new testimony on any proposed new regulations.  He asked Dr. Richardson if the failed regulation would be a good starting point.

 

Dr. Richardson said he believed it would be a mistake to include the proposed regulations in the Nevada Revised Statues in the level of detail that would be required.  He felt it was worth noting there was never a vote of the commission on any specific item.  He suggested the list that was returned from the Legislative Counsel Bureau documented every concern, whether unanimous or not. It was up to the board of the plan, he felt, to examine and weigh the problems based on the most pertinent concerns. 

 

Mr. Humke agreed that the most pertinent concerns should be the starting point for new regulations.

 

Dr. Richardson responded if the new regulations were submitted to the commission shortly, and the commission failed to approve them, then the problem might have to be solved with a committee introduction of a bill to solve some of the matters.  If the commission approves the new proposed regulations then some of the problems would go away.

 

Assemblyman Humke pointed out the ability of the committee to approve a committee introduction for drafting that would state anything the committee wished.

 

Assemblywoman Von Tobel questioned Dr. Richardson about the employees he represented.  She asked if the adjunct faculty members were covered by insurance.

 

Dr. Richardson stated they were not and there was concern about the number of teachers who do not have adequate benefits.  He indicated he was pleased to testify at the last Board of Regents meeting to support setting up a task force to address those issues.  He hoped for a proposal to incorporate health care benefits for the teachers who were part-time. 

 

Ms. Von Tobel questioned Dr. Richardson about the percentage of part-time faculty in the system.

 

Dr. Richardson stated the exact figure was not known; however, the estimate was around 30 percent at the university level and close to 60 percent at community colleges.  The issue, he thought, should be the percentage of courses taught by part-time faculty as opposed to counting them. 

 

Ms. Von Tobel asked if the Board of Regents put health care insurance for adjunct faculty as a priority item on their list.

 

Dr. Richardson stated they did not.  The board was addressing the problem, he indicated, and regrettably that issue was not on the list of high priorities for this session.

 

Assemblywoman Von Tobel commented she had received letters from adjunct faculty members who taught more classes than the full-time staff.  She indicated she was disappointed to see the health care issue be dismissed off the priority list, yet building a new facility was included. 

 

Marty Bibb, Executive Director of the Retired Public Employees of Nevada (RPEN), spoke to the committee informing them of the 7,700 retired employees who were represented by his organization.  He stated in total there were 6,000 retirees who are members of the state’s group health insurance plan.  He emphasized how the collapse of the state’s group health plan in 1999 dramatically changed the philosophy of how benefits were structured.   Medicare retirees were most affected.  He reviewed the history of the self-funded plan, based on increasing costs, since 1983.  The original intention of the plan was to create a self-funded insurance pool to eliminate unnecessary profit margins and taxes.  This self-funded program, it was thought, would be able to offer good coverage programs at attractive rates and would be able to do so for both active and retired employees in the program.

 

Mr. Bibb mentioned a legislative study group in 1983 that recommended retirees should be pooled and rated collectively with active employees.  For many years, he remarked, the program was kept the same with actives and retirees pooled.  Until the now infamous 1999 crisis in which the Medicare retirees were taken out of the pool, the program acted as if it were a Medicare supplement plan.  Typically, he stated, Medicare would pay 80 percent of the bill and the state plan would pay the remaining 20 percent.  Mr. Bibb conceded the program had to be changed with the financial crisis the program suffered in 1999.  The program no longer was a supplement but required the retirees to pay $3,000 per year out-of-pocket.  Mr. Bibb stated there had been some improvement this year with the out-of-pocket reduced to $2,000 per individual.

 

Mr. Bibb indicated in other states, such as California, the largest public employee group plan continued to permit Medicare-aged retirees with the appropriate coverage to have that plan’s secondary insurance serve as a supplement to Medicare.  He mentioned that premium costs for retirees, as envisioned by the legislative founders of this plan in 1983, were to have been computed as a part of the total group insurance premium plan costs and not a separate cost entity.  The situation, he opined, had changed dramatically.  One suggestion posed by the consultant to the plan, he stated, was to consider pooling retired state employees with retired non-state employees.  This suggestion would effectively price the retirees out of the insurance market as a group.  The state could end up carrying the cost of the retirees who could become indigent.

 

 Another departure from the original intent of the legislature, Mr. Bibb indicated, were the premiums that had changed.  Retired state employees and active state employees in the program were both given the same rate of increase to their premium for 1999, 27 percent.  Currently, retired public employees had an 11 percent rate increase, and active public employees had a 4.3 percent increase.  By contrast, non-state retirees suffered a 24 percent rate increase.  Overall he believed the retiree populace in the program cost $1.09 in benefits for every dollar in premiums.  He understood the ratio to be acceptable compared to other plans where retirees had a much higher ratio.

 

Mr. Bibb related that at the beginning of the self-funded plan in 1983, Lillian Bergman, a long-time member of the committee on benefits, stated retirees should not be rated as a separate group, but rather as members of the whole group with retirement considered an extension of state service.  He believed the issue to be a complicated one and complimented the staff and board of the public employees benefits program on their efforts to get the program stabilized.  He felt compelled to point out the differences in rate increases between retirees and active public employees.  He also stated the program and benefits for retirees should move towards increased subsidies to help defray the Medicare deductibles.  Again, in California, he stated, the active and retired public employees are equally compensated for subsidies paid by the state.  The policy in California also acted like a Medigap policy. He indicated his group would be very interested in the current three-phase study on the impact of retirees on the state’s insurance plan.  The results of the study might indicate the ability of the program to be redirected to the goals of the original plan.

 

Robert J. Gagnier, Executive Director, State of Nevada Employees Association (SNEA), referred to Exhibit E, which he felt should clear up some confusion regarding financial figures related to the state’s benefit plan.  He encouraged the committee to commission the Legislative Counsel Bureau to conduct a study within the state regarding how many public employers have a direct cash subsidy of their retirees’ health insurance.  A study, he noted, had been done a number of years ago by the Public Employees’ Retirement System (PERS) to examine the feasibility of setting up an overall retirement plan for all public employees in the state.  He indicated his information showed fewer and fewer public employers were allowing a direct subsidy of the retirees’ health insurance.  The state, he felt, had gone in the opposite direction.  His organization had fought for years to get retirees subsidized and would certainly want it to stay the same way.  Mr. Gagnier felt the retirees would drop the plan if they were not subsidized. 

 

Mr. Gagnier referred to Exhibit E to show the amount provided for subsidies in the budget for the coming fiscal year. He stated the state’s contribution would decrease this year and then increase the following year. The actual amount for retired employees, he indicated, would not be an exact dollar amount in the budget, but rather each state agency would be charged 1.2 percent of payroll for retiree insurance.  Some people would assume the figure meant the budget amount would be pre-funded for retirees; however, he stated, it was a “pay-as-you-go” type of payment.  The subsidy would vanish if the state did not include this item in the budget each year.  He remarked a new bill had to pass each legislative cycle in order to continue the subsidy.

 

Mr. Gagnier noted the funding for retirees was different for retirees and active employees.  In January 1994, legislation had been passed for a sliding scale for retirees and the subsidy was increased based on years of service.  All employees who had retired prior to January 1, 1994 received the same amount of subsidy not dependent upon years of service.  The new plan took into account the years of service.  Exhibit E showed the amount of subsidy for 2001-2002 a retiree would receive if they retired prior to January 1, 1994.  All employees who had retired after that date received amounts indicated by the formula on Exhibit E.

 

He suggested the committee should look at the state as an employer versus an entity when they examined the amount of subsidies paid to retirees and active employees.  These were benefits provided to active employees and retirees by their employer that would be the same as if the employees had collective bargaining.  He referred to the salary survey done by the state of Nevada, which was required every two years.  The salary survey indicated, he noted, how far behind given classifications were in state government. There was very little information in the survey, he mentioned, concerning fringe benefits.

 

Mr. Gagnier mentioned a report completed by the United States Chamber of Commerce Research Association that compared cost of living by metropolitan area.  He noted Nevada’s state costs for medical care as reported by the study were higher by 17 to 19 percent than the national average.  In rural Nevada, which included Carson City he stated, the health care costs were closer to 24 percent higher.  He remarked the majority of state employees were located in Carson City.

 

Assemblywoman Parnell asked for clarification regarding non-state employees who opt to join the state’s health insurance plan upon retirement.  She stated they received no state subsidy for their insurance.  Mr. Gagnier replied the retirees received no direct cash subsidy; however, they received the indirect subsidy that all retirees received.  They were subsidized as part of the group by the active employees.

 

Assemblywoman Smith asked about the qualifications needed for public employees to enter the retired medical plan.  Ms. Smith asked if they would simply have to qualify for PERS.

 

Mr. Gagnier replied the requirements stated the employee had to be retiring from a local government and that they had to apply within a certain time period.  During the certain time period they need only apply without the necessity of supplying evidence of insurability.

 

Ms. Smith queried Mr. Gagnier if the retiring employee had to qualify to be a member of PERS.

 

Mr. Gagnier replied in the affirmative.

 

Chairman Bache remarked the exception was the Las Vegas Water District employees.  Statute prohibited those employees from joining PERS.

 

Danny Coyle, President, Retiree, State of Nevada Employees Association (SNEA), spoke on behalf of maintaining the integrity of the state insurance plan as the only plan the retired state employees had.  He felt the regulations as promulgated by the committee before the Legislative Commission were good regulations. The board did not intend to violate the law when the regulations were formed in accordance with NRS 287, he stated. He referred to the 5 percent hike in premiums if groups of 300 or more left the system. The retirees would be impacted heavily in that situation.  He mentioned under NRS 287.0479, the provision that permits the departure of groups of 300 or more, there were discretionary powers given to the committee to make sure the integrity of the plan was protected.  He added the committee had to review the plan of the departing groups to ensure it was a sound plan and give approval within 90 days.  Mr. Coyle would rather have the regulations be restrictive for groups of 300 or more who wished to leave the plan than be lax, hurt the plan and all employees left in the plan.

 

Mrs. Ruth Hart, a retired state employee, wished to encourage the committee to leave the retirees on parity with the active employees.  She stated 80 percent of the retirees’ medical costs were paid by Medicare and the 20 percent not paid by Medicare was the amount in question for retirees. She asked the committee to reduce the 12 percent the retirees had to pay this year down to the 4.3 percent the active employees were paying.

 

Chairman Bache asked for questions from committee members and other speakers wishing to testify.  Seeing none, he closed the hearing at 10:35 a.m.

 

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Cheryl Meyers

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Assemblyman Douglas Bache, Chairman

 

 

DATE: