MINUTES OF THE meeting

of the

ASSEMBLY Committee on Government Affairs

 

Seventy-Second Session

March 10, 2003

 

 

The Committee on Government Affairswas called to order at 9:10 a.m., on Monday, March 10, 2003.  Chairman Mark Manendo presided in Room 3143 of the Legislative Building, Carson City, Nevada, and via simultaneous videoconference, in Room 4406 of the Grant Sawyer State Office Building, Las Vegas, 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.

 

Note:  These minutes are compiled in the modified verbatim style.  Bracketed material indicates language used to clarify and further describe testimony.  Actions of the Committee are presented in the traditional legislative style.

 

COMMITTEE MEMBERS PRESENT:

 

Mr. Mark Manendo, Chairman

Mr. Kelvin Atkinson

Mr. Chad Christensen

Mr. Tom Collins

Mr. Pete Goicoechea

Mr. Tom Grady

Mr. Joe Hardy

Mr. Ron Knecht

Mrs. Ellen Koivisto

Mr. Bob McCleary

Ms. Peggy Pierce

Ms. Valerie Weber

 

COMMITTEE MEMBERS ABSENT:

 

Mr. Wendell P. Williams, Vice Chairman (excused)

 

GUEST LEGISLATORS PRESENT:

 

Assemblywoman Chris Giunchigliani, Assembly District No. 9

 

STAFF MEMBERS PRESENT:

 

Susan Scholley, Committee Policy Analyst

Eileen O'Grady, Committee Counsel

Pat Hughey, Committee Secretary

 

OTHERS PRESENT:

 

Bonnie Parnell, Non-State Employee

Carol J. Aalbers, Ph.D., Licensed Psychologist, Marriage and Family Therapist, Westside Center for Counseling and Therapy

Doug Bierman, on behalf of non-state employees in Lander County, Eureka County and the city of Caliente.

Frank Brusa, Nevada Association of School Administrators, Clark County Association of School Administrators

James T. Richardson, Lobbyist, Nevada Faculty Alliance

Debbie Cahill, Director of Government Relations, Nevada State Education Association:

P. Forrest “Woody” Thorne, Executive Officer, Public Employees’ Benefits Program

Jim Weishaupt, Citizen

Marty Bibb, Executive Director, Retired Public Employees of Nevada

Scott MacKenzie, Executive Director, State of Nevada Employees Association, AFSCME/Local 4041

Danny N. Coyle, President, Retiree Chapter, State of Nevada Employees Association, AFSCME/Local 4041

Roger K. Maillard, State of Nevada Employees Association, AFSCME/Retiree Chapter

Duane Lewis, Boy Scout Troop 424, Spring Creek, Nevada

Josh Cox, Boy Scout Troop 424, Spring Creek, Nevada

Levi Laws, Boy Scout Troop 424, Spring Creek, Nevada

Gary Wolff, Nevada Highway Patrol Association, Teamsters, Local No. 14

 

Chairman Manendo:

Good morning.  How is everybody doing this happy Monday?  What a nice Committee.  Madame Secretary, will you please take the roll.  [Roll taken]  Please mark Mr. Williams present upon his arrival.

 

Committee, please turn to the agenda.  We have one bill today, Assembly Bill 222.  We have Ms. Parnell and Ms. Giunchigliani.  That’s a team.  Good morning, ladies.  Welcome.

 

Assembly Bill 222:  Revises provisions relating to Public Employees’ Benefits Program. (BDR 23-634)

 

Assemblywoman Giunchigliani:

Good morning, Mr. Chairman.  For the record, Chris Giunchigliani, Assembly District 9.  I guess this is my first time in here this session, but it won’t be my last.

 

The bill before you, Assembly Bill 222, deals with one thing and one thing only.  What it is intended to do is to assure that, as we are contemplating this whole retirement and active employee health care plan across the state, at least at this point, we try to deal with the impact on non-state actives and retirees.  This bill is very similar to Assemblyman Goicoechea’s.  However, his bill also has an HMO [Health Maintenance Organization] statewide standard for services and health care coverage and access, which is what is different from this.  His bill, unfortunately, did not come to this Committee first and then go to Ways and Means as it should, so we pulled his last week.  If this body moves this forward, what we would like to do is schedule both his and this one, so at least we can have a discussion in the Ways and Means Committee.  We also just passed an emergency measure about five minutes ago to allow the PEBP [Public Employees’ Benefits Program] Board to change its notification timelines for rate increases from 60 days to at least 30 days.  That passed out of the Ways and Means Committee, and it will go to the Floor.  

 

I know this sounds a little bit disjointed, but what we’re trying to do is at least give the PEBP Board as much information as they can as they are setting their rates for this next time around.  There will be at least two more bills coming out.  One will be dealing with an interim study that will be dealing with all public employers and how we properly fund the state plan.  Should we now require, if you don’t provide insurance for your retirees or your actives in a proper manner, should they come into the state?  Should we have a statewide public employee plan?  I don’t know the answer.  That’s not anything we can bite off this session, but it’s something that we want to look at over the next two to four years, so at least we have some reasoned approach to some of these problems. 

 

Finally, there will be at least one more bill that will deal with looking at the local governments that do not currently provide funding into our health care system for their actives or retirees, and if they need to begin being assessed that amount.  That will be another piece of the pie that will be coming before you this session.

 

[Assemblywoman Giunchigliani continued]  So basically in Assembly Bill 222, the provisions that are there just allow that you no longer segregate the pooling of active and retirees so that they are segregated and their rates go up tremendously high and negatively impact them.  We wanted to at least be able to say the whole concept of insurance is pooling and if you take one small group off, yes, their rates are going to be huge as far as that is concerned.  I understand why the plan is doing it.  It is because no one has ever paid in for those individuals, so we have the other dilemma that is there.

 

However, right now we want to simply deal with the policy issue and then, whatever outcomes come out this session, we may even have to give a subsidization to the plan to offset some of the coverage or the past coverage for those individuals in the plan.  That is something that I’m willing to put forth as we debate this whole issue of taxes.  If we are going to have to raise something at some point, let’s at least make sure that we’re making the plan whole, and that we don’t pit one employee group against another employee group.  That’s part of what this is attempting to get at.  That is really the simplified version of it, and I’ll turn it over to Ms. Parnell to finish any comments.

 

Bonnie Parnell, a Non-State Employee:

Thank you.  Good morning, Mr. Chairman and members of the Committee.  For the record, I am Bonnie Parnell, joining the approximately 1,600 non-state employees and asking for your assistance today.  Before I begin, I would like to thank Chris [Assemblywoman Giunchigliani].  This was my BDR [Bill Draft Request], and I asked Chris [Assemblywoman Giunchigliani] if she would forge ahead with it for me, and she has, and I thank her for that assistance.

 

The reason you have A.B. 222 before you is, last summer shortly after the Public Employees’ Benefits [Program] Board sent out information on new premiums, I started receiving phone calls from a number of mostly Carson City retired school employees—early retirees that were not yet Medicare-eligible who were shocked when they opened the notification up and read that their insurance rates were going to $711.67 a month.  That was just for themselves.  Double that, and you get into over $1,400 a month if they covered a spouse.  In many cases, this total exceeded their retirement checks.

 

We now have some non-state retirees who never see their retirement check.  They actually have to write a check to cover the health care for themselves and their spouse.  What I am asking for in all this deliberation, and I know we’re looking at a long-term study.  We’re looking at local government responsibility, which I concur with completely.  My concern is for the group we have right now that is being most impacted by health care premiums.  I would like to see the Public Employees’ Benefits Program Board calculate the rates, aggregating all public employees involved, set an across-the-board, per-person rate, and then analyze the effect on the program.

 

[Ms. Parnell continued]  Using the core rate—and I attended the meetings last week, and it’s certainly available—but there was a column that showed core rates and the difference between all of the groups.  Using that core rate, the current proposed rates show that the total cost of the state retiree—so you take their payment out-of-pocket plus the state subsidy—totals $392.  I look at that as kind of a head cost.

 

What does it cost this person as a state retiree to have a health insurance program in the state system?  $392.  Again, that includes the state subsidy.  Yet, if you take the total cost of a non-state retiree receiving no subsidy, it is now proposed to be $609.68 a month.  How can one group of early retirees cost so much more than the other?  Shouldn’t the total cost of any early retiree be equal, therefore, if you think along those lines, bringing the non-state retiree cost down to the $392 a month.  Then if you want to talk local government subsidy, you could.  Even without a subsidy from their local government, that would cut their premium almost half of what it’s projected to cost now.

 

The other thing that is important to remember is that this state health insurance system has 31,000 participants, but we’re talking about the number 1,600.  Actually, it gets smaller than that because, out of the 1,600, the Clark County residents have a much more affordable HMO option, and then you also deduct from that number those who are Medicare-eligible and that’s, again, about half the premium.  So, we are now looking at a number of less than 300 participants.  We have no option except to pay the $609 plus a month.  I am not an actuary.  I don’t know about that part of health insurance, but as somebody who does know basic math, I’m having a difficult time really finding some resolution with that question.  That’s what I’m here to ask you to help me with

 

I thank you again for recognizing the seriousness of the issue.  I applaud both this Committee and the Legislators in this body for realizing the importance of this issue.  Again, just passing this morning out of Ways and Means was A.B. 263, which will give the Board time to recalculate and, hopefully, if this bill is passed out of Committee this morning, a chance to aggregate those non-state employees to see if we can find them some relief.  I thank you for your time, and I would be happy to answer any questions at this time.  Thank you, Mr. Chairman.

Chairman Manendo:

Thank you, Ms. Parnell.  We certainly appreciate everything that you’ve done and for [Assemblywoman] Chris Giunchigliani for moving forward with this bill.  Questions?  Mr. Goicoechea?

 

Assemblyman Goicoechea:

Thank you, Chairman Manendo.  Ms. Parnell, do you have the numbers for the active non-state employees?  You’re saying retirees at $392 and then $609. 

 

Bonnie Parnell:

Thank you.  Through you, Mr. Chairman, I have with me just the non-state actives, non-state early retirees.  I just have the retiree sheet with me.  Actually, proposed last week, the varying numbers with the current program, the core, the Option 2 and the Option I½, but those are available, and I would certainly be happy to get those to the Committee secretary for those to be handed out.

 

Assemblyman Goicoechea:

Just a follow up if I may, Mr. Chairman.  The 1,600 that are in the segregated pool—do they include the local government actives?

 

Bonnie Parnell:

Yes, they do.

 

Assemblywoman Koivisto:

Thank you, Mr. Chairman.  Do you know if anybody has done any calculation to find out what effect this will have on the rates for the active state employees who are already taking a cut in pay this year?

 

Bonnie Parnell:

What I think this bill allows the Board to do—that is why I said in my comments to assess the impact on the existing program.  Let’s aggregate everybody.  Let’s do a head cost and then see how the subsidy would come in to assist you.  Again, and Assemblywoman Giunchigliani mentioned this, we don’t want to penalize any group.  In my comments to this Committee earlier in the session, I said it devastates me to think that we have taken a public employees’ health insurance program and managed to pit one employee group against the other.  No one wants that.  No one wants to have an additional cost to what actives now are having to pay and possibly looking at reduced benefits.  At the same time, it just does not calculate in my mind, and I think to others as well, and that is why you have seen seven bill draft requests addressing aggregation, plus the long‑term study, asking why one small group should be paying such a large percentage of the total, and why it is so much out of sync to where it’s not an equitable system at this point in time. 

 

Assemblywoman Giunchigliani:

If I might, Mr. Chairman.  I think it begs the other issue of collective bargaining in the long run as well.  If we treated our state employees as equal partners, we wouldn’t always be dealing with these types of factors.  It’s shameful what has happened across the state as far salary versus health, and it’s a national issue as well.  That is why I tried to anticipate, even before I came up to session—I set up a meeting with SNEA [State of Nevada Employees Association], local teachers, police, and fire, and then I’m going to set one up with the county managers and those individuals to say, “Let’s take a long term approach here.”  Even though you’ve bargained, even in those groups—retirement and health care—it may be time to say, “You know what, you’re going to become inverted in some of your active versus retirees and some of those groups.”

 

You’ve got to look at right now, teachers statewide, and state employees.  The average age is 47, if I remember.  That’s going to have an impact.  We should start planning for that.  Maybe it’s time that we build a larger pool.  The bigger the pool, the more bidders that we’ll have to potentially offer, not only better health care, but a better plan for all.  We have rurals that can’t access anybody.  You have no HMO in the north.  You only have one in the south.  We need to figure it out and, if the consortium or the buying power is bigger because we go from 31,000 to 300,000, that’s a huge difference.  That is part of what we want to try to do in the long-term piece. 

 

I think Woody [Thorne] might have some answers for you on the actual numbers.  We only have the percentages in the packets, so maybe if they testify they might be able to present that.  Thank you.

 

Assemblyman Grady:

Thank you, Mr. Chairman.  A comment to Bonnie [Parnell]—you mentioned 300 affected people.  I think most of us here have heard from all 300 and rightfully so.  Chris [Giunchigliani], about 10 years ago, Will Keating had a program that he had recommended where there would be either a quarter or a half-percent [levy] on PERS [Public Employees Retirement System] to handle this very situation.  If we would have done that 10 years ago, we would not have the problem now.  Is this something that your interim committee will look at?

 

Assemblywoman Giunchigliani:

Yes, it is.  We dusted off that.  I think Bonnie [Parnell] and I even talked about it when I asked about picking up her bill, so we made sure that this issue was alive.  All of us pay into PERS in some way except for some state employees.  Well, they all pay, but some are employer-paid versus employer/employee-paid.  We felt that PERS was a very well-run system, and even though it’s taken some hits this time on its investments, it has been, far and above any other investment out there as far as its ability, actuarially sound; and the thought was, maybe since you’ve already got those individuals in, maybe we should model it or have some kind of a contribution rate based on that.  I think that is still something that ought to be looked at, because you basically know who your audience is.

 

Assemblyman Collins:

Chris [Giunchigliani] or Bonnie [Parnell], either one, can you give us some history on this?  It seems like, if I’m on page with this thing on the benefits, that it’s been a historical issue that wasn’t always this separated.  Of local governments coming in and out of the state plan in the past 15 or 20 years, when they chose to leave the state and do their own counties, and then their districts got small, and then they tried to get back in, and there was a buy in or issues—can you go back on some history of this?

 

Assemblywoman Giunchigliani:

If I might, Mr. Chairman.  Bonnie [Parnell] is right.  [19]99 is when they did the aggregation, which this bill would change back.  We took them out and allowed them to pool them separately.  But, non-states have been paying in, I want to say at least 15 years.  You don’t want any group going in and out, because then that’s—I forget the insurance term for it—but they’re buying and selling based on how they think the market is going, and that has a negative impact.  It’s been quite some time that non-states have come in because a lot of the local governments—when I was president of the teacher’s association, we did not pay for, and we still don’t—I think they’re negotiating something now—but there was really no contribution made; and that first pocket of individuals were administrators that had to come into the state plan because they had no place else to go.  That’s probably 15, 20, 18 years ago, I would think.  Bonnie [Parnell] might have more on that.

 

Bonnie Parnell:

We did not hear a lot about this for a long time until [19]99.  I was here in [19]99 and when I supported—if I did support it, and I haven’t gone back to look at my vote on it—I don’t know if I did or not.  I think when we looked at the aggregation issue in [19]99, I don’t think anyone had any idea of the consequences of segregating the non-states out.  I just don’t know how any of us could have done that with a clear conscience.  It was over the discussion of pulling the 300 groups out.  We had all of that discussion going on in the [19]99 [Legislative] Session as well.  You will hear from Dr. Aalbers in a minute, and she is going to testify to this.

 

Contrary to the term “being dumped,” many non-state people when they retired chose the state health program because of the mere fact that they were then putting themselves into a larger pool, and we’ve all been taught the larger the pool, the lower the rates.  They made very clear, wise, well-thought-out decisions when they decided to come into the state insurance system.  They were never notified that they were no longer part of that aggregated pool.  It’s only been in the last couple of years that we have all been receiving phone calls and letters from our constituents and, in my case, fellow former employees who are now paying at least double, if not more in some cases, for their health insurance.  So, I think that the situation has become quite a bit more severe since the [19]99 action.

 

Assemblywoman Giunchigliani:

I just thought of the term.  It’s “adverse selection.”  So, we want to protect against that part of it.  But I would answer your question, also.  I think what happened in [19]99.  I didn’t realize and I don’t know, myself, how I voted on this.  I probably voted to support it because, again, it is state employees who are, in their minds, subsidizing non-states and, because they hadn’t had a salary increase, it seemed like the reasonable approach to make.  I don’t think any of us knew how large that increase would be nor had we anticipated it, and that’s part of the problem.  Sometimes you do something to help somebody and you actually hurt another group or several more as we find out up here.

 

Unfortunately, because we’re not on annual sessions, you have to wait two years to be able to come back and fix.  At least if we had been meeting in the interim, I think we would have been able to work with the PEBP Board far more closely and then potentially had some legislation that might have offered a supplemental, like we do for schools when they’re short-funded.  At least we would have been able to have anticipated and then maintained those rates to some extent as the Board ponders what a proper cost is.  We’ve got a huge issue.  You’ve got utilization issues and you have access issues, and it’s bigger than anything we can solve this session.

 

That’s why I decided to do the interim study.  I don’t want us to make another bad decision down the road.  We can do some things this session to make the changes, and we hope that [A.B.] 165 would be at least a beginning step.  The emergency piece, back to Mrs. Koivisto’s question, that the rate, if we “unaggregate” this group, or whatever the term is—then at least the PEBP Board could tell us, with their Choice 1 and Choice 2, I think they’re calling them, “If we put this group back in, this is what we believe the cost will be.”  At least then we’re looking at it.  We wanted to give them that time to be able to anticipate that, so that we could have that discussion, and then if we need to fight, I will fight for additional funding.  I’m sure many of you will, as well, to offset that cost while we move into the local governments participating.

 

Assemblyman Collins:

There’s a shorter answer, and that’s what I’m looking for.  Maybe it’s some research.  I guess we could go clear back to the [19]50s when the school districts were done up by county and whatnot, but there were non-state groups that, as they grew, found better deals than the state and went with their own programs.  Okay, so they drew out of the state program and then, many years later, some of them went back in and, as you mentioned, the administrators, that was a big issue for them.  They wanted back in the state plan because of problems they were having on the local and now this is—you see where I’m going, Chris [Giunchigliani]?  That’s what I’m looking for.

 

Assemblywoman Giunchigliani:

And I don’t have the accurate answer to that, so maybe Research could at least go back and track.  I will say, I was the one who caused the administrators, because we finally bargained our own health care plan—support staff did—but we weren’t the only group.  All of your local government public employee groups and counties did the same thing at that time, and that’s probably anywhere between 18 and 20 years ago where that started to happen.  Part of it was because, at least in our minds, teachers’ association was tired of the district cutting a deal with somebody, and then as soon as they got the underbid, the rates went up after they signed on behalf of all the employee groups.  We all figure,  “If it’s coming out of my salary, I might as well have some control and say over it.”

 

However, I would say in this day and age—and I may not be supported by my former local group down there—but we’ve changed.  Insurance has changed.  What was happening is no longer working well for anybody.  It’s probably time we look at it more like the federal government plan, which is your cafeteria style, where you decide what is your base, core coverage that every employee group ought to be paying into.  Then if you are able to bargain more money, you can go buy X or you can go buy Y.  I’m not saying that’s necessarily what we’ll come to, but it is on the table, and it is something that has worked very, very well.

 

It’s time to just sit back and review, and to me it should no longer be, “Well, it’s a teachers’ plan, the police plan, the county plan, or whatever.”  It ought to be “public employee plan.”  That’s still the name of the state public employee health care.  So maybe it’s time to look at a better buying consortium.  But I would say Research would have to answer the true, “who came in, who went out, who came in, who went out,” because I don’t know that.

 

Assemblyman Collins:

Because it screws up all the actuaries, and so, by bringing in new groups or bringing them in and out, you change the whole program, and it might cost everybody.  So, I’m just looking for some history, so we can justify.  Thank you, Mr. Chairman.

 

Chairman Manendo:

Thank you, Mr. Collins.  Actually, Mr. Thorne is here.  Maybe we’ll have some questions for him as well.  I want to know why these folks weren’t notified.  Mr. Goicoechea?

 

Assemblyman Goicoechea:

Yes.  Thank you, Mr. Chairman.  I think maybe I can kind of clarify where Tom [Assemblyman Collins] is headed.  I represent six local governments that at the point they were noticed, did belong to PEBP.  Many of them are bailing out.  They can’t afford to stay.  I believe 1985 is when the enabling legislation occurred that allowed local governments to come into the PEBP.  At that point, PEBP actively solicited local governments to join their plan.  Many of them have.  I know Lander County, Eureka County, and White Pine County have belonged, and they have participated both with their actives and their retirees.

 

When they allowed them to be segregated in 1999, I don’t believe they were notified, and the big reason why they weren’t notified was there wasn’t any difference in the rates.  It was after the 2001 Special [Legislative] Session and the $18 million was plugged into when the new rates came out, and non-state retirees ended up at $711 for the participant and at $1,422 for participant and spouse, and that got everybody’s attention.  That occurred last August, and that is when Eureka County submitted their bill.

 

As I see it today, the big issue is—and I realize we need to take a long, hard look at this—but there are some active governments that are participating in the PEBP program today.  Bonnie [Parnell] said approximately 1,600.  The issue they’re facing if they bail out of PEBP—and most of them have been in it 10 and 12 years and have been paying with their whole pool—they end up looking for coverage with pre-existing conditions, and many of them are retirees.  They have already retired, and they’re facing this big hit.  They can’t afford to stay because it’s more than their pension check, and ultimately what is happening is they are out soliciting other insurance.  What they are getting into is they cannot get it because they have preexisting conditions.  They are somewhere between 55 and 65 years old.  The latest round of rates that I saw that were proposed last week look like they are going to continue to be high, or maybe even higher in some cases, if you’re between 55 and 65 and you are a participant, spouse and one family member.  It could well cost you $2,000.  Who is going to pay that?

 

Maybe I should have gone around and testified at the table on this.  I feel very strongly about it, and if there are any questions, I would be glad to answer them.  The big issue is, and I have a bunch of these to hand out, if you want Mr. Chairman [Exhibit C, Exhibit D, and Exhibit E].  The PEBP Mission Statement (Exhibit C) addresses public employees benefit programs, and that is all public employees in the state of Nevada.  It is not state employees; it is all public employees, and that is their mission statement.  I’m glad to pass that out. 

 

Chairman Manendo:

We can do that.  We can have the secretary do that later or whatever.  That’s fine.  Yeah, we should have had you out there. 

 

Bonnie Parnell:

I am going to have to leave, but I would like to invite in my place Dr. Carol Aalbers to come speak to the Committee.  Carol was a school counselor at Fritsch Elementary School here in town for a long, long time, and then at Bordewich.  You were at Fritsch, weren’t you?

 

Carol J. Aalbers, Ph.D., Licensed Psychologist, Marriage and Family Therapist, Westside Center for Counseling and Therapy

Yes.

 

Bonnie Parnell:

Then at Bordewich School.  She is a cancer survivor, and she has a story very much like Assemblyman Goicoechea was just referencing.  In my absence, I would like Dr. Carol Aalbers to come to the witness table, if that’s all right with the Chairman.

 

Chairman Manendo:

Thank you for being here.  Mr. Knecht, did you have a question real quick for Ms. Parnell?

 

Assemblyman Knecht:

Thank you, Mr. Chairman, and thank you, Ms. Parnell.  I just wanted to get copies of the data and the summary information materials that you have.  If you would leave them with the secretary so they can be distributed, I would appreciate it.  Thank you, Mr. Chairman.

 

Bonnie Parnell:

I would be happy to do that.  Thank you.

 

Assemblywoman Giunchigliani:

Thank you, Mr. Chairman.  I’ll just vacate the table to let other individuals—I did try to stress that this is a concurrent referral.  Hopefully, your Committee may consider it today, at least to get it to Ways and Means, so that Pete [Assemblyman Goicoechea] and I can have our actual hearing on that and at least move forward, so that the [PEBP] board can actually deal with the rates.  So, we hope today that you will consider that.  Thank you.

 

Carol Aalbers:

Good morning.  My name is Dr. Carol Aalbers.  I retired 2½ years ago, after working as a school counselor in Carson City and as a school psychologist in Douglas County.  As Ms. Parnell said, I thought I was choosing a bigger pool.  That was the wisdom that was running around.  I was told when I called and talked to Public Employee Benefits [PEBP] that I could choose between the insurance offered by the school district or the state self-funded insurance.  I chose to enroll in the self-funded program, because I believed I was choosing a bigger actuarial pool.  At no time in any information that I received was it told to me that I would be put in a separate category.

 

I am intelligent enough to know that if you were going to put me in a group of only old, retired people that my premium would have to go through the roof.  I can’t go back to the school district.  Once you make that choice, you cannot choose to go back.  Like a lot of other retired educators like myself—who I believe I am speaking for—this is not just about me.  I don’t have very many other options.  Like most people who are 55 to 65 years old—I’m 57—I cannot get private insurance, because I’ve had breast cancer and no insurance company will take me.

 

My premium is $64 a month more than my entire retirement check.  So, now my check goes into a bank account automatically, and I have to pay my premium separately.  I might add, they added insult to injury by not being able to get it together well enough, and I got a bill last month for $1,423 and some cents.  I just think that’s ridiculous. 

 

Chairman Manendo:

I agree.

 

Carol Aalbers:

In addition, because the benefits continue to increase, I am paying approximately $200 more a month for my prescriptions than I did last year.  When you add this to the $364 increase in premium, I’m paying almost $600 more a month for the same benefit.  Some people in this situation are having to choose between eating and paying for their health insurance.  I am not being dramatic.  There are women, especially around the ages of 62 or 63 years old, who are having to choose between eating and paying for health insurance, and so they are opting out and so we’re going to have educators—I can only speak about educators.  I’m not trying to single that out, but I just don’t know anything about city and county employees.  Unless something is done, we are going to have educators who have spent their life serving the children of Nevada who are going to have medical catastrophes that are going to bankrupt them, and that’s what it all boils down to.

 

I’m asking you to change the law and let happen what we originally expected, that we would be aggregated with the active and retired state workers.  That is what we thought we were being offered when we opted for the state’s self‑funded plan.

 

Something has to be done because this pool is only getting smaller.  People who are opting to chance it without insurance and dropping their coverage—I personally know some people who are doing that.  People who can get private insurance, who don’t have a pre-existing condition, are doing that, and I know some people who are doing that.  People will die every year.  This is a group of retired people, so the pool will get smaller that way.  No one else is going to elect this insurance coverage now that they know the situation.  So what’s going to happen is, as I was told by the Legislative Counsel Bureau, there are 252 people in the north who are between the ages of 55 and 65, and it is conceivable that pool could go down to 100, and then what is going to happen to the premium?  We’re basically going to be paying out of pocket for any catastrophe that comes along.

 

The other thing I wanted to address were reports in the newspaper that the proposed increase in state workers premiums is because non-state retirees are being dumped back on the state.  This is insulting to everyone’s intelligence.  It is impossible to have this small group of people—252—be responsible for a $20 million shortfall.  That shortfall is a complicated issue involving claims history for all parties, increasing medical costs, and the amount the state wants to save by decreasing the amount they have to pay for state workers’ premiums.  It is not the fault of the non-state retirees, but it is inflammatory, and it pits one group against another group, and it seems that somebody is looking for a scapegoat when they say those kinds of things.

 

Please don’t make the people who serve the children of the state your scapegoat.  One last thought, and I know people won’t agree with this, but we are all state workers.  We were all paid by state dollars.  All the monies for our salaries were based on the money allocated from the state every legislative session.  If so much money was available for teachers’ raises, that’s what we got.  If the Governor said put a 3 percent in and you guys passed a 3 percent raise, that’s what we got in the small counties.  In some bigger counties, maybe something else happened.  Even though you’re calling them non-state retirees, we are all in the state retirement system.

 

We need to be included in the insurance in the same manner as all the other state workers, especially those of us from the small rural counties.  The big counties, Washoe and Las Vegas, can negotiate for decent insurance rates because they are so much bigger.  The employees of the small school districts have been paying huge premiums all along.  If the retirees from the rural counties continue to have to pay huge premiums, the rural counties will find it very difficult to hire teachers.  So, please aggregate us with the state active and retired employees, so that we can live in retirement without fear of medical catastrophe.  Thank you.

 

Assemblyman Knecht:

How many years were you employed with the Carson City School District?

 

Carol Aalbers:

Ten years with Douglas and Carson together.

 

Assemblyman Knecht:

And before that, you worked otherwise?

 

Carol Aalbers:

I mostly stayed home with my children and had a part-time job.

 

Assemblyman Knecht:

My wife is doing that right now, so I understand.  Thank you very much.

 

Chairman Manendo:

Ms. Pierce, did you have your hand up?  I’m sorry, I didn’t see.  We can bring Ms. Giunchigliani back up.  Ms. Pierce has a comment or question.

 

Assemblywoman Pierce:

Thank you, Mr. Chairman.  If this gets passed, will the people who had to get out because they could not afford this, will they be able to get back in?

 

Assemblyman Giunchigliani:

Good question, and I don’t have an answer.  Maybe Mr. Thorne or someone from the PEBP Board would be able to answer that, but I’m not sure.  I would have to go back—I know we changed it, so they couldn’t do it for a selection, but I’m not sure who’s the controlling authority, if that’s the local government saying, once you are out of us, you are out of us.  I think that might have been it years ago, but it may now be controlled by the state, so maybe Mr. Thorne or someone from the [PEBP] Board could answer that question. 

 

Doug Bierman, on behalf of non-state employees in Lander County, Eureka County, and the city of Caliente:

Thank you, Mr. Chairman, members of the Committee.  For the record, my name is Doug Bierman, and I’m here on behalf of some of those non-state government employees that we’ve heard reference made to, specifically on behalf of Lander County, Eureka County, and the city of Caliente.  [Exhibit F was distributed.]

 

I will try not to be repetitive because I know that your time is limited today, but in our case, these non-state local government employees have been members of PEBP since the early 1990s, and they were, indeed, recruited into the system.  They have not been dumped into the system.  They are active members as we speak.  Their premiums are subsidized by the local government entities and, therefore, they have been, I guess we could refer [to] as loyal contributing members all along, yet we see that these groups of people are treated differently.  They are not aggregated into the entire system and, of course, they were not aware of that when they were first admitted into the system.  I would further say recruited into the system.

 

Over the course of the years, and I think we just heard in 1999, that was all changed.  Once again, these employees were not notified that the impact would be severe and drastic, as they are treated as a separate entity.  We see that their premiums have been pretty comparable to state employees up until the 1990s, 2000, 2001, where they started to change and change drastically.  Even under the proposed rates that are coming out for the rest of 2003 and into 2004, those differences continue to grow.  On top of that, when these local government employees choose to retire or take an early retirement, they find that they are assessed the premiums at a rate extremely higher than other employees who may just be joining the program at that point in time.

 

What we ask for is your support of A.B. 222.  We think that they deserve aggregation into a large system in which they assumed, and they believed, rightfully so, when they were first admitted to the program, that they would be treated on the whole, along with everybody else, on an equitable basis. 

 

The other thing that hasn’t been mentioned, I don’t think at this point in time, is the extra health costs that are associated with rural county health care.  In many rural counties around the state, a trip to the doctor is not just a trip across town.  It may involve several hundred miles travel for health care, and may also involve extra overnight stays, meals, and what-have-you.

 

The other factor that I think you’re all probably aware of is that many of the rural areas have not shared in the economic boom and growth that the urban areas have seen in Nevada over the past five years or so.  Many of these rural areas are economically depressed, and their assessed valuation rolls are decreasing rather than increasing.  That complicates things when it gets to the point of negotiations and collective bargaining.  These local entities do not have a general fund that can bail out their particular financial needs.  However, they find themselves contributing to that state general fund that does bail out the state employees.

 

What we would ask, respectfully, is that the Committee do what is right and fair to change the system, and we are fully aware of the constraints under which PEBP is working at the present time; and that is why we’re asking you to change those constraints and to allow them to look at some aggregated figures that will treat all public employees on the same basis and really make the Public Employees’ Benefit Program a public employees and not just a state program.  Thank you.

 

Assemblyman Goicoechea:

Just a comment, if I may, Mr. Chairman.  I want to make it very clear, that because I do represent Lander, Eureka, White Pine, and Churchill [Counties] and some of those impacted entities, they aren’t looking for any preferential treatment.  Clearly, all they want is equity.  Let’s treat them the same across the board.  I also am looking forward to Mr. Thorne’s presentation.  I have some questions on how these people that bail out will, in fact, be able to get back in or if they will.  Thank you.

 

Frank Brusa, Nevada Association of School Administrators, Clark County Association of School Administrators:

Thank you, Mr. Chairman, members of the Committee.  For the record, my name is Frank Brusa.  I represent the Nevada Association of School Administrators and the Clark County Association of School Administrators.  Our organizations would urge you to approve A.B. 222.  As a non-state active, I belong to PEBP.  When I retired, I continued in the PEBP program, never thinking that as a non-state retiree, I would be separated out from the other PEBP members.

 

There are many non-state retirees who did not realize that the present law aggregates them separately.  They thought being part of a 30,000‑member insurance program would bring reasonable health insurance premiums.  Instead, the exact reverse occurred.  Premium shock hit in January with non-state retirees paying the $711 a month and, with a spouse, the $1,422.  The rates will most likely increase again in July.  Passage of A.B. 222 would ensure that any rates established by the Board for coverage are the same for all participants in the program.  Thank you.

 

James T. Richardson, Lobbyist, Nevada Faculty Alliance:

I’m here representing the Nevada Faculty Alliance chapters, but I’m also one of the resident historians since I’ve been around for a while.  At the risk of being lynched by people on both sides, I would admit to being chairman of the precursor of the PEBP Board from 1984 to 1990, during which time some of these fateful decisions were made.  I think it would be useful to briefly recount a bit of that history, at least my view of that history.

 

When I did come on the Board in 1984, I was favorable to the lobbying that was going on to allow local governments to come into the plan and argued and voted that way when we did go forward.  I think the record would show that I testified during my ten years as chair of the board on behalf of broadening the pool.  Then other issues arose later, particularly the issue of what to do about retirees from smaller local governments who either did not have any kind of health benefits offered for their retirees, or who felt that they couldn’t afford them any longer.  The word “dumping” has been used.  I think that’s a word that catches people’s attention, perhaps, but it is a fact that some local governments were looking for a way to relieve themselves of the burden of health care costs for their retirees, even though they had not been participants in the state health plan.  You can imagine that those of us representing state employees in the health plan—Mr. Gagnier was here, and he and I testified together at the time, and he was more in opposition to allowing it.  I said we should allow it, but we should protect the state participants in the health plan and, indeed, the bill did include the proviso for a separate rating for this group, and it was there just because of the concern about negatively impacting state retirees and state actives.

 

The thinking was that this used to be simply a health plan for state employees.  It was broadening, but it was not being broadened in any long-term manner.  People were responding to their immediate problems without making sure that the costs were going to be borne in a reasonable fashion.  So, the bill was passed in 1999, I think it was, to allow this to happen with that proviso.  Everyone supported it.  I don’t remember anyone really arguing in opposition, including representatives of local governments, and that should be noted. 

 

[Mr. Richardson continued]  Now people’s worst fears have been realized and the claims experience for this small group has been very bad of late and when you do rate them separately, then the rates skyrocket, and you’ve got lots of cards and letters, and we have many stories told that are really very moving.  We have a problem that the state has to address, and I’m not here to suggest that you shouldn’t address it.  In fact, I think you’re compelled to address it.  The question gets to be, how do you address it? 

 

On behalf of those that I represent, I would urge, assuming you pass some version of A.B. 222 which I would support, that you amend the bill to also couple with it a proviso to help deal with the cost problem.  I appreciate the fact that Assemblyman Giunchigliani has other bills coming forward.  I really think they ought to be handled together, because some of us, frankly, are a bit nervous that this bill might pass with its fiscal note, which is sizable, with no proviso to cover that, and then those actives and participants in the plan do get asked to absorb the cost.

 

I heard Mr. Thorne say on the record last week that this would mean an automatic 3½ percent increase in the cost for the actives and the retirees in the plan.  That doesn’t seem like much, but it too adds up, and there is a sizable fiscal note, I believe, and perhaps Mr. Thorne should have testified very early to clarify some of these issues, but I believe I heard him say that the fiscal note estimate was $5 million per year to aggregate the groups.  I’m not here to oppose aggregating the groups.  The tales you’ve heard, the e-mails you’ve gotten, and the letters you’ve received are very moving, as I said.  This is actually a problem brought on by a change of policy at the legislative level.  One in 1985, when local governments were allowed into the plan, and then another one in 1999, if the dates that have been given to you are correct—and I think they are—where we allowed retirees to come in from local governments, even though the local governments had not been participating in the plan.

 

We’re basically just being asked to take care of the problems from local governments and to not also have the younger actives from local governments involved in the plan and helping share some of that cost.  I would recommend that you consider amending this bill to respond to the fiscal note that’s attached.  I also personally think that amending the bill to include a mechanism for having local governments make contributions, at least for future people who come into the plan, is a good idea, and package it

 

The reason I say this is the following:  if you pass A.B. 222 with or without the fiscal note—it’s more of a problem if you pass it without it being an appreciative fiscal note, and that’s a Ways and Means problem, I realize—but if you do that, then it becomes even easier or more tempting for local governments to send their retirees to the state health plan, because we’re now aggregating and so they don’t even get the complaints any more.  The complaints are directed elsewhere.  Personally, I think that any local government that sends a retiree to the state health plan should send a subsidy to help make the plan whole and to help keep the people who have worked for many years for those local governments from having to absorb the kinds of costs that are associated now with the way we structured this health plan.  The state government makes a regular subsidy on behalf of all state retirees.

 

[Mr. Richardson continued]  I actually think it represents a serious flaw in what happened in 1999 that this was not included as part of the legislation.  Instead, the Legislature took the half step of allowing separate rating, hoping with fingers crossed that no problems would arise.  But problems have arisen, and it’s now clear that in 1999, if there had been a requirement that local governments sending retirees to the state health plan send a subsidy along with them, we probably would not be having this meeting.  We would all be aggregated and the local governments would be understanding that they could not just shuck the responsibility of retirees, people who’ve worked 20 or 30 years for a local government and all of the sudden facing this kind of a problem.  That’s intolerable.

 

So, I would recommend that you pass A.B. 222.  I do not see how you can avoid it.  I just think it needs to be amended to include the money—and that comes from Ways and Means—to cover those that are already in the plan and that it needs to be amended to have a mechanism so that local governments who send retirees our way know there is a responsibility tied to it when they do that, and that it is an ongoing responsibility.  They cannot just forget people who have worked for them for 20 or 30 years.  With that I’ll close my testimony and hope for the best in the question period. 

 

Assemblyman Grady:

Thank you, Mr. Chairman.  A couple of things, Mr. Richardson.  It was testified earlier that the non-state retirees who, in my mind, are state retirees because they paid into the state retirement, were invited to come in.  They were not “dumped” on the system; they were invited in when the state wanted to raise the numbers.  I think that needs to be explained.  I will tell you I was involved for over ten years with a local government insurance plan through the League of Cities.  We had in our plan that when someone left the plan, be it a school district, a city, or a county, they took their retirees with them.  We never, in the ten years I was there, “dumped” anyone on the system.  They were invited to come into the state plan on more than one occasion.

 

All of the local governments have paid into the state retirement, and I realize the state retirement is different from the state insurance.  But all of these people that we are talking about are state retirees, and I think that makes a big difference.  Should local governments participate?  Definitely something needs to be done, but this was not the local, this was the state that set up the mechanism for the plan.  So I don’t think the fault can be pushed to the local governments whose participants come to the plan.  I think it has to be the structure in which the plan was done over the many years.  Thank you.

 

Assemblyman Knecht:

Thank you, Mr. Chairman, and thank you, Mr. Richardson, for your candor as well as the useful recitation of some of the history here.  I do want to ask you one question.  If we get to the last day of the session and there are no bills, no vehicles riding that would raise the subsidy dollars that are required from state coffers and none that would require local governments to provide any additional coverage, and we have this bill before us and so the subsidy would have to come from your members, would you still support it at that time?

 

Jim Richardson:

I’d like to, at some point, respond to a couple of things Mr. Grady said.  I’ll put it this way.  If we arrive at that very unhappy situation, and I were sitting on your side of the table, I would vote to pass A.B. 222.

 

Assemblyman Knecht:

Again, thank you, Mr. Chairman, and thank you, Mr. Richardson, for your candor.

 

Chairman Manendo:

Good answer.  Any other questions?  Mr. Goicoechea?

 

Assemblyman Goicoechea:

Thank you, Mr. Chairman.  It really isn’t important, but I know that Lander County and Eureka County do participate and provide a subsidy.

 

Jim Richardson:

Yes.  Right.

 

Assemblyman Goicoechea:

All they do is look at the premium rate and offset it.  Eureka County participates at 70 percent.  I believe Lander County participates at 50 percent.  What I’m saying is they do pay 50 percent of the premium and 70 percent of the premium for those local jurisdictions.  So, I guess I’m a little concerned that you are saying local government needs to participate.  All we do is look at whatever the premium—we’re asking that premiums be level across the field—the same premium that is going to be charged to the state before the subsidy is the same to a local government entity.  The other thing is, and its an argument not out in the rurals, is every person in rural Nevada pays into the state coffers.  Not everyone in the state pays into those local coffers.  So, I think we are paying our way.  Thank you.

 

Jim Richardson:

Can I respond?  Jim Richardson, for the record again.  One of my responses to Mr. Grady is to express appreciation.  There are local governments who do subsidize and do take this very seriously, and I appreciate that.  There are some situations, I think—and I won’t name any names here for a lot of reasons—but there are some situations where I think folks may not be taking as much responsibility as they should for their retirees and where folks have actually, more or less, done away with medical care for retirees because they know there is a place they can send their retirees.  That places a burden on the state participants, and it places a burden on counties that are represented here that have tried to step up to the plate and be a good participant in the plan.

 

I personally favor a big pool of people, and I personally agree with the notion of non-aggregation.  I hope, because of my recitation of the history, you can understand where we were coming from, as Bob Gagnier and I testified, that this is an experiment.  You have not quite figured out the mechanisms, but we need something in there that will protect the state participants, retirees, and surviving spouses from a really hard hit because of allowing local governments in, and particularly the issue of allowing retirees from local governments that are not participating at all.  Again, thank you for your comments.  I wanted to set the record straight that my view is that some local governments have been very responsible in this matter.  Thank you.

 

Debbie Cahill, Director of Government Relations, Nevada State Education Association:

Thank you, Mr. Chairman.  Members of the Committee, Debbie Cahill with the Nevada State Education Association.  I want to state for the record our support for A.B. 222 for the reasons which have already been stated.  I also wanted to make you aware that during the last 1½ years, we have been meeting with our affiliates in the 15 rural counties and with the administrations of those school districts to talk about the possibility of forming a rural health trust in which our focus, of course, would be specifically for school district employees to band together with all of those counties to help form a health trust that creates a larger pool for those employees to participate in.  It wasn’t until the recent increase in the premiums, that it came to our attention that this was a huge problem with the disaggregation of those retirees, and then the discussion started that maybe we need to look at participating in a statewide public employee health system which would include other public employees.

 

Certainly the Nevada State Education Association has already gone down the road toward looking at trying to solve the problem.  We did have very good participation from our affiliates when we started these meetings with the administrations of those school districts.  I think it was only the school district in Eureka County that, at the time, said they may not want to participate, but I am not sure where they stand right now.  But, certainly the other 14 counties— In fact, we’ve asked Assemblywoman Koivisto if she would introduce legislation for us which would resolve a problem that we believe existed in statute about the legality of multi-employer health care systems and then working with the local employee groups to form the health trust.

 

We would support any effort to pull together an interim study and we would look forward to participating in that discussion.  Thank you for your time.

 

Assemblyman Goicoechea:

Just another comment.  Eureka County, I think, bailed out and went with another provider.  It couldn’t afford to stay with PEBP.  However, I don’t think they really recognized what was going to happen with their retirees, either.  Most of those people cannot afford to retire at this point.  They have to stay and work even if they wanted to retire.

 

P. Forrest “Woody” Thorne, Executive Officer, Public Employees’ Benefits Program:

Thank you, Mr. Chairman, members of the Committee.  [Introduced himself]  I wanted first to address the fiscal note on A.B. 222.  We have estimated that the initial cost on the plan is approximately $5 million per year.  We cannot project beyond that because, depending on what happens with additional enrollment of what I will call local entity retirees into the program, we may have increased costs in the future.  What that works out to is, every state participant will be looking at an additional cost to the participant, absent any additional state funding, of approximately $17 per month for every participant.  That number may change as we finalize the plan, but that’s going to be in the ballpark.

 

I would ask that perhaps Research or Legal Counsel check on the change in the non-state entities, both actives and retirees, being rated as a separate entity.  It is my understanding that they have always been rated as separate from the state, but I want to get clarification on the legislative history on that.  I think that change in 1999 had more to do with the addition of commingling of state actives and state retirees into a single pool.  I’m not sure that it altered the fact that non-state entities, as such, were treated as a separate group from a rating standpoint.

 

[Mr. Thorne continued]  Up until recently, the non-state entities were a large enough pool, and the experience was such that their rates moved in at fairly the same levels as the state rates and, in fact, for 2002, the increases for the non‑state entities, active and retirees, were slightly less than they were for the state entities.  It was when we got into what we needed to do with the experience in the last couple of years for the rates for January of 2003 that we had the huge increases.

 

Another point to note is that a policy of requiring groups that come into or go out of the plan to take their retirees with them is one that I would wholeheartedly support.  That is fairly typical in any insurance carrier’s requirements.  What we currently have is that over 90 percent of the non-state or local entity retirees in the plan are not tied to or related to local entity actives who are currently in the plan.  So, over time, as local entities have left PEBP, their retirees have essentially remained with PEBP.  We fully understand that it has been difficult from a cost standpoint not only for the local entities in supporting their active employees, but it has been particularly hard on the non‑state retirees.

 

As to A.B. 222, speaking for the PEBP Board, the Board supports the concept of the bill, but cannot support it as currently written with the fiscal note attached, because of the impact on state participants.  However, we do support the idea of commingling and going to a larger group.  From a purely underwriting standpoint, it makes sense to increase the size of the group.  Ideally, as Ms. Giunchigliani spoke to, a public employees’ benefit program would certainly make more sense.  If we were to move in that direction, at the very least, we would be looking at tripling the size of the group.

 

However, just as local entities look for the best cost-benefit for themselves and their programs, as well as shop for coverage, when you look at the different areas of the state, you are going to have local entities who are currently participating in the north and rural areas where it is advantageous to go to that, but many of the programs, particularly in the Las Vegas metro area where there is more competition and much better rates are available and better options that are available such as the HMO than in most of the state, that will be very difficult for them.  Many of them will be looking at a significant increase in the cost of benefits regardless of the size of the pool.  We will be happy to work with the Legislature and look forward to the interim study and dealing with this and many other complicated issues having to do with the benefit program.  I’ll be happy to answer any questions.

 

Assemblyman Goicoechea:

Thank you, Mr. Chairman.  Mr. Thorne, how would look at it if, in fact, it was a requirement?  By statute, all local governments have to participate in PERS [Public Employees’ Retirement System], and we also have to budget, or at least put it as a line item in our budget, the deficit that PERS presently has in front of them.  I think that number is around $3 billion or something right at that point.  Again, county government has to put that on their annual audit.  Do you think it would be fair then that we said that if you participate in PERS that you, in fact, participate in PEBP?  I look at PEBP and it is not state employees, it is the Public Employees’ Benefits Program, and that means everybody across the state.  So, would you be supportive of, if you participate in PERS you, in fact, have to belong to PEBP?

 

Woody Thorne:

Most certainly I’d be supportive of that personally, and I believe that the PEBP Board would as well.

 

Assemblyman Grady:

Mr. Thorne, I don’t envy the job that you have any more than the job we with the tax issues, and my partner to the right here keeps reminding me this is not the money committee, but I think to look at the overall picture, can you tell me, using Ms. Parnell’s figures, did you base the fiscal note on 1,600, or 300, or what number of people or participants were used to establish the fiscal note?

 

Woody Thorne:

It was based on the claims data from, I believe it was June of 2001 through May of 2002.  We’ve since updated that for our rating for the [PEBP] Board for the rates coming up in July, and it was based on, I believe, a total of about 3,100 non-state participants, including both actives and retirees.

 

Assemblywoman Pierce:

This is a question I asked Assemblywoman Giunchigliani.  Will the people who have had to bail out be able to get back in if this bill is passed?

 

Woody Thorne:

Yes, currently under our statute, any retiree who does not elect to participate when they first retire or later drops out can apply to come back into the program in January of every even-numbered year, which would be effective in May of that year.  So, anyone who has dropped out now could apply to come back in in January of 2004, with an effective date of approximately May of 2004.

 

Assemblyman Goicoechea:

Mr. Thorne, aren’t there certain times when you open your rolls to take retirees?  Isn’t that correct that it isn’t open all the time?

 

Woody Thorne:

Yes, there is, in the even-numbered year scenario I just gave.  That is open every two years regardless of the retiree or where he or she retired from. 

 

Assemblyman Goicoechea:

But what would they do in the interim two years?  That’s a long time until you got to an even year.

 

Woody Thorne:

There’s no mechanism currently for any participants to come in other than under that scenario.  There is a biennial open enrollment for those who retired at a time when the option to come into the state plan was not available to them, but that is a very unique group and one that is gradually diminishing. 

 

Assemblyman Goicoechea:

Just one more follow-up, if I may, Chairman Manendo?  I really don’t know how I want to go with this.  In many of the rural counties, their actuary and their risk assessment don’t reflect that they are, in fact, a bigger risk.  In fact, in many cases, it is less than what the state pool would provide.  So, why aren’t their rates lower than if we were going to actually separate these pools?  Why don’t we separate them a little further?  I know Eureka and Lander Counties risk assessments and their actuaries do not reflect that they should be paying ten times what a state employee is.

 

Woody Thorne:

I can understand that, and that is why a number of local entities left the program.  Based on their particular group, they could go out into the market and, because their data was better, they could get a better rate.  You’ve seen what has happened to the non-state entity pool because it is a smaller group.  If you fractionalize that even further to go down and experience-rate each individual entity, you further aggravate that situation.  You could have one entity paying 20 times what their neighbor is paying based just on their particular data.  The smaller the group, the greater the fluctuation you will have in claims.  The larger the group, the rates will not necessarily be any less, but you will have more stability, and they should grow without that violent fluctuation that we’ve seen.

Assemblyman Goicoechea:

A follow-up, if I may, Mr. Chairman?  Doesn’t it seem very unfair when you take the non-state actives and combine them with the retirees that you are bound by statute to admit every even year, and you throw them in that one pool?  There is no way that the pool can ever come up with a rate that would be affordable under the existing law without A.B. 222, because, technically, you are bound by law to open your rolls every even year.  That means retirees from across the system can be  “dumped,” or they can jump into the program, and yet you’re combining them with the non-state actives—the local governments that are trying to participate and come up with affordable health care for their people.  This is slanted to the point it could never work.

 

Woody Thorne:

The statutory requirement is that the non-state actives and retirees cannot be combined with, or commingled with, the state actives and retirees.  Further within that, the non-state actives and the non-state retirees cannot be commingled.  You have a further aggravation in that because you have a retiree group, on their own, of non-state retirees, and that is a recipe for disaster, because that group will always have worse experience then a combined group of actives and retirees.  The actives with the non-state group are rated separately from their retirees.

 

Assemblyman Goicoechea:

You say they are rated separately?  Clearly the premiums don’t reflect that.

 

Woody Thorne:

The premiums do reflect that.  You will find that the rates for the actives in the non-state group are much lower than for the retirees.  The experience for the non-state group has been much worse than the comparable group of actives in the state.  That is why their rate increases were considerably higher.  Unfortunately, we did not see a big improvement.  Part of the reason for that is because the group shrinks.  When you have entities such as Eureka [County] that are able to go out and find alternative coverage for lesser cost, the group that remains has the higher-cost group, and their rates are going to go up even further.

 

Assemblyman Goicoechea:

I won’t take any more time, but I look forward to getting with you, Mr. Thorne, and I’d like to see those actuarial figures that reflect that the non-state actives have that much of a larger risk assessment than state employees.  Thank you.

Chairman Manendo:

Anybody else speaking in favor of Assembly Bill 222?  Would you like to go on record, sir?

 

Jim Weishaupt, Citizen:

Good morning, members of the Committee.  My name is Jim Weishaupt.  I have been in the PERS program for 28 years, and I’ve been a continuous employee under an irrigation district since I believe it was stated since 1985.  I have a letter of concern [Exhibit G]; I don’t want to take up any more of your time, but I would like to enter it for the record.  It would just be repetitious if I went into these items that I have concerns for.

 

Chairman Manendo:

Please do.

 

Marty Bibb, Executive Director, Retired Public Employees of Nevada:

Good morning, Mr. Chairman, Committee members.  [Introduced himself]  Pooling and aggregating make great sense, and we support pooling and aggregating as would be provided for in Assembly Bill 222.  Clearly, the broader the base, the bigger the pool, the less fluctuation that a little bad experience has upon you.  At the same time, we also think the issue of local government funding for health care does need to be addressed for the folks that local governments do have in the group health insurance plan.  That is a real challenge here.  Too often, local government subsidies, for retirees at least, do not exist.  They range greatly.  One employer we’ve heard of anecdotally in the last week or so—one public employer who is in the group health insurance program of the state, the PEBP program, actually has the individual [employee] and they are strapped with that horrible $711 rate for self only, but the individual [employee] must actually pay the first $60 and the employer pays the additional $650 per month, which seems astounding when you compare that with some who subsidize less or none for their employees.  That is a serious issue.  There have been a lot of previous witnesses.  I won’t be redundant to the plight that these folks experience because it is terrible.  The real critical need is some sort of short-term relief for the individuals in the category of non‑state retirees, particularly during the time that the legislative study that Assemblywoman Giunchigliani has referenced earlier and that she is going to see is completed.

 

For example, when the PEBP Board met, three different options were discussed, and one of those options would have actually reduced the premium cost for the non-state retiree in this plan by about 15 percent.  One of those options would have taken that down from the $711 figure for self only to about $609 which, though not perfect, was at least a fairly significant decrease.  In the period of time between now and the enacting of legislation for the future that would deal with aggregation and that sort of thing, we should at least try to find some short-term solution for the folks who simply cannot afford the insurance.  One of the other proposals that was offered up last week by contrast was, instead of a reduction of 15 percent of the premium cost for the non-state retiree in the plan, it would have reduced it by only 2.5 percent—maybe $17 a month, if my math is correct—but that is not much relief for somebody who simply cannot stay in the program, and I think it is a real crisis.

 

The legislative study I alluded to is extremely important, as is the notion that I believe Assemblyman Grady referred to, and that is the pre-funding of insurance for retirees.  It’s a critical element of this entire debate, and it was very heartening to hear Assemblywoman Giunchigliani indicate that this is the type of thing she would entertain and consider in some sort of interim legislative study of this topic.  One of the things that few people understand while they’re still working is that when they retire, not only are they going to be on a fixed income, but so much greater a portion of whatever available income they have is going to be devoted to health care.

 

That is particularly acute for the person who is pre-Medicare age or who happens to be Medicare age but may have worked for a public employer for so long that they do not have Medicare on their own.  That is a real consideration with early retirements and early retirement options.  You could get someone retiring at 46 or 47 who might have to wait nearly 15 or 20 years to get into Medicare and that is a particularly difficult time.  At least those who are of Medicare age and have that coverage when they arrive at age 65 do have some relief relative to their monthly health care costs.  I appreciate the Committee’s time and will be happy to try to answer any questions.

 

Assemblyman Goicoechea:

Thank you, Mr. Chairman and thank you, Marty.  I guess I have to be completely up front with it.  I have been recommending to those counties that I represent in Assembly District 35 that they probably better go out and solicit a different type of health care insurance, because clearly the PEBP program was going to be unaffordable.  In the private sector those plans, even for retirees, is probably half the PEBP rate, and I do not understand that.  I see Mr. Collins shaking his head, but one particular constituent that called me last week is faced with this $711.  She went to Unicare, and it is $300 and some change for the same coverage.  Mr. Collins, she didn’t have a pre-existing condition and that is the rub.

Marty Bibb:

One of the challenges that the PEBP staff and board are looking at and are going to consider later this week, deals with what can be done in the short-term.  I think people need to get creative.  If there are ways that they can offer some sort of a buy down option, as I believe it was termed, so that whatever coverages are out there and available might be somewhat more affordable premium-wise for the non-state person in the plan.  There is a great commitment by this Legislature, and especially those who have been involved with this issue for several sessions of the Legislature, to find a long-term solution.  If there is a way to simply try to keep some folks involved rather than dropping out and running bare without insurance until that broader solution is reached, then I think the whole notion of a larger pool, maybe two or three times the size of the one we have, would certainly provide some stability, but trying to get people through that time until that can be done would be a real need.

 

Assemblyman Goicoechea:

I agree.  Thank you, Mr. Bibb.  Thank you, Mr. Chair.

 

Chairman Manendo:

Thank you.  Any other questions, comments?  Thank you, Mr. Bibb.  Anyone else speaking in favor of Assembly Bill 222, who needs to go on record?  Speak now or forever hold your peace.  Opposition?

 

Scott MacKenzie, Executive Director, State of Nevada Employees Association, AFSCME/Local 4041:

[Introduced himself]  We agree that this is a terrible situation and we understand why folks are trying to find a solution to a very, very difficult situation.  However, it is our concern that this not be done on the backs of the state workers; that there has been separate commingling all along as far as I understand.  We do agree that the health insurance program as a whole needs to be looked at, and that the study to put all public employees or as many as we can get to agree to one fund for buying power, is the only way to proceed in the future for the state.  The AFSCME [American Federation of State, County and Municipal Employees] research has looked into this, and they have concluded that this is the only avenue that we can take to put all public employees in one fund and to building a buying consortium for pharmaceuticals so that we can have market leverage.

 

Currently, the market appears to be leveraging us, and we’re talking to folks all around the state, and all these funds are starting to have difficulty, and I don’t think it’s going to get any better.  A.B. 222, in its current form, appears to add an additional burden to state workers.  Although it sounds like it is good that we should all be commingled into one fund and that somehow makes an even playing field, part of the problem is that when we have good experience, people want out of the fund, and when we have bad experience, people want in the fund, and we have to figure out a way to hold everybody accountable for the decisions that they make.

 

[Mr. MacKenzie continued]  It is a very, very difficult situation, but we would be in agreement to an amendment to this bill if it would be clear that this was not going to be put on the backs of the state workers, and we also would like to work to figure out a solution.  We are totally in agreement with what everybody is conceptually trying to do for non‑state retirees, except that we think, in the short-run, over the next 16 months is going to be the dilemma, until we can figure out how to change the direction of the fund.  We just do not want to see state workers who have never had the advantage of collective bargaining or the ability to control a lot of the wages and benefits and so forth that they receive through collective bargaining, are burdened with this.  So, I would just like to open with that.

 

Danny N. Coyle, President, Retiree Chapter, State of Nevada Employees Association, AFSCME/Local 4041:

[Introduced himself]  Back when Senator McGinness was an Assemblyman, he was the one that introduced the enabling legislation for the non-state retirees that come into the system.  I understand it had to do with his mother-in-law working for the Churchill County Telephone Company, and she didn’t have a place where she could buy insurance.  I had a chance to talk to now Senator McGinness, and he indicated to me that, in retrospect, had he known what was going to happen now, he would have probably included some sort of a funding mechanism for the employers, the local state governments, the political subdivisions, to make a contribution commensurate to that with the state.  He said that at that particular time, he did not know what was going to happen in retrospect, but he did tell me just a few days ago that if he had it to do over again, he probably would have put that provision in the bill.

 

I, like Scott [MacKenzie], would support A.B. 222 if an amendment was put in there to provide for the funding of the non-state retirees by their employers in an amount commensurate with that which the state agencies are making toward their retirees.  My own personal feeling on this is I think there should be a bill introduced that would mandate all local public entities under a public employee benefits program.  I realize there are some real problems with that, but I do not think those problems are insurmountable.  I understand that some of the local governments and school districts do have collective bargaining agreements and that they would have to deal with budgeting problems and so forth, but I think we could phase in this legislation at the end of the budgeting cycles and then, at the conclusion of the collective bargaining agreements, it could take effect.

 

Right now I feel for the plight of the non-state retirees.  I see them every day, I socialize with them every day, and I hear their problems, and I don’t think that A.B. 222 in its present form is going to solve their problems.  Mr. Thorne, the Executive Officer for the Public Employees Benefits Program, has all the statistics on what it’s going to cost, so you can consult with him, as well as also members of your Legislative Counsel Bureau who have also done some research on this and take a look at the previews for yourself, but A.B. 222 in hits present form does very little to help the non-state employees.  With that, I’ll let Mr. Maillard have the mike unless you have any questions. 

 

Assemblyman Knecht:

Thank you, Mr. Chairman.  Not a question, as much as a comment.  I know this is difficult for the two of the witnesses who have spoken, and I appreciate your candor.

 

Roger K. Maillard, State of Nevada Employees Association, AFSCME/Retiree Chapter:

Good morning, Mr. Chairman and members of the Committee.  For the record, my name is Roger Maillard, and I represent the AFSCME SNEA Chapter of Retired State Employees.  I am here today to speak in opposition to Assembly Bill 222 as written.  It is common practice to encourage as many participants to join an insurance pool as possible, and I support this concept.  The benefits of doing so are numerous.  However, this should always be done while maintaining an actuarially sound ratio between active and retired participants.  Based on the latest figures published by the Public Employees Benefits Plan staff, the ratio of actives versus retirees is currently five active state employees to every one state retiree.  These two groups of state employees, actives and retirees, then have their claims experiences commingled to set premiums.

 

By permitting only the non-state retirees into the pool, and commingling them, the ratio could and surely would change quickly to four or fewer active state employees to every one non-state retiree.  Is this an acceptable ratio?  I don’t have a clue.  I’m not an actuary.  However, it has to have a negative impact of some kind when setting premiums.  The state program could soon be the only choice available to the non-state retiree.  This would increase additional retiree enrollments beyond expectations.  This, combined with the reduction in active state employees that is taking place by hiring freezes and budget cuts, could rapidly change to a ratio of more and more retirees to actives.  If this were to happen, it would make the program actuarially unsound in my estimation.  It could drastically increase the premiums for actives and retired state employees and non-state retirees.

 

[Mr. Maillard continued]  Quite often, we read news articles about the state of Nevada being a training ground for local government.  The reason most often attributed to this exodus is the higher wages the local governments and school districts pay their employees.  If they do not provide good medical insurance for their retirees, I can see why the salaries they offer are superior to that of the state.  In my comments, by stating that I support the concept of as many participants in the pool as possible, but by that, I mean all or nothing.  If you are a member of PERS, you must be a member of PEBP.

 

Having said this, I think that before any changes are made, an interim study should be conducted to ascertain a proper course of action.  As it stands right now, the actuarial impact of this bill to the state health system is unknown.  I cannot help but believe that the bill would cost the state and/or state actives and retirees a substantial amount of money.  In addition, I would say that I also am quite concerned about the funding of this based on what Woody [Thorne] said.  I think it is the responsibility of the Legislature to fund this and not the responsibility of active and retired state employees to bear the cost of this.  Thank you.

 

Chairman Manendo:

Thank you.  Questions, comments, Committee?  Thank you very much.  Anybody else?  Actually, we have Troop 424 from Spring Creek in Elko County.  Welcome.  Do you have a designated person who wants to say anything?  Did anybody from Troop 424 want to say anything?  This is your government at work.  Welcome.  Identify yourself for the record.

 

Duane Lewis, Boy Scout Troop 424, Spring Creek, Nevada:

My name is Duane Lewis.  I’m from Spring Creek, Nevada, and I’m here on a tour seeing what you guys do.

 

Josh Cox, Boy Scout Troop 424, Spring Creek, Nevada:

For the record, I’m Josh Cox.  I’m from Spring Creek, Nevada, too, and Troop 424.  I’m here just to see what it’s all about out here.

 

Levi Laws, Boy Scout Troop 424, Spring Creek, Nevada:

For the record, I’m Levi Laws, and I’m from Spring Creek, and I’m in 424, and I’m just here seeing what you guys do.

 

Chairman Manendo:

Good deal.  Are you going to be here most of the day?

 

Levi Laws:

Yes.

 

Chairman Manendo:

Welcome.  Any questions, Committee?  Thank you for being here and for your troop.  Thank you, gentleman.  Mr. Wolff, come on up.

 

Gary Wolff, Nevada Highway Patrol Association, Teamsters, Local No. 14:

Mr. Chairman, for the record, my name is Gary Wolff.  I represent the Nevada Highway Patrol Association, Teamsters 14, out of Las Vegas.  Let me first start by saying we are not opposed to A.B. 222 with its intent.  I will be the first one here to thank Assemblywoman Chris Giunchigliani for all the efforts she has put into helping state employees in a special session to alleviate the suffering of other state employees.  Why I said that I was opposed to A.B. 222 is probably the same frame as my colleagues with SNEA.  We want to make sure that this is not going to impact the active state employees who have already suffered plenty over the years with the increases projected through the Public Employees’ Benefits Program.

 

My phone is already ringing off the hook, and I am sure they are going to start ringing off yours.  I don’t know what the answer is within the state system, but something has to be done.  As much sympathy as I feel for the non-state retirees, I have got to tell you we did not put them in this predicament.  Currently, Washoe County offers no supplement for their employees when they retire after 1997.  I do not believe a lot of Clark County agencies do.  I know Metro doesn’t; they do it themselves.

 

So this puts everybody in a predicament when they retire, and I would have asked the doctor why she chose the state plan over the school plan in Clark County.  This is a sad business we are in today.  I’m starting to hear socialized medicine coming across.  If you’re in PERS, you also automatically go into the state insurance system.  I’ve been fighting this system for years.  In 1999, I got my head lopped off in here for bringing the same issues before that they are bring now, which seems to be acceptable today.  If you are going to pull your group, which is ironic—our group wants out of the state system, while a lot of these people want in.  Lincoln County came to our union, because they could not get anything else.  Other counties have approached us to come into our plan.  We have thousands of classified school employees in Clark County signing cards to come into our program because of horrendous costs of health insurance, and nobody seems to find an answer.

 

I don’t really know if we are the problem solver of the state down there, but our plan is much better than the state’s.  We can insure two families for what the state is proposing to insure one family for right now.  That is starting to scare me with the vehicle that A.B. 222 is taking.  So, with all due respect, Mr. Chairman, if you can guarantee us that it is not going to impact the state employees at this time, and I know Chris [Assemblyman Giunchigliani] will fight her heart out for everybody—she always has—then I can support this bill.  Thank you.

 

Assemblyman Grady:

Thank you.  Mr. Wolff, under your plan, do you cover your retirees or are they left with the state?

 

Gary Wolff:

No, we cover our retirees.

 

Chairman Manendo:

Any other questions, comments, Committee?  Thank you, Mr. Wolff.  Anybody else speaking in opposition or a neutral stance on A.B. 222?  I’m going to close the hearing on Assembly Bill 222, bring it back to Committee.  Thank you, very much.  Nice to see you, Troop.  Mr. Collins?

 

Assemblyman Collins:

Thank you, Mr. Chairman.  Being a former scoutmaster, I learned to be prepared.  I already signed my paperwork this week for my COBRA insurance because my local insurance has expired now that I’ve been up here in session, so I’m going to start paying $524 a month, effective going back to the first of March.  That’s my insurance premium.  The reason I’ve asked for some history was that it is my belief from recalling the issues in the 1999 session that the bill passed because of the segregation and would not have without it.  I know we have got folks in a bad situation, because I visited with some of the non-state insurance representatives from different agencies because of retirees telling me they were losing their coverage and what not.

 

I think we have an issue, and I understand this goes to Ways and Means.  Because of our time constraints of 120 days and the slowness of amending things, I would recommend to the Committee, if the Chairman would accept the motion, to send this to Ways and Means without a recommendation and let them deal with it, because it is not an exempt bill, and so we’re under a timeline.  I think by forwarding it to Ways and Means without recommendation, we’re not bailing anybody out and, at the same time, we’re not harming any group either, so let them sort out the dollars, and if they can find ways to do the dollars and with amendments to protect the people in the plan and allow the new ones to come in, I think that would be a good cause for Ways and Means.  That would be a motion if you accept it.

 

Chairman Manendo:

I do accept it.

 

ASSEMBLYMAN COLLINS MOVED TO REFER A.B. 222 TO THE COMMITTEE ON WAYS AND MEANS WITHOUT RECOMMENDATION.

 

ASSEMBLYMAN HARDY SECONDED THE MOTION.

 

Chairman Manendo:

I know that there are some concerns that folks have with amendments and we have been informed that amendments are not taking center stage, because they need to kick out bills because of the time constraints that we have, so this will give the folks more time to actually work out concerns in the Ways and Means Committee.  My understanding was it should be an exempt bill, but it does not say it.  When it goes to Ways and Means, it should be then.

 

Assemblywoman Pierce:

It should be.  They haven’t marked any, I’ve noticed.

 

Chairman Manendo:

I think once it lands there, then it is exempt.  Discussion?  Mrs. Koivisto?

 

Assemblywoman Koivisto:

Thank you, Mr. Chairman.  We may be jumping the gun a little bit because there are several other bills coming out on this same subject that we’ll be hearing. 

 

Chairman Manendo:

I think Mr. Goicoechea has a bill similar to this.  Well, I guess we’ll hear them and get them there as soon as we can.  If they’re not written and they’re not here, we’ve got to move them.

 

Assemblyman Goicoechea:

Yes, Mr. Chairman, just one point though.  A.B. 165, which is Eureka County’s bill, is in Ways and Means and will be coming from there to here.  So, maybe if this doesn’t work, we can catch it up on this side again.  Thank you.

 

Assemblywoman Pierce:

What is an exempt bill? 

 

Chairman Manendo:

Exempt from the deadlines that we have on the 120-day session.  Bills need to get out of Committee at a certain time.  They need to get out of the house at a certain time, and if it’s an exempt bill, then it doesn’t have those deadlines on it. 

 

Ms. Pierce:

So, is this an exempt bill?

 

Chairman Manendo:

It doesn’t say it on there, but I think it should be.  Other comments, questions, Committee?

 

Assemblyman Goicoechea:

I would support the passage because we do have the other bills coming, otherwise I would have to vote no.

 

Chairman Manendo:

Motion is to pass out with no recommendation.  I’ll place the question.

 

THE MOTION CARRIED.  [Assemblyman Williams was not present for the vote.]

 

Chairman Manendo:

The motion passes.  Anything else to come before the Committee?  We are adjourned.

 

RESPECTFULLY SUBMITTED:

 

                                                           

Pat Hughey

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Assemblyman Mark Manendo, Chairman

 

 

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