Lawmakers struggle with how to solve group’s spike in health care costs
May 9, 2013
Lawmakers are struggling to help about 3,600 public retirees whose health-benefit costs are going through the roof.
All agree the answer contained in Senate Bill 34 — moving those mostly school district retirees into the general employee-retiree pool — isn't the answer. That solution would add $40 a month to the premium cost for every state employee and retiree.
The separate pool was created in 2003 to allow local-government workers and retirees to stay in the state plan. Originally, there were about 2,500 active nonstate employees in the pool and 1,700 retirees.
Since, local governments including school districts have found other ways to ensure their active workers receive cheaper benefits, in part because current law allows them to leave their retirees in the state plan.
The result: almost no active local government workers remain in the pool. In a letter to lawmakers, Public Employees' Benefits Program Director Jim Wells said all but 28 of the more than 3,000 people in the nonstate worker pool are retirees. That has caused premium rates for that group to increase dramatically.
Director of Administration Jeff Mohlenkamp pointed out that most of the bill would fall on state government, given that the state pays about 75 percent of the employee premium.
Jim Richardson, representing active state workers, said the amendment to move them all into the state plan was never intended to be the solution. He said the amendment just gave the bill a fiscal note — a huge one at more than $8 million a year. The fiscal note exempted it from the deadline that otherwise would have killed the measure.
Marlene Lockard representing the Retired Public Employees of Nevada agreed. All parties are working to find a solution to help those "orphans" keep health coverage they can afford, she said.
Written by Sen. David Parks, D-Las Vegas, the original bill would increase active-employee enrollment in the state program by allowing local governments to enroll with PEBP, giving smaller nonstate governments access to a much larger pool and helping to reduce annual premium fluctuations.
"It's such a dwindling number and the cost is so substantial that I think there needs to be a permanent fix this time," Wells said. "My worst fear is that these people can't afford access and don't seek treatment until it gets really bad."
Lockard said there has been "a huge under-utilization of the plan" by employees and retirees who can't afford the high deductible — up to $3,000 — before the plan kicks in. She said she knows of one retiree who doesn't take his cancer treatments because he can't afford it.
Sen. Joyce Woodhouse, D-Las Vegas, agreed the Legislature needs to find a solution.
But Richardson and Lockard said the issue might well be a two-year or, at most, four-year problem. Within two years, they said, the vast majority of the "orphaned" retirees will reach the age where they qualify for Medicare coverage.
The few who don't, he said, could be covered without significant impact to the state plan.
"If they can cover them this time around, they can put it in the budget next time so it doesn't hit state employees," Richardson said.
But they said there also has been discussion that, since the local governments who dropped those retirees on the state created the problem, maybe they should fix it. Wells, too, suggested a special enrollment period during which those non-state retirees could re-enroll in their local-government plan.
Mohlenkamp made a similar comment, asking, "would it be more appropriate for the institutions where these employees did work to bear the cost?"
There might be legal problems with that, Richardson said, given that several of the groups including the Clark County School District don't currently allow re-enrollment by retirees who have left their plan. More than half the 3,200 retirees involved are former school employees from Clark and Washoe counties.
By contrast, he said, the police health care trust does allow retirees to re-enroll.
The issue is expected to come before the money committees reviewing the PEBP budget at a hearing Friday.