State health insurance sees decreased costs
March 27, 2014
Lawmakers were told Wednesday that, during the past two years, the state's health insurance plan has seen lower than expected costs, causing a huge increase in the plan's reserves.
Those reserves are projected to total $82.9 million by the end of this fiscal year and that's after known liabilities are subtracted.
But there was considerable discussion before the Interim Retirement and Benefits Committee over the reason for the lower costs and mounting reserves.
Consultants from AON Hewitt pointed to lower medical inflation than at any time in the past 50 years along with better contract negotiations and a reduction in unnecessary care.
It was that last one, however, that drew questions from committee members including Assemblywoman Maggie Carlton, D-Las Vegas, who chairs the committee, because the decrease in unnecessary care stems in large part from shifting the plan to a high deductible Consumer Driven Health Plan.
A significant number of state workers say that deductible — which is $1,900 for an individual state worker and $3,800 for a family — simply keeps people from going to a doctor.
Public Employee Benefits Program Director Jim Wells said that 30 percent of those covered by the plan didn't go to a doctor this past year. Actuaries say that number should be lower — 15-25 percent. He said those are probably young people who "are not sick so there's no reason to go to a doctor."
He said another 30 percent of those insured through PEBP went to a doctor but didn't receive any benefits to offset their medical costs. He emphasized that's most likely because they paid those bills with money from their Health Savings Accounts but didn't have enough costs to reach their deductible.
The board recently voted to drop that deductible to $1,500 and $3,000, but workers say that's still too high.
"It's all about access to health care," said Carlton. "People are paying a premium but not getting benefits."
Board Chairman Leo Drozdoff, however, pointed out that since the state contributes a total of $1,100 a year to worker Health Savings Accounts, the individual deductible is actually just $400 a year for individual employees.
"That's a pretty low deductible," he said.
Carlton, however, said the real "elephant in the room" is the excess reserves. She said PEBP's funding for the plan has missed the mark "multiple times," resulting in the state budgeting more than the program needs to cover its costs.
"This is a lot of money," she said. "I'm looking at this money and thinking what could we have done with this money. It's state money that could have been used for other initiatives. We don't want this to keep happening."
"There's money coming out of people's pockets as well," said Assemblyman Randy Kirner, R-Reno.
Drozdoff said going forward, the board intends to be less conservative in its projections so that reserves don't build to such huge numbers every year.
Wells told the committee the PEBP board plans to reduce excess reserves by restoring some benefits that were cut over the past few years. He said those proposals already committed to by the board include increasing Medicare support, adding to Health Savings Account contributions for both primary and dependents, increasing wellness incentives and raising the percentage the state pays after the deductible is covered from 75 to 80 percent. He said they are also raising the annual dental maximum from $1,000 to $1,500 — where it was before the cuts — and adding an annual vision exam.
Those changes are on top of the decision to reduce the deductibles from $1,900/$3,800 to $1,500/$3,000.
Altogether, he said those changes would drop the excess reserves to $54.56 million.
He said the board next week will also consider projecting medical inflation at 3 percent or zero instead of the original 6 percent projection. Either of those choices would save both plan members and the state money.
Carlton, however, asked the board to consider burning through reserves by giving both the state and members a premium holiday one month next year.
"That would be good for seniors, employee families, everyone," she said.
Wells told her that idea has been tossed around but they first need a legal opinion on whether it can be done without changing statute. He also pointed out it wouldn't really benefit a single employee who is on the wellness program and basically pays nothing for his or her insurance.
"If there is a statutory issue, we can work on it," she said.
Wells said the board would look at that idea next week but needs legal counsel from both the Attorney General and Legislative Counsel Bureau to weigh in on the legality of a premium holiday.