Lawmakers approve state benefit cuts
May 9, 2011
Members of the Assembly Ways and Means and Senate Finance committees Monday reluctantly voted for the governor’s recommended cuts to the Public Employee Benefits Program.
The move will save the state an estimated $85.2 million over the biennium, $54.5 million of that General Fund money.
It maintains the current state contribution of $680.84 per employee per month.
Total funding for the program will be $481.9 million in Fiscal 2012 and $487.5 million in 2013 – both slightly less than the $489 million this fiscal year.
The vote came after a majority of lawmakers rejected a plan by southern Nevada lawmakers to again separate the northern and southern HMO plans. That would have resulted in lower rates for southern Nevada state workers but higher rates for state employees in the rest of the state.
The plan adopted by the PEBP board in August blended those rates together so that everyone pays the same premium. Senate Majority Leader Steven Horsford, D-Las Vegas, said that has the effect of raising what workers in the south pay.
“It causes the southern Nevada plan participant rate to go up higher than it needed to for the benefits they receive,” he said. “Why not stick with the old allocation?”
PEBP Executive Officer Jim Wells said the rates were blended as an equity issue because workers in the north and rural areas were essentially getting less benefits.
“One of the things the board elected to do was standardize the rate between the north and the south,” he said.
He pointed out that was the one area in all of the benefits to state workers where those in different areas were treated differently.
The north is more expensive, Wells said, because there just isn’t enough of a market to attract several HMO plans. There are just three major hospitals in the north compared to a dozen in the south.
“It’s that kind of competition that drives down the cost in the southern market,” he said.
Wells also pointed out that rates for the PPO health plan are already blended north and south.
Assemblywoman Maggie Carlton, D-Las Vegas, whose husband is covered by PEBP benefits, moved to direct the program to separate the north and south HMO programs.
Assemblyman Randall Kirner, R-Reno, a former member of the PEBP board, objected to the idea
“It takes every state employee in the north and raises their fee,” he said.
Kirner said her motion would penalize more than half of state workers “so the people in the south can have a better rate.”
He was joined by Ways and Means Chairman Debbie Smith, D-Sparks, who said that would be penalizing state workers who live outside the Las Vegas area.
Republican committee members joined by Smith and other northern Democrats defeated the amendment.
The vote changes the state benefits plan to a high deductible program with $1,900 a year in out of pocket costs for individuals and $3,800 for families. But Wells said those using the plan for medical costs could apply the $700 individual annual account contribution to offset that out of pocket hit.
After that, the state would pay 75 percent of medical and pharmaceutical costs. The current plan pays 80 percent after that and has a deductible of just $800 for individuals, $1,600 for families.
Wells said the changes shift more of the cost burden of the plan to “the people who are using the plan.”
He pointed out that healthy families and healthy workers end up better off under the new plan.
The proposed plan changes also move Medicare eligible retirees off PEBP and to a Medicare Exchange program and reduce or, going forward, eliminate subsidies for retirees. Also moved out of PEBP are spouses who can get insurance from their own employer.
The changes eliminate vision benefits except for the annual exam and reduce dental benefits.
Wells said the changes will encourage state workers to examine the benefits they are using more closely and, hopefully, reduce utilization in some cases as people question whether they really need a certain test or procedure. Under the current system of co-pays, he said most state workers don’t know what a medical procedure actually costs because all they see is the co-pay amount.