Subcommittee looks for way to fix retiree benefit premiums
May 6, 2005
The head of the Public Employee Benefits Program told lawmakers Friday there’s no quick and easy way to fix the huge jump in premium costs for Medicare eligible retirees.
Retirees in that category who have a spouse will see their premium costs from the state plan jump nearly $300 a month because state law requires their claims be commingled and their premiums and services match those provided all other participants in the plan. The effect of that is the state plan would not longer give them a break for the share of medical costs covered by their Medicare.
The subcommittee of the Senate Finance and Assembly Ways and Means committees asked him to review different ways of fixing the problem and return for another hearing next week.
Medicare-eligible retirees have for years received a lower state premium rate because the state recognized that Medicare as their primary insurance, which reduces costs to the state plan.
Woody Thorne told the subcommittee commingling them with all others in the plan pushed the premiums of Medicare eligible retirees up dramatically.
Assemblywoman Kathy McClain, D-Las Vegas, said the increase can’t be justified.
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“We need to fix it. The only thing they access PEBP for is dental and vision,” she said. “What I want you to do is fix this thing so that for the Medicare people, PEBP is the is secondary insurance.”
Thorne admitted some 2,700 Medicare eligible retirees were hit harder than other plan members by this year’s rates.
Subcommittee Chairman Sen. Bob Beers, R-Las Vegas, asked what it would take to subsidize those retirees so they weren’t hit so hard. Thorne said about $3 million.
“We’re suggesting that for the first year you fund that $3 million impact out of your reserve and for the second year, recalculate the rates for the 2,700,” he said.
“We can do that with a change in the statute,” said Thorne.
“And we can do that,” said Beers.
But Beers was advised by staff they only have a week or so to figure out what to do because the budgets for PEBP must be settled by then. Analyst Mark Stevens said any change in the rates would change every budget in the state’s more than 225 different agencies and require a lot of recalculation.
Beers said one of the biggest problems is this year’s PEBP premiums were artificially low – especially for Medicare retirees who only paid $78 a month for benefits.
“Last year’s premiums for everyone were subsidized by our spending down reserves,” he said.
Marty Bibb representing Retired Public Employees of Nevada said the plan should commingle the parts of coverage for which Medicare is not primary but give them credit for the portions of coverage where Medicare is primary.
Asked whether it is legal to offer different groups different sets of benefits within the plan, Thorne said no, that would violate his understanding of federal law.
“It appears to be the desire of the committee that we want Medicare eligible retirees to have a rate that reflects Medicare as their primary insurer and PEBP as their secondary insurer and, in the process, if we end up increasing their rate because they are no longer commingled with actives, we don’t want to do that,” said Beers.
He asked Thorne to bring information back to the subcommittee next week on what is or isn’t legal and what the effect of the different options would be.