Q&A Tuesday: Curing Nevada’s employee benefits planPhoto:3996282,left;
Mike Hillerby, chief of staff to Gov. Kenny Guinn, and Woody Thorne, executive director of the Public Employee Benefits Program, talk about issues that have been under discussion by the Legislature. The state’s executive branch has promised to thoroughly examine options for improving and stabilizing the plan.
Nevada’s Public Employee Benefit Plan last week basically went back to “partially commingling” Medicare retirees to lower their rates. Why can’t they just stay with that system in the future?
Thorne: With the partial commingling that’s going on now, Medicare retirees have their cake and eat it too. They get advantage of commingling where it helps them but they have no commingling where it helps everybody else. The Medicare retirees are bringing their risk to the pool (for catastrophic coverage Medicare doesn’t provide) but none of the money from Medicare. Active employees are subsidizing Medicare and non-Medicare retirees.
Hillerby: The Medicare retirees say wait, it’s my money. Why don’t I keep that. But you’ve brought your risk to the pool. As a long-term policy, it’s not a really bright idea.
The problem with un-commingling that group is they’re so small that if they have a bad year, they don’t have a big enough group to spread that risk over and their premiums will skyrocket and then they’ll want to be commingled back in again.
It would seem almost all future retirees will be Medicare eligible. If that’s the case, won’t the Medicare-eligible problem solve itself in the future?
Hillerby: It’s true the non-Medicare retiree pool is going to continue to shrink.
Thorne: All those hired after April 1986 are Medicare. But it’ll take a while because they’re just starting to retire now. In a decade or so we should see the percentage go up.
It seems every year or two there is another crisis at PEBP. How can the plan break out of that cycle?
Hillerby: One of things heard that participants and everybody wants is predictability and stability in rates and benefits. I think Woody and the board are trying to get there, but part of the problem is they do this in a political realm. Every time we get a surplus up, there’ll be a move by some group to spend it either to increase benefits or reduce rates. The more we can not meddle in that, the better. This year more than any other more accurately reflects the actual cost and risk of those tiers. We’ve got a good director and a good board. We’ve all got to try leave that alone.
You’re planning a study in the interim. What is the purpose of that study and what do you expect to get out of it?
Hillerby: We’ve committed to looking internally at what some of the options are for the Medicare folks. Maybe we can develop some other kind of plan that acknowledges Medicare as primary payer for those folks. Maybe somebody else has come up with an idea we can use. We can look actuarially at what other states and local governments have done.
Thorne: Part of the ongoing work of the board and PEBP staff is to look at what issues are facing the plan and what we can do with them. With Medicare, we’re going to have to look at what happens as that group gets bigger. Do you start to see they’re big enough that they can be separate? ACR10 is looking at if it is possible to get all public employees into a single group. That would greatly enhance our buying power.
Hillerby: Part of this too is going to be educating the plan participants as well. They need to understand what the real cost of insurance is. For about half those Medicare retirees, the state is paying $800 a month for their insurance and they’re paying $270.
We tend to focus on the employee premium side and forget how much the state taxpayer side is.