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To the PEBP board: Use your reserve to lessen our out-of-pocket burden

13 Mar 2012 10:15 AM | Anonymous
On behalf of the more than 3,500 Nevada System of Higher Education faculty and professional staff across the state, represented by the NSHE Council of Senate Chairs and the NFA, we urge the Public Employees’ Benefits Program board, as it sets rates and considers modifications to plan design for fiscal year 2012-2013, to devote all available resources, including excess reserves and the scheduled increase in employer premiums, to slow the skyrocketing increase in out-of-pocket costs for public service workers and their families.

Specifically, we urge that you…
  1. Subsidize domestic partners, which we have supported for nearly 10 years.
  2. Reduce premiums on all PEBP participants to reverse the alarming increase in the number of our colleagues declining coverage altogether.
  3. Address the alarming increase in HMO premiums for southern Nevada.
  4. Enhance contributions, at the beginning of the contract year, to the HSA/HRA accounts and clarify how this money can be used.
The faculty and staff of NSHE have expressed, in numerous public venues, our concern over the negative consequences to our System's competitiveness in an active market for skilled academic talent. Particularly in light of the diminution of our salaries by 4.8 percent, amidst a national trend in which higher ed salaries increased by 1.9 percent last year, the state of Nevada and thus PEBP ought to be making its highest priority the shaping of a benefits plan that is as competitive as possible given available resources committed by the state and by PEBP participants, of which NSHE workers represent about one-third.

Included in that one-third are our colleagues among the classified state workforce on NSHE campuses. Among these workers, a majority of whom earn less than $50,000 per year, the sharp increases in out-of-pocket, up-front costs resulting from the conversion to a high deductible plan (an increase of several thousand dollars per year for some families) have forced a significant rise in the number foregoing care, either by opting out of insurance altogether or by declining prescribed cures, especially by reducing medical dosages below prescribed levels to cut costs.

The conversion of the PPO to a high-deductible plan, accompanied by a jump in premiums and co-insurance, along with the sharp increase in premiums for HMO enrollees (especially in the south, where rates increased more sharply due to the blending of subsidies), has had a well-documented negative effect on our workforce. The University of Nevada, Las Vegas, survey of faculty and staff conducted in November found that in addition to an unacceptably high 3.2 percent of workers who declined medical insurance entirely due to costs, more than 60 percent of those who are covered reported either skipping prescribed medications or taking medications less frequently than doctor's orders to reduce out-of-pocket expense.

Lest one think this is merely a matter of faculty and staff cutting back on vanity care, our survey identified three instances of faculty or staff skipping prescribed insulin to control diabetes because they could not afford the cost of either the insulin pump or of the insulin itself at the end of the pay period.

We have therefore urged -- and continue to urge -- the board to consider a "middle tier" plan, if not for fiscal year 2013, then for the next biennium, that would allow participants to better anticipate (and budget for) the out-of-pocket cost of medical care through a separate prescription drug deductible and fixed co-pays for doctor visits.

When an enhancement of coverage options was first suggested to the board last fall, the response was that modifications to plan design would not be financially feasible or would come at such a high rate of participant premium as to be nonviable. However, it appears from the program's last two quarterly financial reports that, in actual cash terms, the program is accruing money to its reserve rapidly. Last spring, during the 2011 legislative session, PEBP staff told a legislative committee that if the plan did not switch from a conventional PPO model to a high-deductible plan, participant over-utilization would drive the program to lose approximately $80 million in the 2011-2013 biennium. However, it now appears that at the end of the 2010-2011 plan year, when we abandoned the conventional coverage paradigm, the plan had accrued between $20 million and $43 million in excess reserves -- above those necessary to meet the cost of care encumbered but not yet claimed and of catastrophic claims. As of Sept. 30, 2011, the plan had an excess reserve of $43 million, some $32 million above that which PEBP had projected for the legislature in its work program.

And the most recent financial report states that, while the projected end-of-year excess reserve is down to $29.8 million (due to the loss of an anticipated $12.5 million in federal grants, not due to any increase in claims or coverage), the actual available reserve is up to $55 million -- some $44 million above what was projected in the budget submitted to the legislature. That is quite far to miss the mark, and participants really do deserve an explanation.

Even more importantly, we deserve health coverage, which is the primary mission of the program, not the controlling of costs or the accrual of reserves. The state has allocated money for health coverage, participants have dutifully paid their premiums and deductibles, and the program appears to have netted at least $10 million last quarter. Moreover, next year the program will receive a hike in employer-side contributions, representing an increase in revenue of more than 10 percent (over $30 million statewide).

So between this excess reserve of more than $40 million currently and an increase in revenue of more than $30 million for fiscal year 2013, the program clearly has the funds necessary to lower premiums for all participants and enhance HSA contributions. We urge the PEBP board to do so.

A final thought. We are aware that the staff is disposed not to alter the current plan design in order to see how it works out over the course of the biennium. From a scholarly standpoint, we understand this interest in carrying an experiment through to its conclusion. However, the mission of PEBP is not to show how to get us to use less care; it is to provide the care we actually do need, to the best of its ability and resources.

That need is clear, the resources are available, and the time is now. We urge the board to commit to reducing out-of-pocket costs and enhancing coverage options for next year and beyond.


  • 15 Mar 2012 9:58 AM | Jane Davidson
    I think a lot of people will be surprised to find that their medical savings money is reported to the IRS and income and that they will have to pay taxes on it. Yes, it is on the payslips, but I think most will not notice it until they had their W2 form. What kind of "savings" is it to help people when it is taxable?
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  • 15 Mar 2012 12:42 PM | Shannon
    Add me to the "taking medicine less frequently." A medication I am supposed to take twice a day I take only once, because a 90-day supply of this GENERIC medication just cost me $370 to fill. Bloodwork (which I thought was covered under our great wellness plan) showed I have a thyroid condition and resulted in a $250 lab services bill showing up at my house. I was supposed to go back and have my levels re-checked after 6 weeks of medication, but I can't afford that again, not after having to refill a prescription!
    I went to college for a total of 10 years to earn three degrees in my field, and I have been working in my field for 20 years. It's beyond degrading to not be able to afford basic health care for myself after all this.
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