Governor asks special session to fix employee benefits program

Sen. Mark Amodei, R-Carson City, and Assemblywoman Chris Giunchigliani, D-Las Vegas, took the governor's original proposal one step farther -- amending it to ensure that state workers won't have to pay a dime more to maintain their benefits this fiscal year.

Both houses gave final approval to the plan as the 18th special session of the Nevada Legislature wrapped up business shortly before 4:30 a.m.

"This is fantastic," said John Yacenda of the State of Nevada Employees Association. "It's going to eliminate the anxiety a lot of employees feel right now."

The program was rescued in 1999 by a $26 million cash infusion to cover losses caused by rising costs and the collapse of L&H, the benefit plan's administrator.

The program seemed better financially by the time the 2001 session opened, so Guinn and lawmakers agreed to spend down some $17 million of the plan's reserves rather than increase premium rates. They reduced the state-paid premium for health coverage by 3 percent per employee.

Since then, PEBP Director Woody Thorne says, the plan has been hit by rising costs and more major claims than expected -- including more than 20 liver transplants since the last legislative session.

The situation was further aggravated when UICI, the plan's new administrator, fell behind in processing those claims. That, according to Thorne, prevented his staff from seeing the true impact of the rising costs. When UICI began to catch up on those claims, he said, much of the plan's reserves disappeared.

Budget Director Perry Comeaux told the Senate that without a premium increase, the program "will have exhausted their reserves by the end of this calendar year."

"Something has to be done and if something isn't done, the only other place the program can go is to the participants," Comeaux said.

The legislation drafted by the governor called for an increase in the state-paid premium of $81.28 per employee per month. It would also mandate an increase of $46.05 in the state share of premiums for retired state workers.

But as proposed, it would also have required increases of about 20 percent in the premiums employees pay to cover their families.

Amodei said neither retirees nor workers covering their families should have to pay more, and a majority of the Senate agreed.

The Assembly Ways and Means Committee voted to begin the higher state premiums Oct. 1 instead of Jan. 1. Giunchigliani said that would allow PEBP managers to either build up reserves or use the money to prevent further reductions in benefits.

They combined those ideas in an amendment designed to ensure that employees don't see premium increases they must pay while preventing major benefit cuts.

But lawmakers will have to make up the extra costs when the next legislative session begins because Guinn's request to the Legislature orders state agencies find the money to pay for the increases out of their existing budgets.

Altogether, it will cost about $18 million to make up the costs to agencies over the next six months. It could cost $20 million more to make the plan solvent after that.

Giunchigliani said rather than bailing the plan out every four years, lawmakers need to look at other solutions, including privatization. She said the bill directs PEBP to explore the possibility and feasibility of privatizing the plan to improve benefits and stabilize it financially and report those options to the 2003 Legislature.

The governor is expected to sign the legislation this week.