State slashing health benefits

Facing a $111.2 million shortfall to support existing benefits, the Public Employee Benefits Plan board voted Thursday for sweeping changes that will drastically reduce benefits for active state workers and retirees.

The changes include reductions in coverage for Medicare-eligible retirees and dependents and eliminating almost all dental and vision coverage.

But those cuts are projected to cover just $80.7 million of the shortfall.

The remaining $30.5 million will come from increases in premiums, according to PEBP Executive Director Jim Wells.

The final decisions will be made in September when the nine-member board must finalize its projected $1.1 billion budget for 2012 and 2013.

The current PPO medical plan, which covers most state workers, will be replaced with a high deductible plan that raises the current $200 deductible to $2,000 a year for individuals and $4,000 for a family.

The annual out of pocket maximums would increase to $3,900 for individuals and $7,800 for families. The percentage co-insurance coverage by the state would drop from 80 to 75 percent.

The changes to the medical plan will save the program about $28 million over the biennium.

Eliminating the dental plan except for periodic cleanings and X-rays will save another $16.6 million. More costly procedures, like cavities, crowns or root canals, would not be covered.

The vision plan will be eliminated except for an annual eye exam; if someone needs glasses, they'll have to pay for them. Medical procedures such as cataract surgery still would be covered under the medical plan.

In addition, spouses and domestic partners who can get coverage elsewhere will be booted off the state plan.

The board also cut the basic life insurance provided by the state in half, to $10,000 for active workers and $5,000 for retirees, and cut the long-term disability insurance benefit by a third.

The final big piece will come from changes in coverage for retirees eligible for Medicare Part A who will be moved to a private market Medicare exchange. That decision will save about $26 million, but Marty Bibb of the Retired Public Employees of Nevada described it as "a 150-mile-an-hour U-turn."

"Our decisions here today are going to be significant and have a long-term impact," Randall Kirner, board chairman, said near the end of the eight-hour meeting.

Wells said that without program cuts, premiums for active workers alone would skyrocket as much as 500 percent, from $40 to about $200 monthly.

To offset the burden to workers and retirees, the board agreed to help set up health savings accounts and health reimbursement accounts that could be used for out-of-pocket costs or non-covered expenses.

The decisions will be thoroughly reviewed again when the board meets to finalize its proposed budget in September.

The reductions come on the heels of more than $56 million the program had to cut from its spending in the current budget cycle.

But Gov. Jim Gibbons has served notice that, because of the state's massive $3 billion projected general fund shortfall, he cannot raise the $680 a month now paid per employee in the upcoming budget cycle.

Kirner early in the meeting said he hoped to do what the board did last budget cycle and take half the cuts out of benefits and the other half by increasing costs to the participants.

But board member Julia Teska said she supported the staff recommendations eventually adopted which will take about 75 percent from plan changes - especially the high deductible PPO plan known as a "consumer driven model."

"We need to put more onus of responsibility on individuals," she said. "The consumer driven model is going to drive more change (by participants) than any wellness program."

Member Karen Caterino joined Teska saying the larger plan changes will hold down premium hikes for many plan participants.