Governor told state workers' health plan is back on track

CARSON CITY -- The hemorrhaging has stopped in the 47,000-member state employees health insurance system, which was losing up to $1 million a month last year.

The plan is starting to build a small surplus each month. It could reach $300,000 by the end of the year, a report to Gov. Kenny Guinn said.

"At least we are in the black and we're moving in the right direction," Scott Scherer, legal counsel to Guinn, said. Guinn personally took control of the near-bankrupt system earlier this year.

The system has stabilized in the past few months because claims from state workers and their dependents, which unexpectedly spiked upward in 1997 and 1998, have returned to a near normal flow, the report said. Payments to hospitals, doctors and for other medical services are for the most part being paid on time. That means the state is receiving discounts for prompt action on bills.

$26 million from Legislature

The 1999 Legislature pumped at least $26 million into the insurance fund to keep it afloat. In addition, last January the premiums for dependents and retired state workers were raised 23.7 percent and benefits were cut. The plan then was to boost those premiums another 12.7 percent this January.

The state pays the full premiums for employees. Retirees from the state receive a subsidy to help them pay for their insurance. Employees pay the premiums for their dependents.

Scherer said Wednesday it may not be necessary to raise premiums for dependents and pensioners by 12.7 percent. He said the increase may be lowered to 7.5 percent. That decision will be up to a yet-to-be appointed board of directors.

In the next week or two Guinn is expected to name the first members of a new nine-person board of directors for the system. He will give the board a list of four or more candidates for the $90,000-a-year job of executive director to take over the job of keeping the system from insolvency.

The board of directors of the state system was enlarged by the Legislature from five to nine members.

The original plan to raise premiums 12.7 percent was calculated on the Legislature giving the system a loan, Scherer said. Instead lawmakers appropriated the money without any payback strings.

Marty Bibb, executive director of the Retired Public Employees of Nevada, said he wants to see a quick recovery so benefits can be restored.

Among the biggest complaints are ones about reductions in benefits to retirees who are also on Medicare. In the past, many state workers had Medicare coverage as their primary policy. After Medicare paid 80 percent of the cost, the state insurance picked up the remaining 20 percent. Under the new policy effective last January, the state insurance didn't kick in until the state worker paid $3,000 of the cost after Medicare.

Bibb said $9.3 million in benefits were cut from the state's plan. Of that, about $3.3 million came from the Medicare deduction.

Guinn said last week one of his top priorities is to restore the benefits to those on Medicare. The $150 million-a-year plan ought to be able to demand better benefits, he said.

As a step in that direction, bids will be solicited soon to hire a brokerage firm to help on future health insurance contracts. Guinn announced he was going to do that in May, but that plan was buried under other business in the closing days of the Legislature.

"We must develop a long-term plan to provide stable and efficient health benefits for our employees and retirees," Guinn said. "This is the next step toward that goal."

State Budget Director Perry Comeaux said many of the health and administrative contracts that are to expire this coming December have been extended for another year to give the new board of directors time to get on their feet.

Troubles for the insurance plan started in 1997 when L & H Associates, the company hired to process claims and pay bills, fell behind. Claims were not being paid for months and the board of directors fired L & H Associates. It hired UICI out of Texas, but by that time there was a backlog of nearly 100,000 unpaid claims.

$608,640 embezzlement found

State officials also discovered that an employee of L & H Associates in Las Vegas embezzled $608,640, of which about $466,000 has been returned to the state plan. L & H Associates is in bankruptcy court and a legal battle is under way to recover about $140,000.

In addition, there was an unexplained increase in claims. In the confusion, some claims were paid twice, and efforts are being made to recover that money.

Because of the lack of records, it was impossible to determine if state workers had met their $250 deductible before the insurance payment kicked in. So the state waived that requirement the deductible must be paid by the worker before the insurance starts to contribute.

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