Guinn gets emergency control of state insurance

CARSON CITY -- The Senate Finance Committee today gave emergency approval to immediately put Gov. Kenny Guinn in charge of the near-bankrupt 47,000 member state group health insurance plan.

Assembly Bill 176, includes an appropriation of $10 million to carry the system through until sometime in May. Guinn's Chief of Staff Peter Ernaut said without the money the insurance plan would "have to close its doors by the end of April," ending health coverage for state workers and their dependents.

"This is a four-alarm crisis," Ernaut told the committee. The plan is losing $50,000 to $60,000 a day.

The bill will come up for emergency final passage in the Senate later today and then go to Guinn for his signature. The takeover should be accomplished by next Monday or Tuesday.

The bill indefinitely suspends the five-member Committee on Benefits, which has supervised the plan that fell from a $26 million surplus in 1997 to a projected $15 million deficit by the end of the fiscal year.

Ernaut said the governor was not looking for control, but he "wants to stop the hemorrhaging of the plan."

Ernaut heads a "working group" that is looking at both short-term and long range solutions. He said it would come with a recommendation for restructuring the management by April 1. His group will meet next Tuesday and will seek an insurance benefits expert to be temporarily in charge.

A major problem, Ernaut said is that "Nobody has taken responsibility."

State Budget Director Perry Comeaux said AB176 "will not solve the problem, but it will keep it from getting worse."

The bill gained the support of the Nevada Highway Patrol Association, Nevada Faculty Alliance and the Retired Public Employees of Nevada. Robert Gagnier, director of the 4,400 member State of Nevada Employees Association, endorsed the $10 million bailout.

But he was reluctant to turn over control of the plan indefinitely to the governor. He worried that the benefits for employees are not protected by law and could be lowered by Guinn.

The present Committee on Benefits is composed of two members from Gagnier's association, a retired public employee, a representative of the university system and Comeaux.

Gagnier complained the bill would "allow the governor to run the program forever."

Senate Majority Leader Bill Raggio, R-Reno, told Gagnier that Guinn didn't create this problem. He said the governor should be given credit for stepping forward. "He's got enough headaches without wanting this," Raggio said.

Raggio said there was precedent when Gov. Bob Miller was given control of the ailing State Industrial Insurance System. But Gagnier said the benefits for injured workers were set in law and could not be changed. That's not the case here, he said.

The Guinn Administration decided to take control before the next scheduled meeting of the Committee on Benefits Feb. 24. At that time the committee was going to consider allowing private contractors to take on more duties for the administration of the program.

The committee now pays the state Risk Management Division to take care eligibility duties and other administrative tasks. It was going to discuss the possibility of ending its contract and giving the work to the consulting firm of William Mercer, which is the actuarial advisor to the system.

Mercer earned $430,000 last year on its contract with the state at a time the system was falling deeper into the red.

Members of the Assembly Ways and Means Committee said they are going to look at the Mercer contract and performance to see if things were managed properly.

The problems started when the benefits committee in 1997 hired the firm of L & H Associates to pay the claims from doctors, hospitals and other medical providers that treat state workers and their dependents. L & H fell behind in payments and was fired. The committee then employed UICI of Texas, which faced a backlog of more than 80,000 unpaid claims plus it had to keep up with the present business.

Some doctors and hospitals were not paid for more than a year. UICI has caught up with the backlog, but an audit said many of the payments were incorrect -- either too much or not enough.

And claims came in higher than projected from workers and their employees, adding to the financial problems of the system.

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