public employees' benefits program (pebp)

March 18, 2011 1

We’re in it together

Public Employees'

Benefits Program

(PEBP)

Presentation to:

Assembly Government Affairs

Committee

March 18, 2011

C - 1

wolfley

Text Box

Assembly Committee on Government Affairs Exhibit: C of 36 Date: 3/18/11 Submitted by: James Wells

March 18, 2011 2


Topics• Governance

• Eligible Participants

• Current Benefit Options

• Current Funding

• Benefit Plan Changes for July 1, 2011

• Performance Indicators

• Other Post-Employment Benefits Liability

• PEBP Legislative PlatformC -

March 18, 2011 3


Governance

• Chapter 287 of NRS and Administrative Code

– Non-state benefit plans

– PEBP

• Board - Nine members appointed by Governor• Jacque Ewing-Taylor, NSHE representative (Vice-Chairman)

• Karen Caterino, Risk Manger

• Julia Teska, Director of Administration designee

• Leo Drozdoff, Director, Department of Conservation and Natural Resources

• George Campbell, retiree representative

• Dawn Stout, City of Elko (non-state representative)

• Teresa Thienhaus, Director, Department of Personnel

• Jeffery Garofalo, Private

• Vacant, Private

C -

March 18, 2011 4


Governance

• NRS 287.043 – Board Shall:

– Establish and carry out a program of group life,

accident or health insurance.

• Purchase policies of life, accident or health insurance, or

provide similar coverage through a plan of self-insurance.

• Develop and establish other employee benefits as necessary.

– Set rates and ensure that the Program is funded on an

actuarially sound basis.

– Contract with Nevada local governments to provide

group insurance for their active and retired employees

and dependents.

C -

March 18, 2011 5


Governance


– Appoint independent CPA to provide an annual audit.

– Appoint an attorney to perform a biennial review of

compliance with federal and state laws relating to taxes

and employee benefits.

– Adopt necessary regulations to carry out the NRS

provisions.

– May make recommendations to the Legislature

concerning legislation it deems necessary and

appropriate regarding the Program.

C -

March 18, 2011 6


Governance


– Submit an annual report regarding administration and

operation of the program to the Legislature, including:

• The financial results for the preceding plan year;

• An assessment of actuarial accuracy of reserves for the current

and preceding plan years;

• A summary of the plan design for the current plan year and

comparison to the preceding plan year, including rates;

• A description of written communications to participants; and

• A discussion of activities of the Board concerning purchasing

coalitions.

C -

March 18, 2011 7


Eligible Participants• State

– Active employees

– Retirees

• at the time of retirement, or

• during “late enrollment” in even numbered years

• Non-state

– Actives if employer “participates” in the Program

– Retirees

• Eligibility frozen at those enrolled as of 11/30/08 except from

any “participating” entity

• “All in or all out” policy of SB 544 (2007)

C -

March 18, 2011 8


PEBP Enrollment Projections

FY 2010

(Actual) FY 2011 FY 2012 FY 2013

State

Actives 25,807 25,443 25,522 25,602

Early Retirees 3,189 3,347 3,469 3,613

Medicare Retirees 4,779 5,064 5,359 5,650

33,775 33,854 34,350 34,865

Non-State

Actives 459 222 242 268

Early Retirees 5,531 4,848 4,255 3,623

Medicare Retirees 3,882 4,247 4,569 4,930

9,872 9,317 9,066 8,821

Total 43,647 43,171 43,416 43,686

Increase -1.1% 0.6% 0.6%

C -

March 18, 2011 9


Current Benefit Options

• Medical Coverage (Including Prescription Drugs)

– Self-funded Preferred Provider Organization (PPO)

Option

– Health Maintenance Organization (HMO) Option

– Medicare Advantage plans for Medicare retirees

• Dental

• Basic Life Insurance and Accidental Death &

Dismemberment

• Long Term Disability

C -

March 18, 2011 10


Current Benefit Options

• Voluntary Products

– Flexible Spending Accounts

• Medical

• Dependent Care

– Additional Life Insurance

– Long Term Care

– Short Term Disability

– Home & Auto

C -

March 18, 2011 11


Current Funding FY 2011$489.0 Million

Carryforward17%

State Subsidy

52%

Contributions30%

All Other1%

SourcesOperating

1%S/F Admin

3% HSA/HRA Contributions

0%

S/F Claims51%

Fully Insured22%

Reserves23%

Uses

C -

March 18, 2011 12


$578.7 Million

Revenue required

Federal Health Care

Reform

Medical Inflation

Enrollment Growth

Plan Utilization

$493.5 Million

Total Revenue

$75.5 Million

Retiree subsidy

$85.2 Million shortfall

$418.0 Million

Active subsidy

C -

March 18, 2011 13


Governor Recommends 2011 - 13$969.4 Million

Carryforward20%

State Subsidy

51%

Contributions27%

All Other2%

SourcesOperating

1%S/F Admin

2%HSA/HRA

Contributions7%

S/F Claims48%

Fully Insured25%

Reserves17%

Uses

C -

March 18, 2011 14


$-

$10

$20

$30

$40

$50

$60

2000 2001 2002 2003^ 2004 2005 2006 2007 2008 2009 2010 2011*

Mil

lio

ns

Fiscal Year

^Supplemental Appropriation *Projected as of February 2, 2011

Reserves by Fiscal Year(HRA Reserve not included)

Funded IBNR

Funded Catastrophic Reserve

Recommended IBNR

Excess

C -

March 18, 2011 15


Summary of Plan Design Changes Effective

July 1, 2011A. The current Preferred Provider Organization (PPO) plan will be replaced with

a PPO Consumer Driven High Deductible Health Plan (HDHP) including

Health Savings Accounts (HSA) and Health Reimbursement Arrangements

(HRA);

B. Coverage for various Medical plan components will be changed and coverage

will be eliminated for spouses and domestic partners who are eligible for

health coverage through their employer;

C. Reductions to dental benefits (deductibles, coinsurance, max benefit)

D. Fully insured supplementary product coverage will be reduced (i.e. life

insurance and long term disability); and

E. Medicare retirees will be offered coverage through an Individual Market

Medicare Exchange (IMME).

F. Shift premiums from State Subsidy to participant contribution

C -

March 18, 2011 16


High Deductible Health PlanAnnual Deductible

(In-network)

Participant Only coverage tier:

• $1,900 deductible (increase from $800)

Participant plus dependent tiers:

• $2,400 individual family member deductible (increase

from $800)

• $3,800 family deductible (increase from $1,600)

Co-insurance

(In-network)

Change from 80% to 75% after Deductible

(in-network/covered expenses)

Annual Out-of-Pocket

(OOP) Maximum

(in-network)

Participant Only coverage tier:

• $3,900 deductible (increase from $3,700)

Participant plus dependent tiers:

• No Individual Family Member OOP Maximum

• $7,800 for Family (increase from $7,400)

Changed to a true OOP Maximum

C -

March 18, 2011 17


PPO High Deductible Health Plan

• Add Health Savings Account (HSA) and Health

Reimbursement Arrangement (HRA)

– PPO Plan only – HSA and HRA not available for participants

selecting HMO coverage

• Provide Plan contributions to the HSA/HRA

– Employee Only: $700

– Family coverage: $700 for the employee and $200 per dependent

(max 3 dependents) up to a maximum of $1,300 for the family

– Annual contributions

C -

March 18, 2011 18


Health Savings Account (HSA)Interest bearing or investment account established by the employee and administered by a bank . HSAs are portable (owned by the employee), do not have a maximum balance limit and carry over in perpetuity. Purpose of an HSATax-exempt account to pay for qualifying health care expenses such as, doctor’s

visits, lab tests, diagnostic tests, prescription drugs, coinsurance, dental procedures, vision exams, etc. Use for non-qualifying expenses result in taxes and penalties to the account holder.ContributionsCan be plan or employee fundsEmployee contributions, earnings and distributions are pre-tax2011 Calendar Year Maximum Contribution (combination of plan and employee contributions)$3,050 for Employee only coverage $6,150 for Family (two or more)

C -

March 18, 2011 19


Health Reimbursement Arrangement (HRA)

HRAs are established on behalf of an individual to help pay for qualifying health

care expenses such as doctor’s visits, lab tests, diagnostic tests, prescription drugs,

coinsurance, dental procedures, vision exams, etc. Can not be used to pay

premiums (exception for HRA for Medicare retirees).

• Regulated by IRS

• PEPB-owned and funded

• Participant contributions are not allowed

• Not portable – If participants leave, balance returned to PEBP

• Funds may be used for spouse’s and/or children’s qualifying health care

expenses (even if not covered under PEBP)

• Maximum carryover limit-- set in future plan years by the PEBP Board

• Tax-exempt

C -

March 18, 2011 20


Other ChangesLab Testing – PPO Plan Eliminate lab testing performed at hospitals, except for pre-

admission, urgent care, emergency room care and in-patient

admissions

TMJ Coverage – PPO Plan Reduce from 80% to 50%

Retail pharmacy – PPO

Plan

90-day supply of certain maintenance drugs

Vision Coverage – PPO

Plan

Annual vision exams (subject to deductible); eliminate vision

hardware, e.g., glasses, contacts.

Preventive Wellness Benefit

– PPO Plan

Remove “or as needed” from the preventive/wellness

guidelines to limit wellness benefits to those approved by the

Centers for Disease Control

Spouse / Domestic Partner

Coverage

Eliminate any coverage for spouse/domestic partner with

other employer based coverage

C -

March 18, 2011 21


Dental Plan Changes

• Increase dental deductible:

– from $50 to $100 for Individual

– From $150 to $300 for Family

• Decrease maximum benefit from $1,500 to $1,000

per person

• Maintain 4 routine cleanings per year

• Maintain existing network and discounts

C -

March 18, 2011 22


Life Insurance Plan Changes

• Reduce Basic Life Insurance payouts by 50%

– Actives from $20,000 to $10,000

– Retirees from $10,000 to $5,000

– Policy amounts for voluntary life will not be reduced

• Eliminate Dependent Life Insurance

• Eliminate Accidental Death & Dismemberment

C -

March 18, 2011 23


Medicare Retiree Plan Changes

• Move retirees eligible for Medicare Part A to an

Individual Market Medicare Exchange

• Eliminate premium subsidy and Fund an HRA for

retirees in the Medicare Exchange

– $10 per month per Year of Service (YOS)

• minimum 5 YOS ($50/month; $600/year)

• maximum 20 YOS ($200/month; $2,400/year)

• $150/month for pre-94 retirees, regardless of YOS

– Can be used for premiums or other out of pocket cost

for both the primary retiree and the spouse

C -

March 18, 2011 24


Medicare Exchange

• Offers Medicare Advantage and Medigap plans provided

by recognizable insurance companies (e.g., Anthem, Cigna,

Aetna, Humana, United Healthcare, etc.)

– Guaranteed issue and pricing regardless of health status

– Multiple plans available in every zip code in which PEBP Medicare

retirees reside

• Larger risk pool (40+ million) over which to spread risk

– Provides for more competitive rates due to the size of the risk pool

and the competition in each geographic location

• Allows for similar benefits at lower cost for PEBP and

retiree

C -

March 18, 2011 25


Medicare Exchange

• Allows for participant and spouse to enroll in different

plans depending on their individual circumstances

– Healthy individual may select a low premium plan

– Member with medical conditions can select a plan covering more

out-of-pocket costs

– Spouse may select different plan from retiree

– Based on RX usage, geographic location, provider preferences

• Provides licensed benefit advisors to guide retirees through

the plan evaluation and selection process

• Provides advocacy to retirees in dealing with insurers

• Can add prescription drug, dental and vision coverage

C -

March 18, 2011 26


Medicare Retiree Plan Changes

• Retirees not eligible for Medicare Part A or those with non-

Medicare eligible Dependents

– Option to remain on non-Medicare HDHP or HMO Plan

– Pay non-Medicare retiree rates and receive premium subsidy and

HRA contributions as a non-Medicare retiree

– Receive a credit for primary insured Medicare Part B premium

– Option for retiree to go on Exchange and pay full premiums for

dependents remaining on the HDHP or HMO

• Eligible to participate in Dental (voluntary)

• Eligible for Basic Life (except reinstated retirees)

C -

March 18, 2011 27


Subsidization Changes

• Board Recommendations

– Establish a standardized differential for dependents

and plans

– Create a single blended “statewide” HMO rate

– Participants have the choice between paying lower

premiums with higher out of pocket costs (PPO Plan) or

higher premiums with lower out of pocket costs (HMO)

C -

March 18, 2011 28


E661 – Subsidization ChangesCurrent New

Active PrimaryBase Plan 93% 92.8%All Other Plans 85% 77.8%

Active DependentBase Plan 73% 72.8%All Other Plans 67% 57.8%

Retiree PrimaryBase Plan 64% 63.8%All Other Plans 61% 48.8%

Retiree DependentBase Plan 43% 43.8%All Other Plans 41% 28.8%

C -

March 18, 2011 29


State Active

EmployeesPY 2011 Partic

Prem

PY 2012 Partic

Prem$ Difference % Difference

Statewide PPO

Employee Only 43.73 43.90 0.17 0.4%

Employee + Spouse 278.84 198.40 (80.44) -28.8%

Employee + Child(ren) 81.53 91.71 10.18 12.5%

Employee + Family 195.14 246.23 51.09 26.2%

Northern HMO

Employee Only 64.69 116.57 51.88 80.2%

Employee + Spouse 393.57 338.16 (55.41) -14.1%


Employee + Family 301.93 446.84 144.91 48.0%

Southern HMO

Employee Only 54.81 116.57 61.76 112.7%

Employee + Spouse 172.52 338.16 165.64 96.0%


Employee + Family 255.07 446.84 191.77 75.2%

EXAMPLES ONLY – REQUIRES BOARD APPROVAL


C -

March 18, 2011 30


State Retirees

Non-MedicarePY 2011 Partic

Prem

PY 2012 Partic

Prem$ Difference % Difference

Based on 15 YOS Statewide PPO

Retiree only 217.71 220.70 2.99 1.4%

Retiree + Spouse 722.01 539.93 (182.08) -25.2%

Retiree + Child(ren) 298.79 319.49 20.70 6.9%

Retiree + Family 542.49 638.76 96.27 17.7%

Northern HMO

Retiree only 274.62 268.85 (5.77) -2.1%

Retiree + Spouse 756.29 642.72 (113.57) -15.0%


Retiree + Family 621.65 826.08 204.43 32.9%

Southern HMO

Retiree only 136.78 268.85 132.07 96.6%

Retiree + Spouse 347.23 642.72 295.49 85.1%


Retiree + Family 494.82 826.08 331.26 66.9%



C -

March 18, 2011 31


Performance Indicators

FY 2010

Budget

FY 2010

(actual)

FY 2011

Budget

FY 2012

Gov Rec

FY 2013

Gov Rec

Expense Ratio 4.6% 4.7% 5.0% 4.2% 3.9%

Claims Loss Ratio 100.6% 99.7% 93.3% 106.7% 105.3%

Generic Drug Utilization 65.0% 71.6% 65.0% 71.6% 71.6%

Medical Network Use 93.0% 94.5% 93.0% 94.5% 94.5%

Dental Network Use 85.0% 93.2% 85.0% 93.2% 93.2%

Appeals Ratio .15/1000 .73/1000 .15/1000 .15/1000 .15/1000

C -

March 18, 2011 32


Other Post-Employment Benefits (OPEB)

• Liability to the State of the cost to provide

subsidized health insurance to retirees

– Comprised of cash subsidy and benefit of commingling

experience with less expensive active employees

(“implicit” subsidy)

– Earned during working career and considered

“deferred compensation” since it is provided after

retirement

– Governmental Accounting Standards Board (GASB)

requires recognition of cost when incurred not paid

– Record liability in financial statements or footnotes

C -

March 18, 2011 33


GASB OPEB Valuation – July 1, 2009

• Present Value of Benefits $3.3 Billion

– Total amount of the expected benefits to be paid in the

future including amounts earned by existing employees

throughout the remainder of their working career

• Actuarial Accrued Liability $1.9 Billion

– Snapshot of the liability for benefits earned as of 7/1/09

• Annual Required Contribution $222 Million

– Cost of benefits earned during FY 10 plus 30 year

amortization payment on previous unfunded liabilities

– “Pay-as-you-go” subsidy payments about $46 million

C -

March 18, 2011 34


Assembly Bill 76

• Replace biennial late enrollment with one-time

late enrollment during annual open enrollment

• Allow closed meeting to appoint and review

performance of Executive Officer

C -

March 18, 2011 35


Assembly Bill 80

• Eliminate pre-existing condition exclusions

(required by Federal Health Care Reform)

• Simplify and improve annual reporting

requirements to the Legislative Commission

• Clarify subsidization of local government retirees,

state employees and state retirees

• Clarify subrogation rights

• Provides domestic partners survivor health

benefits similar to a spouse, except unsubsidized

C -

March 18, 2011 36


Questions?

C - 36

public employees' benefits program (pebp)

Documents