Lawmakers told state health insurance fund will have to borrow

Thursday, Sept. 24, 1998 | 10:52 a.m.

Legislators serving on the Interim Finance Committee heard a report Wednesday on the self-funded health plan and on actions taken by the Committee on Benefits to stem the red ink.

The benefits panel earlier this month voted to cut benefits and raise by more than 23 percent the premiums state employees have to pay to insure family members. The increase goes into effect Jan. 1.

Even so, lawmakers were told that the fund will have to borrow almost $13 million to solve cash flow problems this fiscal year. The money would be repaid over four years through higher premiums.

The news of the crisis in the health plan, which went from a $26 million surplus on July 1, 1997, to a $1 million deficit on July 1 of this year, has outraged state employees.

Several employee groups, including the Nevada Highway Patrol Association, have formed the State Worker Coalition to Fix the State Health Plan to find ways to repair the damage and ensure it will not happen again.

"Nevada's state employees have been acute victims of poor funding management dating back to 1992," said Gary Wolff, coalition spokesman and business representative for the Nevada Highway Patrol Association.

The coalition is circulating petitions statewide to request the Legislature's intervention to protect the health plan.

"Sadly, those who have paid the price for this poor management are state employees and their families who continue to suffer from increased premiums and reductions in benefits," Wolff said. "This simply must not be allowed to continue."

Wolff said the coalition may ask for federal review of the fund expenses if satisfactory answers aren't forthcoming.

Gov. Bob Miller and the State of Nevada Employees Association have recommended legislative changes to fix the problems.

Senate Majority Leader Bill Raggio, R-Reno, asked for an explanation of how the fund, which spends in excess of $90 million a year on health care costs for 24,000 state employees and retirees, could suffer such financial damage in such a short period of time.

Mike Gray, a consultant to the state plan from the firm of William M. Mercer of Seattle, said he could account for $24.4 million of the reduction, $6 million of which was budgeted to be spent because the reserves were thought to be higher than necessary.

Another $8.9 million was lost because of the failure of the former claims administrator to pay the health plan medical bills on time.

Former claims administrator Jane Treher, also known as Mary Ferris, was sentenced in August on charges related to the embezzlement of about $617,000 from the now defunct L&H Administrators. It had a contract through May 1997 to manage insurance claims for the state and Clark County self-funded health plans. A new administrator took over last year.

The Committee on Benefits also voted to increase the life insurance benefit to state employees, which cost $2.6 million.

The fund also had to pay out $1.4 million in claims incurred in the prior year but not reported until fiscal year 1997-98, which ended June 30.

Additional administrative costs to run the plan cost another $2.5 million, including costs paid to the current administrator to pay old medical claims.

About $600,000 in expected revenue also didn't materialize, and the plan had $2.4 million in claims that were higher than expected.