Guinn to offer plan for state workers’ insurance

Wednesday, July 31, 2002 | 11:04 a.m.

CARSON CITY -- Gov. Kenny Guinn says he's going to have to cut $7 million to $8 million more from the already lean budgets of state agencies in order to prop up the ailing state employees health insurance program.

The insurance system, which covers 55,000 state workers, dependents and retirees, is running out of money and is considering raising premiums or reducing benefits in January.

Guinn is preparing a plan to present to the special session of the Legislature that would eliminate the impending crisis. But he concedes this is only a short-term fix to get the system through June 30 of next year.

And his solution means that agencies, already strapped for cash, will have to tighten their belts another notch.

The governor said the Legislative Interim Finance Committee is barred from appropriating any money from its emergency fund to help the system. And he said he can't tap the $130 million "rainy day" fund to rescue the system.

The 2001 Legislature allocated each agency $384 a month this year for each employee to pay their full premiums. Employees pay for their dependents.

Under the Guinn plan, the special session of the Legislature would raise the $384 figures to an amount to carry the system until next July. The agencies would have to contribute the higher amount to the insurance system but they would not receive any extra money. It's sort of an unfunded mandate for agencies.

Guinn figures the state will be $165 million to $175 million in the red this fiscal year because of a downturn in expected tax revenue. And the $7 million to $8 million would add to that deficit. Forrest Thorne, executive director of the Public Employees Benefit Plan, estimated the system needs $15 million to carry it through without making massive cuts in benefits or requiring state employees to pay higher premiums for their dependents.

But the $15 million includes agencies that don't receive money from the general treasury. For instance, the state Transportation Department is financed by user fees and the federal government. The department would pay the higher premiums but it would not come out of the general state treasury.

So Guinn estimates he will need only $7 million to $8 million from the general fund.

Three years ago, the state had to appropriate an additional $26 million to keep the system from becoming insolvent. Executives from the system recommended to Guinn in 2001 that premiums paid by the state be increased in both years of the biennium to keep pace with the medical inflation rate. But Guinn chose to decrease the premium for fiscal year 2002 by 3.1 percent, instead of the amount recommended.

After the Legislature acted, Thorne took over the job last summer and has been trying to keep the system afloat.

That shortfall in premium payments plus the higher than expected number of medical claims has thrown the system into its present financial status.