AN EDUCATION: PEBP PAST AND PRESENT
Over the past year and a half, health benefits for state employees has been a topic of much debate. The arguments and issues are extremely complex and rather daunting to try to understand.
We have been following the issue since last spring and, through this series, will help the campus community understand the ins and outs of health benefits for Nevada state employees.
[flickr id="8229587416" thumbnail="small_320" overlay="true" size="large" group="" align="center"]
HEALTH BENEFITS 101
This issue matters on a college campus because it affects all Nevada System of Higher Education employees — that is, everyone who works at Nevada’s community colleges and research universities, including professors. Also, it affects you, students, but we’ll get into that later.
The story starts when “The Great Recession,” as some call it, began about four years ago. Nevada was one of the hardest hit states with an unemployment rate soaring rapidly above the national average and a housing bubble that did not seem to just burst, but explode.
With this came the need for the state of Nevada to undergo tremendous cutbacks.
Last year, Gov. Brian Sandoval asked Nevada’s health benefits program, Public Employees’ Benefits Program (PEBP), to create a budget reflecting an approximate $111-million-cut.
That’s a hefty decrease for a program that provides people with health benefits — everything from prescription drug coverage to doctor visits. Naturally, this had a lot of state employees worried.
In order to meet this budget request, PEBP had to change the health plans it provides to state employees: Health Management Organization and PPO Consumer Driven Health Plan (CDHP), now known as “the high deductible plan.” For our purposes, we’ll keep calling it CDHP.
The changes to HMO and CDHP were executed on July 1, 2011.
HMO Individual participants — state employees who are not covering anyone in their health plan — were subjected to a 112 percent increase in monthly premiums. Participants who have children in their HMO plan saw their monthly premiums rise 63 percent.
What is a premium? It is a monthly fee people must pay to have health coverage. So that fee increased by 112 percent and 63 percent for those HMO individuals I just mentioned.
Those under CDHP also saw changes in their health plans.
CDHP individual participants saw their annual deductible rise from $800 to $1900, while CDHP participants who have their family on their plan saw their annual deductible rise from $1600 to $3800.
A deductible is the amount of money you must pay out of your own pocket for your health needs until your health insurance starts shouldering your medical costs.
In other words, an individual participant would have to pay the first $800 in health costs — be it ten doctor visits that cost a total of $800 or 25 ER visits that amount to $800, etc. — before CDHP starts paying the medical bills as well.
But as of last July, these CDHP participants would have to pay either $1900 or $3800 — more than double of what they used to pay — out of their own pocket before the plan starts helping pay for the health costs they incur.
CDHP also removed its co-pay for prescription drug costs, and transferred these costs into the new deductible numbers.
Simply put, before CDHP removed this co-pay, a state employee in this plan could pay, let’s say $20, for a drug that actually cost $300 without the co-pay. Now that the co-pay was removed, however, these participants had to pay the full amount for their prescription drugs — the $300 instead of just $20 — until they reach their deductibles.
Suddenly, the cost of drugs skyrocketed, and became unaffordable for many state employees.
SALT TO THE WOUND
Budget cuts at Nevada’s colleges and universities added a heavier burden to its employees.
Last year, UNLV faculty and staff took an approximate 5 percent pay cut.
In addition, state employees’ cost-of-living allowance, which is an allowance these individuals receive to compensate for higher costs of living, was suspended because of budget cuts.
Furthermore, state employees’ merit pay — a salary increase that employees can request if they feel their work and service justify it — was put on hold also because of the budget cuts. Step increases, the equivalent of merit pay for classified staff or those in non-teaching positions such as maintenance workers, were ceased until further notice as well.
These various salary cuts made it even more difficult for faculty and staff all across Nevada to cope with the drastic health benefits cuts.
Earlier this year, it was discovered that PEBP had a $43 million excess reserve in June 2011 before all the changes to HMO and CDHP were put into effect. This had many NSHE employees asking why all these drastic changes were necessary if PEBP had this excess supply of money.
How did PEBP get this money?
PEBP had an actuarial consultant company, an advisor called AON Hewitt, that predicted that claims would rise by 9 percent after July 1, 2011.
Claims is the part of the health costs a health insurance company has to pay. So when you go to the doctor or the emergency room, for example, that health care provider would bill your health insurance and say it has to pay a certain amount for your visit.
Because AON Hewitt predicted claims would go up, PEBP raised its premium rates in order to be able to pay for these claims. But instead of increasing by 9 percent, claims only increased by 1 percent, which resulted in the $43 million reserve.
But isn’t $43 million enough to offset such a drastic change in the HMO and CDHP plans? Not quite, according to PEBP.
AON Hewitt told PEBP that the premiums participants had paid to the program in the year leading up to July 2011 would not be enough to cover the cost of benefits PEBP was currently offering at the time.
Simply put, if PEBP did not change the health plans, it would not be able to afford the costs of benefits it would be offering to its participants in the coming year. The HMO and CDHP plans had to undergo some kind of structural change so that participants would continue to receive health benefits.
This did not sit well with a lot of state employees, many of whom could no longer afford their prescription drugs or declined health coverage from PEBP. However, those who have dropped out of HMO or CDHP will have to rejoin either one health plan or the other as of 2014 under the individual mandate in the Affordable Care Act.
In the next issue of The Rebel Yell, I will delve into the solutions Nevada’s higher education system is trying to pursue to put an end to the health benefits woes. I will also explain why all of this matters and how it affects you — and, yes, that includes you as well, students.
An Education: PEBP Past and Present is a two-part series that seeks to clarify the Public Employees Benefits Program within the state of Nevada.
Contact Julie Ann Formoso at [email protected]