February 24, 2003

To: UCCSN Employees

From: Jacque Ewing-Taylor, PEBP Board Member, UNR Faculty

Nobody wants us. We’re too old, too sickly and too big a risk for insurance. At least that’s the message I heard when no acceptable proposals were submitted in response to a request for proposals (RFP) for a state wide HMO, a Medicare Supplement plan or a fully insured PPO. The Public Employees’ Benefits Program (PEBP) put out RFPs last fall for these and other products and services and the review process has been ongoing since early December. At the January board meeting, PEBP staff recommended that the RFPs for a state wide HMO and for the Medicare Supplement plan be withdrawn due to this negative response. This is the second RFP this year for a state wide HMO that had to be withdrawn due to a lack of response. At the February board meeting the top three vendors from the PPO RFP will make presentations but none of them submitted a proposal for an insured product, only a self-insured product, which is what we have currently.*

What does this mean for you? This means that you will have fewer choices in health care than we had hoped, that employees in Northern Nevada will continue to have no HMO option, that rural employees will continue without an HMO and with very limited PPO options, and that many retirees will have to look elsewhere for a Medicare Supplement plan. This does not mean we will stop trying to find an HMO for Northern Nevada, nor does it mean we will stop pursuing fully insured options to the self-funded plans. But finding good deals in health care is extremely difficult. PEBP staff and the program’s consultants are trying to determine how to better structure an RFP to elicit a more positive response from insurance companies, while maintaining the levels of service and benefits we all want.

We cannot, however, deny the numbers that paint the picture of our insured population. The latest data from the Segal Company, consultants to the program, show that 54% of the claims costs are incurred by 2% of us. If you look at the chart labeled “Who Uses the Plan” you will see that female primaries and male spouses have the highest total dollars in claim costs and that female primaries have the most claims. But you will also see that male spouses have the highest cost per claim of any group. If you then look at the chart labeled “Age of Participants” you can see that our insured population falls into the range in which the most expensive health care issues arise. Direct claims paid represent 90% of the total costs of the self-funded plan, whereas the industry standard is 86-87%. Insurance companies have told PEBP staff and some board members, off the record, that given our demographics they cannot propose an insured plan that would be palatable to the employees and that would allow the company a profit. We will continue to look for ways to attract companies willing to bid on an HMO, a fully insured PPO, and a Medicare Supplement plan for our State’s employees.

The positive news from the January board meeting is that Davis Vision was selected to provide vision care to PEBP self-funded participants, replacing Outlook Vision in July 2003. Outlook, Davis and Anthem were the three finalists in the RFP review process for the vision plan, and each made a presentation to the board and answered board members’ questions about the proposals. State Purchasing is negotiating the final contract and you will see the Davis Vision option during open enrollment this Spring.

The February board meeting was held February 5 and 6 at the DRI campus in Reno, but the results were not available at press time. The main agenda items were the presentations by the three finalists from the PPO RFP and the three finalists from the long-term disability RFP. The board made its selection and Purchasing is negotiating the final contracts. You will see these changes in your open enrollment packet this spring.

PEBP staff and consultants are in the process of preparing a series of plan change scenarios for the board to examine at its March board meeting, set for March 5 and 6. You will be able to listen to these meetings on the Internet at http://www.pebp.state.nv.us/Agendas.htm#listen . The board will make rate decisions at these meetings based on the information presented for the plan year July 1, 2003 through June 30, 2004. Options being explored include cost-cutting measures as well as rate increases, and some of these are dependent on the PEBP budget request presented to the State Legislature and discussed in a related article in the most recent edition of The Alliance.

These are national trends. The State of Nevada is not alone in this health care cost crisis. If you look at the chart labeled “National Survey: Participants’ Share of Plan Costs” you will see that participants around the country are being asked to pay an increasingly larger share of the costs of their health care plan.

Our health care plan remains in a precarious financial situation. But everyone involved, PEBP staff and board, Governor Guinn’s office, and our State Legislature, are working hard to ensure the plan returns to sound financial footing.

*In a fully insured plan the insurance company assumes the risk, controls plan design and builds a profit into its rate structure. In a self-funded plan like ours, the employer assumes the risk and controls plan design, but is not profit driven.