March 2005

To: All UCCSN Employees

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

The PEBP Board set rates and made plan changes at yesterday’s meeting for plan year 2006, which runs from July 1, 2005 through June 30, 2006. The details will be in the next PEBP newsletter and in the open enrollment packets, but I wanted to give you a heads up and some background.

General Financial Condition of the Plan

The PEBP plan is in excellent financial condition and is situated to remain so into the future. Changes made in Plan Year (PY) 2003, along with a significant reduction in large claims over the past two years have enabled PEBP to build up critical contingency reserves over and above actuarial recommendations. These reserves will enable us to smooth out unusual claims activity that inevitably occur without needing to radically change contributions or benefits every year to balance the budget. These reserves mean that we are able to restore and enhance some benefits for PY2006, which I’ll detail below.

Legislative Budget Matters

The PEBP budget for the biennium was prepared by the PEBP staff, approved by the PEBP Board and then sent to the Governor’s office. The Governor’s office then combines that request, with any revisions, with all other agencies’ budget requests to form his total budget package that is presented to the legislature for approval. In this process during the last month, our budget request was changed so that the State’s contribution level is will actually go down by 13.8% in PY2006, and rise by 4% in PY2007. This action, if passed by the legislature, reduces the plan’s reserves to the actuarially recommended levels, but leaves no money to help offset the increased premiums of some retirees, which is what some on the board wanted to explore. The board passed a unanimous motion to encourage the legislature and the executive branch NOT to reduce the State’s contribution level. However, that is all we can do.

Plan Enhancements

There are a number of revisions and excellent benefit enhancements to the self funded plan that make it a much better plan than it has been for several years. Below is a list of plan changes and plan enhancements, effective July 1, 2005:

Changes:

– Maintain the $500 PPO deductible plan, but eliminate the $1,000 and $2,500 PPO deductible plans, which were not being selected by participants

– Add a $2,000 PPO deductible comprehensive major medical plan (80/20) with true single and family deductibles (the new Base Plan)

– For the $500 PPO plan only, recognize chiropractic care as specialty visit and set copay at $30/visit specialist level

– In establishing the new rates for both the $500 PPO plan and the new $2,000 major medical plan, combined (commingled) plan experience for the actives, early retirees and age 65+ (Medicare) retirees (required by NRS 287.0434(3)(b)).

This commingling requirement has been addressed in stages as follows:

• Last year the experience for actives and early retirees were commingled. Retirees over age 65 were handled separately.

• This year the experience for actives, early retirees and retirees over age 65 were commingled.

• From an equity standpoint, this meant we had to include the Medicare Part B premium as a covered benefit under the plan.

• Otherwise age 65+ retirees would have paid the same as actives and early retirees for their plan benefits in addition to paying for their Medicare Part B premium.

• Full commingling results in relatively lower rates for actives and early retirees, and relatively higher rates for Medicare retirees.

Enhancements (Includes the restoration of some benefits previously eliminated):

– Lower deductible (50% reduction with completion of online health assessment form)

– Increase in dental maximum to $2,000 (with completion of online health assessment form)

– Enhance Rx benefits by including the tobacco cessation prescriptions

– Enhance vision benefit by including a lens/frame allowance of $125 every 2 years and an exam allowance equal to 80% of usual and customary fees

– Enhance dental benefit by including 4 cleanings per year

– Eliminate the pre-certification requirement for MRI, CT/MRA/PET scans

– Increase the wellness benefit maximum from $600 to $2,500

– Expand the wellness benefit to cover such things as:

• All recommended health screenings and immunizations

• Additional tobacco use cessation and weight control programs

• Stress management

– Include Medicare Part B premium as a covered expense not subject to the deductible and paid at 80%

– Coordination of Benefits will change from integration of benefits to maintenance of benefits

Online Health Assessment

The Health Assessment program will be a voluntary program, designed to help educate participants about the state of their own health. The information gathered WILL NOT, in any way, affect the level of your benefits. The information will be used for educational purposes only. Data will be used to target informational mailings on ways to help you stop smoking, lose weight, or better manage chronic illnesses such as diabetes. By just completing the online questionnaire, you will lower your deductible by half, and increase your dental annual maximum benefit to $2,000.

*Deductibles are reduced by 50% and dental maximum increased to $2,000 if participant and covered spouse complete the online Health Assessment

**Dental maximum increased to $2,000 if participant and covered spouse complete the online Health Assessment

Retiree Plan Changes

Because all participants’ experience becomes fully commingled in PY2006, significant changes had to be made in some retirees’ plan. All retirees were collapsed into one group, which simplifies the rate structure and provides for more uniform and equitable rates across the board. Depending on years of service, there are some categories of coverage that will experience large increases. It is important to remember, however, that the board made a one-time reduction in contributions to smooth out rates in PY2005 that is not possible this year.

The campus benefits offices and the PEBP staff will be conducting seminars on these changes for retirees and those close to retirement in the coming weeks. I encourage you to attend one of these sessions, as this is a complex issue and individual circumstances may differ from the examples in tables below.

The following tables assume a retiree with 15 years of service credit (the average YOSC of the state’s retirees is 16). Those with 20 YOSC will have a greater state subsidy and correspondingly lower contribution.

*Deductibles are reduced by 50% and dental maximum increased to $2,000 if participant and covered spouse complete the online Health Assessment

**Dental maximum increased to $2,000 if participant and covered spouse complete the online Health Assessment

The spreadsheet on this page,retiree_cost_analysis.html, is a cost analysis of the changes for Medicare retirees, and is based on PY2004 numbers, because of the one time reduction in contributions in PY2005. And again, the commingling of experience that causes much of the change in rates was required by NRS 287.0434(3)(b).

While some employees and retirees will experience increases in contribution levels, I think it’s important to note that medical costs are rising nationally about 13%. Our claims experience the past 18 months has been favorable, however, and the predictive modeling methodology used by our actuaries predicts much more normal trends than the plan has experienced in the past. PEBP staff and the board believe that the plan is on sound financial footing, and the changes we have made to the base structure of the plan will keep it that way moving forward.