MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session March 24, 1995 The Committee on Government Affairs was called to order at 8:00 a.m., on Friday, March 24, 1995, Chairman Lambert presiding in Room 330 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Douglas A. Bache, Chairman Mrs. Joan A. Lambert, Chairman Mrs. Deanna Braunlin, Vice Chairman Mr. P.M. Roy Neighbors, Vice Chairman Mr. Max Bennett Mrs. Marcia de Braga Mr. Pete Ernaut Mrs. Vivian L. Freeman Mr. William Z. (Bill) Harrington Ms. Saundra (Sandi) Krenzer Mr. Dennis Nolan Mrs. Gene Wines Segerblom Mrs. Patricia A. Tripple Mr. Wendell P. Williams COMMITTEE MEMBERS ABSENT: None GUEST LEGISLATORS PRESENT: Assemblyman Joe Dini Jr. STAFF MEMBERS PRESENT: Denice Miller, Research Analyst OTHERS PRESENT: Wanda Biggs; RPEN, Bob Gagnier; SNEA; Al Edmundson; RPEN,Minard Maus; RPEN, Tom Grady; NLC, Frank C. Page; RPEN, George Pyne; PERS, Debbie Cahill; NSEA, Dan Crosby; RPEN, George Yoes; SEIU, Audrey Brooks; RPEN. Chairman Lambert called meeting to order. ASSEMBLY BILL NO.309 - Revises provision governing requirements for early retirement of police officers. (BDR 23-799) Chairman Lambert notified the committee members the sponsor of the bill had asked that it be withdrawn. Chairman Lambert said they would now discuss A.B. 328. ASSEMBLY BILL NO. 328- Provides annual period of open enrollment during which certain retired public employees may join state's program of group insurance. (BDR 23-494) Chairman Lambert recognized Speaker Dini. Joe Dini, Assembly District 38, spoke on A.B. 328 stating it would create annual open season for retired public employees to enter the state group insurance program. He said many of these people have no chance to continue health care coverage with their employer's plan at the time they retire. He said in 1993 the legislature passed S.B. 278 giving retirees a one time three month window to enter the group insurance program of the state. He said more than five hundred did so. He said as would be the case under the provisions of A.B. 328 being considered, those retirees were required to pay their own premium and were pooled separately from other retirees. He said this program seems to have worked well from last session's bill. He said he would encourage the committee the passage of this bill. He stated that a great deal of people have problems getting health insurance and this would give them another opportunity. He said we should take care of all retirees if possible. Chairman Lambert recognized Mrs. Krenzer. Mrs. Krenzer stated she needed to disclose that she works for Sierra Health Services, and she will abstain from voting. Chairman Lambert recognized Marty Bibb, Executive Director of the Retired Public Employees of Nevada. He said health care is a major concern in this country. He said in the private sector it remains a major concern. The cost and availability of health care insurance is a number one priority of small businesses in the nation. He said it is a particularly concerning area for retirees and senior citizens. He said last session, without one "no" vote, the legislature enacted a measure, S.B.278 which allowed retired public employees into the group insurance program on a one time basis. This was possible only if they paid their own way and were placed in their own insurance pool. He said many of the people had no opportunity to continue health care insurance with their former employers at the time of retirement. RPEN believes this was a step in the right direction and in three short months, five hundred and thirty nine people signed on to that group insurance option. He said they believe many more will elect that opportunity if given a chance to enroll in the group insurance program. He said this is one small area that can be addressed in terms of the legislature and continuation of the progress made last session is essential. (EXHIBIT D). Chairman Lambert recognized Mick Maus, retired teacher and school administrator. He said his career began in 1946 and he retired in 1976. He said during the time he was employed he had the opportunity to have insurance with his employer. He said upon retirement, there were no options so he had to insure himself. He said he was one of the five hundred thirty nine who took advantage of the group insurance, for which they pay their own way and own premiums. He said he would encourage the committee to approve A.B. 328 so that other retired employees could have the same opportunity. (Exhibit E). Chairman Lambert recognized Mr. Bache. Mr. Bache asked if the experience rating was still being maintained by separating state employees as opposed to the retired employees. Mick Maus said he understood it was still being ascertained. They have not had enough time to establish an experience rating to set a separate rate. Marty Bibb said, "yes" it is a separate pool comprised of the people who are allowed into the program under last session's bill. He said they are pooled and rated separately from the other group of retirees covered in the group insurance program. He said Mr. Maus was eluding to the first years' numbers as to what the precise actuarial date was on that group. It is still being compiled because the policy year ended in December of 1994 and it takes a few months for those claims to come in. He said when it is adjusted again it will affect only those people in that pool. Mr. Bennett said he understood the experience rating is being compiled, what he wanted to know was if there was any feed back on a rate adjustment for the future. Marty Bibb stated he was sure the rate would be adjusted. He said the present rate was set for the other group of retirees, that was the only mark they had to work with. He said the numbers are still not available, it will take several months for claims still coming in. He said as soon as all that data is available they will have a review of it, and they will adjust that rate accordingly. Chairman Lambert recognized Mrs. Segerblom. Mrs. Segerblom asked if there was a limit on how long someone is retired. Mr. Bibb said there was not. It simply allows people into the program if they met the retired test from public employment. He said there was not a particular limit on the length of time under that bill because it was a "one time" option. He said it was only between October and December of 1993 that anyone could have entered. Under this bill it would allow someone, regardless of the date of retirement, to avail him/herself with that opportunity to join the group insurance program. Chairman Lambert recognized George Pyne, Executive Officer of the Retirement System. He said the retirement board has studied the provisions of A.B. 328 and taken the position in support of this measure. He said over the past years, the board has recognized the dilemma that retirees face in terms of sky rocketing health care costs and limited health care options. He said it is the board's position that A.B. 328 provides a reasonable health care alternative for certain retirees who might otherwise find themselves without any insurance coverage. He said therefor, the board is supporting this measure. Chairman Lambert asked about the fiscal note on the bill. Mr. Pyne responded the estimated annual cost for the retirement system to administer the notice process for the open enrollment period would be about fourteen thousand dollars per year. He said that would not be a significant impact on the operating affairs of the retirement system. He said it generally covers the cost for postage, mailing and staff time. Chairman Lambert asked what if the bill were amended to include that the notice might be included in the PERS newsletter. She asked if that would affect the cost or the ability to give proper notice. Mr. Pyne stated it would reduce the cost to some extent in terms of the postage. (Exhibit F). Chairman Lambert recognized Tom Grady, Executive Director of Nevada League of Cities. He introduced Nancy Howard who is the administrative assistant for the Nevada League of Cities and who handles their insurance program. He said the NLC has sponsored benefit plans for local governments, including some cities, counties, school districts, and irrigation districts since 1963. He said they average about one thousand employees including retirees. He said when they started their insurance program they would encourage their retired employees to stay with their group. He said contrary to some of the information which the press has released, they have about 100 retirees that are on their plan now. He said last session when the window of opportunity was given to the retirees to switch from a plan or go into the state plan, they lost a total of six people out of the original one hundred. He said they do support the efforts of A.B. 328 and encourage adoption. Chairman Lambert recognized Debbie Cahill. Debbie Cahill of the Nevada State Education Association went on record in support of A.B. 328. Chairman Lambert recognized Gary Yoes. Gary Yoes of SEIU Local 1864, represents the blue ribbon workers. He said they are supporting A.B. 328. He said there would be no negative effect on the system by including them. He said Nevada currently has the highest percentage of uninsured folks in the nation. He said we should be doing everything possible to change this statistic (Exhibit G). Chairman Lambert recognized Bob Gagnier. Bob Gagnier, of the State of Nevada Employees Association pointed out some issues concerning the bill that have not yet been addressed. He said on page one, section one, line 7, the provision would allow retirees to come in and out of the plan. He said he thought the two provisions in subsection one of one, no insurance company in the world would agree to. He said you are asking the State Employee's Health Insurance Plan to provide this. He said this gives local government retirees a benefit in the health insurance plan that not even the employees have. He said if a state employee is covered by the plan, chooses not to cover his dependents and then later wants to cover the dependent, they must provide evidence of insurability to cover that dependent. He said no evidence of insurability is being required here for people who have never been in the plan. If an employee worked for Clark County, they had the option of staying in the Clark County plan, and if upon retirement chose not to, and later on did choose to, you would not have to meet any health eligibility requirement you come into the plan and hit it for a substantial sum of money. He said you are allowed to get out and come back in at another time. He said the potential of having people come in and out of the plan and impacting this is great. He said the people who are going to take advantage of this are the people who are going to use it. He said the proponents point to the provision on page three, line twenty seven through line thirty six. He said this is the provision that separately rates this group. He said these are local government employees who are not part of the plan and then come in at a later time. He said as long as the wording stays that way, this group will not impact our state retirees. He said they were basically talking about local government retirees. He said two years ago the proponents of the bill did not want to do this. He said there needs to be assurance that the section will remain intact. He said there have been efforts to take it out so that our state retirees will have to subsidize local government retirees. He said it needs to be retained because of the opportunities that other state employees do not have. Chairman Lambert recognized Mrs. de Braga. Mrs. de Braga said these two groups would be in separate pools with one having acquirement of group insurability. She asked if the problem would be solved if they were lumped together and wouldn't they have a better rate. Mr. Gagnier stated you would have a better rate for the people who come in at some later date. They would be subsidized by the state employees who are covered under plan, and retire under the plan. He said they would end up subsidizing local government employees. He said they are talking about people who had the opportunity to continue in their local government plan, but for whatever reason chose not to. He said each local government should accept responsibility for their retirees. Mrs. de Braga stated she did not understand why a large number of people in a plan doesn't mean a lower rate for everybody. She asked why isn't that the case if they are all in the same pool here. Mr. Gagnier replied it was because of adverse selection. He said the people that are going to participate in this, are people who are going to have medical bills. He said that is why an insurance company would not allow this. He said if it is optional at any time, the only people who will participate are the people who are going to use the insurance. Chairman Lambert recognized Mr. Bache. Mr. Bache stated that his wife is an administrative assistant for the Clark County Public Employee Association, SEIU 1107. Chairman Lambert recognized Mr. Neighbors. Mr. Neighbors asked for clarification on the particular group of retirees that were being discussed. He asked if their primary insurance would be Medicare, and after Medicare stepped in then it would be a secondary insurance. He said it is not like someone retiring who does not qualify for Medicare initially along the line. He asked Mr. Gagnier to respond to that. Mr. Gagnier said "yes" there are a number of people who retire before age 65 and they are not eligible for Medicare, because the state's plan would be primary. He said his recollection a few years ago there was an interim study of health insurance for retirees. He said a plan was set up for all retirees, managed by PERS. He said they had statistics at that time, and one of them was that of all the people who retire under PERS, seventy five percent have Medicare, twenty five percent do not. He said this plan does require that if someone is eligible, that Medicare is primary and the state secondary. He said there is a gap, and it could be large now that they have thirty year retirement at any age. He said it would also be a larger gap for people who are in the police and fire retirement system. Mr. Neighbors said you will have to pay a much higher rate as opposed to someone under Medicare or someone who may have co-insurance with two or three other insurance companies. Mr. Gagnier stated the people who are under the age of sixty five and not eligible for Medicare, those retirees pay the same rate as active employees. It is a much higher rate. He said once you are eligible for Medicare the premium takes a dive, because Medicare is primary. Chairman Lambert recognized Mrs. Segerblom. Mrs. Segerblom asked if the Clark County employees are members of PERS. Mr. Gagnier replied "yes". Mrs. Segerblom asked if all the people they are talking about would have to be a member of PERS to get into the state insurance. Mr. Gagnier stated it was another problem with this bill that needs to be addressed. He said if you read the bill carefully, it says they have to be retired, it does not say they have to be drawing a benefit. He said this needs to be clarified, to make sure these are people who are drawing a benefit under PERS, so that PERS could make the deduction. He said it may be implied, but he said it is not clear. Chairman Lambert recognized Mr. Bennett. Mr. Bennett quoted Mr. Gagnier as saying that no insurance company would take these people on because it is not good business. Mr. Bennett asked if PERS was out to make a profit. Mr. Bennett asked if PERS is out to break even. Chairman Lambert interrupted to clarify that PERS does not provide health insurance. She said the Committee on Benefits provides health insurance. She said PERS knows who the retirees are. Mr. Gagnier responded that PERS' role is to administer getting the people on and maybe deducting them. He said the state health insurance must be operated like a business and if the benefits that are paid out exceed the amount coming in, the rate goes up or benefits are reduced. Mr. Gagnier spoke saying state employees have for a very long time, taken care of their retirees. He said they have a good program for the retirees. He said they have fought over the years to get a system where the state pays a portion of the retirees cost. He said last session they processed a bill to set up a system where long term employees could get more contributed towards theirs. He said each governmental group should take of their own retirees. He said the need of this bill demonstrates that some local governments have not taken care of theirs. Chairman Lambert recognized Fred Suwe. Fred Suwe, of the Committee on Benefits, stated the committee did not take a position on this bill. He said they expressed concerns at their last meeting which he spoke about. He said while the public employee works as an employee, both the employee and the employer contributed to PERS to help finance the retirement benefits. He said they have public employer groups that do not contribute to the health plan for their active employees. He said so neither the employee nor the employer is contributing during an actuarial period where utilization of the plan would be less than after those employees retire. He said this bill would give a window of opportunity to a group of retirees who did not contribute while they were employees. He said he is not opposed to a singular window of opportunity, when there is no other plan for these folks to join for health care, to continue as they retire. He said this bill provides a permanent and annual window of opportunity after the person retires. He said he thinks the question needed to be given is where a person can annually decide whether or not he/she should have health care year to year. He said this was adverse selection, because if you know you need insurance there is no shared risk. He said the shared risk comes into play when you pay a premium when you do not know if you are going to need the insurance. He said he does not have a problem with the offering of a single window of opportunity, but there are employers out there who assume no responsibility to cover their retirees, and that becomes the state's responsibility Mr. Ernaut asked if there was a list of entities which do not provide payment to PERS. Mr. Suwe said he did not know. He said he would provide a list of the public employer groups who have their active employees on the plan. He said both the employer and employee contribute to PERS, while the employee is an employee. He said they were not contributing to the health plan. Chairman Lambert said one concern she had was that this was a separate pool. She said if people are allowed to go in and out and shop around, it would raise the total cost for all in the pool. She suggested that you have an open enrollment every year, but once you are in and you decide to leave you would not be allowed out. Mr. Suwe said they have provisions or safeguards for that such as evidence of insurability. He discussed the national health care reform. He said if they were to not require evidence of insurability or pre-existing condition clauses, then they would only want one window of opportunity to come on to the plan. He said the pooling is important because if you are going to allow folks to become insured on this plan annually, protection to the groups providing premiums both through their employer and their employees, while they are active employees, you would want to separately pool their experience. He said perhaps the premium for retirees would be less and perhaps their experience would be such it would not require a larger premium than what the state retirees are experiencing. He said this would probably be unlikely. He said as a group, retirees tend to have higher utilization of the plan which is mitigated by Medicare when they reach age 65. He said prior to age 65, there are attempts to retire early, those costs can be very high. Mrs. Lambert stated she was interested in the cost to members of the pool. Mr. Suwe stated "yes" that cost would go up. He said you would be getting adverse selection and anytime you have adverse selection, you are getting people who will undoubtedly join the plan because they intend to use the plan. He said the utilization would be higher than what would be reasonably expected by the average participant. Mr. Suwe said there was discussion for the potential for amendment. He said they realize there is an obligation to public non state retirees. He said he did not want to give the impression they are not for that window of opportunity. He said he thinks there will be an amendment forthcoming that would take care of section B, which gives the annual enrollment period kind of an open enrollment which allows people to come in and out of the plan. Chairman Lambert recognized Mr. Ernaut. Mr. Ernaut asked if they create a separate pool with adverse enrollment would they have a much higher potential to access benefits. Mr. Suwe stated the difficulty you would have is the experience does not occur until after a period of time. He said the people using the plan when they really need it will pay this premium. He said the experience comes in a year later when you are offering a new premium to a new amount of people. He said that cost may be prohibitive for those people. Mr. Ernaut said the size of the rate payer pool is only fifteen hundred people, of those fifteen hundred people, they have much higher potential to access the benefits. He said if these people were accessing benefits in a constant period, here the premium they pay would be astronomical in insurance terms. If that went to an extreme and was not solvent, who would pay. Mr. Suwe said the fund would have to. He said it would be a combination of all the pools. He said if a person is insured, the bill must be paid. He said since it is self insured it would come from the resources of all the plan participants. Mr. Ernaut asked if it got to a point where the pool was so out of balance, which it has a potential of doing, how would that be solved from the legislative standpoint. He asked what measures would have to be taken, and where would the money come from. Mr. Suwe said first the plan would have to pay the bills as they come in. The Committee on Benefits would have to address a stream of expenses greater than the stream of revenue. He said that occurs by raising the premiums of all the pools, or reducing the benefits of all the pools. He said how you counter that is if a local government does not provide health insurance for the retiree, he suggested upon retirement, that employee make the decision then. He said this makes him a part of the risk sharing between the retirees who do not use the plan and the retirees who do use the plan. He said his concern is for the person who is gone over a period of years with other coverage or no coverage, now is being given an opportunity to jump on the plan. He said if the state decides to assume the responsibility for retirees of local government groups, give them the window of opportunity to do that at the time they retire not ten years down the road. Chairman Lambert recognized Mrs. de Braga. Mrs. de Braga stated she was having trouble understanding the "in and out" process being discussed. Mr. Suwe stated the bill offers an annual opportunity. He said many people go in and out due to premium changes, and when the opportunity arises again, they may choose to sign up again. He said this was adverse selection. Mrs. de Braga stated it was and that is the failure of the whole insurance system. She said people are forced into that kind of position because insurance is either not affordable or not available to them. She asked if he would consider a change in a one time window, with the condition that the provision for pre-existing condition was eliminated. Mr. Suwe replied "yes", if a person has already been insured for a period of time and shared in that risk, I would see no problem of anyone coming on the plan with evidence of insurability. The person who has been insured either by the contribution of the employer or the employee is O.K. He said what he wants to avoid is the possibility that people will choose when to become insured, because they know they have a problem. Chairman Lambert recognized Mr. Neighbors. Mr. Neighbors asked if the Committee on Benefits has had a chance to study the lost premium record of the people who came in during the window of opportunity two years ago as opposed to the regular PERS employees. Mr. Suwe replied "no," not yet. He said the five hundred people are not a very large group. He said they would like to work on plan year that runs from January to December. He said even when the figures are presented for 1994, he felt there would not be any change of premium until January of 1996. Mr. Neighbors stated he would like to see the comparison of the two. Mr. Suwe stated it was disappointing that more people did not sign up. He said the sum of five hundred was astonishing. He said it should have been a couple of thousand. He said a few retirees had suggested to him that the three months retirees had to look over the plan was not enough time to make a decision. Chairman Lambert recognized Mrs. Freeman. Mrs. Freeman spoke saying suppose the bill was amended and the employee had to make the decision when they retire. If we are doing this to correct past problems, how long would it take to insure the people who are currently in the position of needing this window, to get to the point where we would only have those who are not retirees yet. She asked how many years ahead are we looking at. Mr. Suwe replied he did not know. He said the only thing he is opposed to is the annual window of opportunity. Chairman Lambert recognized Mr. Bibb. Mr. Bibb said the reason why more people had not signed up was because some of the presentations were not made in a timely manner which shortened the window from three months to a few weeks. He said there were several members struggling with making the decision. He said some perhaps did not have insurance, and some were in another program. He said it did lead to retarding the enrollment. He said they did an informal survey at the time the bill was being considered last session. He said from those responses it was his understanding about three thousand people were interested in the program. He said it was his expectation should a window have been left open for another three months, there would have been a good deal more signed up. He said it is there feeling that the larger the pool the better the rate. He said he did not believe RPEN would be opposed to making this a one time option into the program. If the option is exercised, someone enters and then volunteers to leave, perhaps that person should not be allowed to enter the program again. He said their goal is to try and find coverage for those who are in a difficult situation. He said by being pooled separately those people in that pool would ultimately bear the tariff for those coverages. Chairman Lambert recognized Mr. Neighbors. Mr. Neighbors asked if they would accept an amendment with a one time option to join the plan. What about those in the plan who leave. Once they leave would they still have the one time option. Mr. Bibb asked if Mr. Neighbors was referring to those who are in the original five hundred and thirty nine. Mr. Neighbors said yes. Mr. Bibb said the intent would be if the bill was processed that person who elects to come in to the group insurance program under the bill would have that opportunity. He said if they drop out of that insurance, they would not have another opportunity to re-enter. Chairman Lambert recognized Mrs. Freeman. Mrs. Freeman asked what the total enrollment was. Mr. Suwe stated he believed it was twenty one thousand employees. He said they roughly insure approximately forty two thousand lives. Chairman Lambert asked Mr. Bibb to talk to his membership about the "one time in", due to her concern of the rates people in the pool might have to pay if there was an ability to go in and out without any restrictions. She asked if it would be helpful to have a six months enrollment period for a first time window, so the pool may get bigger faster. Mr. Bibb said they would be amenable to work out the language. He said it would make better sense for initial enrollment period and match up open enrollment dates to simplify the paperwork for either people coming in under this bill or those re- enrolling under the existing provisions affecting state employees. He said in addition to doing this, there might be an additional enrollment period so publication could be achieved. Mr. Suwe interrupted to say they are talking about two different groups of people. Those retired and those still actively working. He said for those retired you are going to need one more window of opportunity. For those who are currently employed by local government, and do not have a plan, the window of opportunity should occur on the day they retire. He said that is what the state employee does. He said this would cause no lack of coverage. He said this would not be an annual event, it would occur for each employee on the day he/she retires. Chairman Lambert stated Mr. Neighbors has volunteered to report and work with RPEN on the bill and how they might deal with some of the technical aspects of this issue. There being no further business, Chairman Lambert closed the hearing on A.B. 328. Chairman Lambert recognized Mrs. Braunlin. Mrs. Braunlin stated she and Mr. Neighbors were requesting a bill draft request from the committee for an interim study of the impacts of competition in the electric industry in the state of Nevada. Chairman Lambert turned the gavel over to Mrs. Braunlin due to her conflict in that area. ASSEMBLYMAN ERNAUT MADE A MOTION FOR PREPARATION OF A BILL DRAFT REQUEST. ASSEMBLYMAN WILLIAMS SECONDED THE MOTION. A discussion was held. Mr. Neighbors stated that retail wheeling is a very complex issue. He read from an article. See (Exhibit H). Mr. Bennett said the Federal government is getting out of the power transmission business. He said something has to be done where Nevada will be in the forefront and it needs to be studied and make sure that we have adequate power that we can afford. Vice Chairman Braunlin recognized Mrs. Freeman. Mrs. Freeman said there was a study in the last interim of energy sources. She said this is one of the issues brought up. She said people from the Public Service Commission testified that they were reviewing it carefully. She said members of the committee expressed concern the users do not get left out and have some consumer protection. Vice Chairman Braunlin asked for a vote. THE MOTION PASSED UNANIMOUSLY WITH CHAIRMAN LAMBERT ABSTAINING FROM THE VOTE. There being no further business the meeting adjourned at 9:20 a.m. RESPECTFULLY SUBMITTED: Kelly Liston, Committee Secretary APPROVED BY: Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs March 24, 1995 Page