Until 1983, the State of Nevada provided eligible participants comprehensive healthcare benefits through fully insured policies. In 1983, legislation approved the establishment of a self-funded plan. The Committee on Benefits developed the benefit plans, and the Benefit Services Trust Division of the Department of Administration performed the day-to-day operations. In 1999, Senate Bill 544 spelled out the provisions of the dissolution of the Committee on Benefits, the split between risk management and benefit services, and the creation of the Public Employees' Benefits Program. Senate Bill 544 also included the requirement that a Board oversee the operations of the newly formed agency. The Board currently consists of nine members. Eight of the members are appointed by the Governor. The ninth member is the Director of Administration or his designee.

Plan History

Due to volatility in the insurance industry, periods of skyrocketing health costs, and increased premiums during the 1970s and 1980s, many insurance companies offering fully insured products were not willing to bid on the State of Nevada health plan. Because of this, and due in part to the adverse claim history for the State of Nevada, alternatives were needed. Looking for options, the Nevada State Legislature authorized a 1983 legislative study examining the feasibility of establishing a self-funded group insurance plan. It was determined that by self-funding, the State of Nevada would not have to cover the profits of an insurance company. The study identified five major benefits of self-funding which were (1) to provide more flexibility in determining the types and amounts of benefits offered, (2) the ability to retain any interest earnings that would normally become an insurance company's profit, (3) reduce the fixed costs and retain dollars for use within the plan, (4) the ability to choose where "retained" dollars are spent, and (5) to help defray premium costs and maintain benefit levels.

In 1992, the Committee faced a projected shortage in the reserve for incurred but not reported claims, and in the face of skyrocketing health care costs and inflation in general. The Committee on Benefits significantly increased the cost for dependent coverage, eliminated some benefits, increased out-of-pocket costs in several areas, and implemented various cost control mechanisms.

In 1994, additional plan design measures were implemented to control costs, and to restore fiscal solvency to the plan. These measures were taken on the advice of the Committee on Benefits actuary to restore the reserve levels to an actuarially sound basis.

Beginning July 1, 1994, non-state retirees were allowed to join PEBP regardless of their employer participation in the program. However, the non-state retirees rates were determined separately from the state retiree population.

By mid-1994, the actuarially sound reserve level had been reached, all previously reduced benefits had been restored and several enhancements to the overall program had been made. In January of 1994, Mutual Administrators, the PEBP self-funded third party administrator (TPA) since 1983, and the fully insured vendor (subcontractor for the PEBP fully insured plan since 1976), sold their business to Coresource. The Committee on Benefits placed the TPA services out to bid on the normal four year bid cycle. Coresource was awarded the bid and a new contract was written for the period January 1, 1995 through December 31, 1998.

In July of 1996, Coresource advised the Committee on Benefits that L & H Administrators would acquire the TPA assets of the western operations of Coresource, and requested that the state contract be assigned to L & H. The Committee approved the assignment.

In 1997, the Committee became aware that L & H had stopped paying claims, and after an internal audit, a Division of Insurance investigation and revocation of their license, their contract was terminated May 29, 1997. L & H Administrators was placed into involuntary bankruptcy and ceased all operation by August 1997. During that same year, the Committee approved a contract with UICI Administrators.  Premium increases and benefit cuts were implemented in an effort to stabilize the failing program.

In 1999, the Nevada State Legislature provided approximately $26 million dollars to bail out the program. In February of 1999, the Nevada State Legislature suspended the Committee on Benefits. That same year, the Public Employees' Benefits Program Board was created under NRS 287.041 to oversee the program. The board members appointed to a four year term based on the following criteria: one member who is professional employee of the Nevada System of Higher Education, one member who is retired from public employment, one member who represents local government agencies who participate in the program, one member who is employed with the State in a managerial capacity, two members who have substantial and demonstrated experience in Risk Management, portfolio investment strategies or employee benefit program, the Director of the Department of Administration or his designee and two members who are employees of the State. The Board was created to help ensure the program would be conducted on a fiscally and actuarially sound basis. The criterion for board member selection ensures a wide diversity of experience in areas relevant to the program.

In 2001, the PEBP Board appointed new management to oversee the daily Program operations. In addition, during the 2001 Special Session of the Legislature, the Plan received a $24 million bail out to stabilize the Plan financially.

In 2002, the PEBP Board and staff identified major problem areas with the Plan and began implementing measures to resolve them. As a result, a new Pharmacy Benefit Manager contract was awarded to Catalyst RX, a new Third Party Administrator (TPA) contract was awarded to Benefit Planners, Inc. (BPI) out of San Antonio, Texas, and a contract was awarded to the Iowa Foundation for Medical Care (IFMC) to provide a new eligibility and enrollment system.

In 2003, PEBP contract with a new life insurance and long-term disability vendor, utilization review and management vendor, national PPO network vendor, statewide PPO network vendor and consultant and actuarial services vendor. In addition, PEBP changed its plan year from a calendar year to a fiscal plan year. From January 1, 2003 - June 30, 2003, PEBP had a short plan and subsequently implemented the new fiscal plan year effective July 1, 2003.

In October, 2003, Legislative changes resulting from Assembly Bill 286 (codified in NRS 287.023) changed the method of determining retiree subsidy allocation. Under the new method, the subsidy credit was based on the total years of service from all employers with whom the retiree earned a minimum of 5 years service credit. Under this method each employer paid a proportionate share of the subsidy, based on the service credit earned with that employer.

Following the passing of Assembly Bill 286, PEBP experienced a large influx of non-state retiree enrollment. This initiated a four year interim study on the program.

The Plan's financial stability had returned by 2004. During this year PEBP implemented a new disease management program to assist participants with chronic diseases such as diabetes, asthma, congestive heart failure and hypertension.

In January 2005, PEBP introduced its new logo and slogan (Health Matters), launched a new and improved website and began sending out its first quarterly newsletter to all plan participants.

Beginning in Plan Year 2006, the Program established a Reserve for Rate Stabilization. A high deductible plan was implemented to create a lower cost option for individuals interested in reducing their monthly premium. The coordination of benefits methodology was changed to "maintenance of benefits". The most significant change to the Self-funded PPO Plan was to increase the wellness benefit from $600 to $2500 per covered participant per plan year. PEBP also introduced the annual Health Assessment Questionnaire (HAQ) consisting of 30 health associated questions. By completing the HAQ PEBP PPO Plan participants received benefit enhancements offering a 50% reduction to the annual deductible. For all covered participants (including HMO), an increase in the annual dental maximum from $1500 to $2000. Annual preventive dental cleanings increased from two to four. Medicare retirees and their covered spouses with Medicare Part B received a reimbursement of 80% of the Medicare Part B premium. This benefit applied to participants enrolled in the Self-funded PPO Plan only.

Plan Year 2007 had minimal plan changes. Due to numerous requests from Medicare eligible retirees, the coordination of benefits methodology was returned to "integration of benefits". A supplemental subsidy was implemented to reduce the cost of health insurance (through monthly premiums) to three retiree categories most impacted by the commingling of claims experience. All retired participants and their covered spouses enrolled in the Self-funded PPO Plan with Medicare coverage received a Medicare Part D premium credit. The credit was a pass-through of federal funds received by PEBP under the Medicare Part D program for continuing prescription coverage to Medicare participants.

The ACR 10 Interim Study concluded with its recommendations contained in SB544 (2007). The bill included several proposed changes to PEBP. The most significant change limited the eligibility of non-state retiree coverage under PEBP effective November 30, 2008.

Plan Year 2008 brought some positive changes to the benefits offered by the Self-funded PPO Plan. The $50 annual deductible for generic prescription drugs was waived and benefits for some over the counter medications were deemed eligible under the prescription drug plan. Limited benefits for genetic testing were approved under the Self- funded PPO Plan. The coordination of benefits methodology changed to "Standard" coordination of benefits. APS Healthcare became the new Utilization Management, Disease Management and Large Case Management vendor. Effective July 1, 2007, PEBP discontinued reimbursing Medicare retirees 80% of the Medicare Part B premium and, instead, retirees and their covered spouses enrolled in the PPO plan with Medicare Part B coverage received a rate reduction of $78.21 per month.

In Plan Year 2009, the Self-funded PPO Plan expanded its benefits to include treatment of ADD and ADHD. Hometown Health Plan replaced Anthem HMO as the HMO in northern Nevada. In compliance with Senate Bill 544 (2007), a new Self-funded PPO Plan option was made available to retirees. This new plan option called the "PPO Value Plan" was made available to retirees who have both Medicare Parts A and B. It provides coverage for prescription drugs, dental and vision services not covered under Medicare. Rates for Medicare retirees were un-commingled and the Medicare Part B rate reduction was eliminated. The Plan continued to maintain a fully funded reserve for incurred but not reported claims and a reserve for rate stabilization.

Plan Year 2010 brought about significant changes as a result of the reduction in the State subsidy for Fiscal Years 2010/2011. When PEBP began working on its budget request for the current biennium, the State Budget office directed staff to submit its budget request with specific limits in the amount of the State subsidy. About 2/3s of PEBP’s revenue is generated from the State subsidy.  After accounting for projected cost trends, enrollment growth, and the subsidy reduction, compared to what would be required to sustain existing benefits and cost sharing policies, resulted in a $53 million funding gap.

To meet PEBP’s budget target, the Board faced some very difficult decisions regarding changes to plan design and premium increases.  They reviewed various options, and agreed the most equitable way to meet the budget target  would be to  meet half of the funding gap through plan design and the other half through rate increases.  While these changes were necessary, the Board’s primary objective was to continue providing PEBP participants with protection from catastrophic health care expenses.  Based on that philosophy, the following changes were incorporated into Plan Year 2010 and 2011:

·      Merge the Self-funded PPO High and Low Deductible Plans into one single plan option. The new PPO plan features a $725 Individual and $1,450 Family deductible. It is structured similar to the Low Deductible plan with fixed copayments for physician office visits and urgent care visits. 

·      Continue the Board’s current policy regarding the use of Reserve for Rate Stabilization. This means that the reserve will be retained by the plan for use, if necessary, during rate development each year to smooth the impact and plan changes to the participants.

·      Reduce the percentage of cost paid by the State subsidy in all tiers, in all plan options.

·      Allocate the Medicare Part D revenue between the plan and the Medicare retirees.

·      Remove the Health Assessment Questionnaire and its plan incentives.

·      Implement a new policy to index (i.e., inflate) the annual out-of-pocket maximum at 50% the rate of medical trend each year. The annual deductible would be indexed at 100% the rate of medical trend each year. The indexing would increments of $25 and would begin July 1, 2010.

·      Eliminate the neurotherapy and psychotherapy benefits for ADD and ADHD.

·      Increase the PPO retail pharmacy benefit for specialty pharmaceuticals from a $40 copayment to a $50 copayment or 25% of the cost of the drug (whichever is greater) to a maximum $100 out-of-pocket coinsurance per prescription.

·      Increase the PPO copayment for mail order prescription drugs on Preferred (Tier 2) drugs from $80 to $120 for a three month supply.

·      Hold HMO premium increases to a maximum of 5% for Plan Year 2010.

·      Implement additional precertification requirements for participants seeking approval for weight loss surgery and outpatient spinal surgery.