Health care program for state employees shows $43 million surplus

CARSON CITY -- State legislators heard some surprising news Monday: The once nearly insolvent health care program for state employees is sitting on a $43 million surplus.

The news prompted state Senate Majority Leader Steven Horsford, D-Las Vegas, and Assemblywoman Debbie Smith, D-Sparks, to question why legislators last year supported efforts by the Public Employees' Benefits Program to cut medical benefits for state employees and to require them to pay much higher deductibles.

Smith also said some state employees are not going to their doctors as frequently as they should because of higher deductibles and out-of-pocket expenses.

"People are saying, 'I am not going to the doctor.' They are waiting things out. They made the decision not to go based on costs," Smith said.

Agency Administrator Jim Wells told members of the Legislature's Interim Retirement and Benefits Committee that he agreed in part with Smith's statement on the effect of higher premiums but said the surplus will be needed to handle future claims, which are expected to grow.

Wells said that medical costs dropped 2.9 percent in 2011 and that 1,601 people decided against signing up for the health care program. And because of "sheer luck," he said, there were fewer catastrophic medical events.

But he added in an interview that it is "speculation" that employees are not signing up for health care benefits because of the higher deductibles. The agency does not ask employees why they do not sign up for coverage.

Horsford said he thought Wells and the benefits agency would want to know why employees do not participate.

While agreeing that the surplus was "unexpectedly high," Wells told Horsford and other members of the legislative committee that health care benefits cannot be restored in the coming year because he expects a 9 percent increase in claims costs.

That increase will eat up the reserve, Wells said. He said he will request that rates remain static when his governing board meets in March.

The annual deductible before state workers receive any medical benefits climbed to $1,900 for individuals and $3,800 for families in July. It had been $800 for individuals and $1,600 for families.

Employees receive $700 that they can use for any medical reason, which in effect cuts the deductible to $1,200 for individuals. There also is an annual cap of $3,200 for workers' out-of-pocket medical expenses.

What workers pay for health care insurance is as low as $43.90 per month for the employee and $198.40 per month for the employee and spouse.

With a $43.90-per-month cost of insurance, Wells said it makes no sense why employees would not sign up because that would mean giving up the $700 a year that they would receive for any medical costs.

Vishnu Subramaniam, chief of staff of the American Federation of State, County and Municipal Employees Local 4041, which has 4,500 state employee members, said his calculations show that state employees are spending $9.5 million more of their own money before acquiring medical services because of the higher deductibles.

"The governor's budget is putting state employees under financial strain," Subramaniam said. "With all the drastic cuts, more people are not signing up for health insurance, and that's why some jobs are not being filled."

Subramaniam was speaking of the 200 correctional officer vacancies in the Department of Corrections. Current training classes are expected to fill about half of those vacancies.

State employees were hit with a 4.8 percent pay cut in July.

Contact Capital Bureau Chief Ed Vogel at or 775-687-3901.