George Chamberlin fears the worst.
The Chaparral High School government teacher has been consumed by worry ever since a statement about the Teachers Health Trust — not meant for his ears nor that of 17,000 other teachers and their families — was leaked two weeks ago.
John Vellardita, executive director of the Clark County Education Association, said in a private meeting that the union-created trust, which provides health coverage to 34,000 people, is hemorrhaging money and will be “belly up in 60 to 90 days.”
Knowing a patient is ultimately responsible for the bill, Chamberlin immediately called the trust to see whether it had paid for his $100,000 back surgery from December.
A trust staffer said the checks were “pending” and would be paid.
But he fears the prospect of nonpayment, which also prompted at least one local doctor to adopt a new policy: Avoid taking any expensive work from teachers or their dependents.
“Providers with a brain think, ‘I’m going to get burned,’u2009” said the doctor who has worked more than 20 years in the Las Vegas Valley and has seen other trusts go bankrupt, leaving him with thousands of dollars in unpaid bills. “What did I do? I ate it.”
Sending bills to collections on patients rarely works, but some providers do it, said the doctor who wished to remain anonymous for fear of retaliation.
It rarely comes to bankruptcy and collections with normal insurance companies, which are regulated by the Nevada Division of Insurance. The division would have stepped in “long before it even got to this point” if the trust were a traditional insurance provider, said Jake Sunderland of the Nevada Division of Insurance. But, under the law, the division can’t regulate trusts.
But both the trust and union since have claimed the news of imminent bankruptcy couldn’t “be further from the truth,” according to mass emails sent to teachers after a Feb. 2 Review-Journal article about Vellardita’s statement. In those same emails though, the union didn’t deny Vellardita’s statement, or address it at all and also said the trust’s “financial situation” requires an increase to premiums paid by teachers through paycheck deductions, which the Clark County School District must authorize.
Trust and union officials blamed the trust’s financial problems on the district for not approving an increase in teachers’ premiums in a decade, though medical costs have greatly increased.
However, the union didn’t request such an increase during negotiations either this or last school year when costs exceeded revenue by $14 million, according to district officials and trust CEO Peter Alpert.
In recent years, Alpert also called multiple years without premium increases a “positive step,” according to his statement to teachers in the trust’s quarterly newsletter.
“Sure, it puts us in a bad situation,” said Alpert on Monday in reference to the trust losing millions of dollars a year since 2010 because claims have exceeded revenue and exhausted cash reserves.
He asserted the trust can survive for more than six to nine months without a premium increase, but it may have to start liquidating its $27.7 million in investments. That would be the trust’s last and only resort at this point because cash reserves are nearly exhausted, according to trust audits.
Chamberlin is astonished he is only being told now of the troubles facing his trust.
“As far as I’m concerned, it’s criminal,” Chamberlin said.
Usually, insurance companies are required by state law to have a certain amount of money on hand and operate in the black, or risk being taken over. But self-funded plans — like the trust — don’t have to follow these laws and are out of the division’s control, Sunderland said.
Even worse for the 34,000 people covered by the trust, the state can’t protect them from doctors seeking unpaid claims, as it would if an insurance company went under.
Normal insurance companies have their own insurance in case of failure. They pay into the Nevada Guarantee Fund, which the state can draw from if a defunct insurance company can’t pay its debt after being liquidated, Sunderland said. The fund operates much as the FDIC covers banks.
But the trust can’t use the fund because it doesn’t pay into it, meaning teachers are responsible for every cent.
If the state division had the authority, it could have taken over the trust, putting it into “conservatorship” should premiums continually fail to cover claims, Sunderland said.
That started in 2010-11 for the trust, paying $5.45 million more in claims than the $144.6 million it received in revenue, according to its audits. The next year, claims exceeded contributions by
$3.89 million. The trust is in the hole nearly $1 million for the first six months of this year, Vellardita said two weeks ago.
The division would have also been checking the trust’s quarterly reports to make sure it had sufficient cash reserves, Sunderland said.
Those reserves had dwindled from $7.23 million in the 2009-10 school year to $547,000 as of June 30.
“Even now, there is largely nothing we can do for them (teachers),” said Sunderland, noting that when an insurance company is beyond recovery, the division will liquidate it to cover as much debt as possible and move customers to a new plan.
Since the division can’t offer that to teachers, the district is having “preliminary discussions” with the insurer of its 1,200 administrators, UnitedHealthcare, in case the trust fails, district spokeswoman Amanda Fulkerson said.
“Our first priority is ensuring teachers will be covered, period,” she said, noting that the district will also approach UnitedHealthcare about covering unpaid claims that the trust may leave behind.
When the trust covering district support staff went bankrupt a decade ago, it left $8 million in debt. The district put those workers under Sierra Healthcare, which agreed to pay off a portion of the claims, Fulkerson said.
Ever vigilant about his own $100,000 claim, Chamberlin called the trust Monday and was told a check was issued to University Medical Center on Feb. 5 for its $72,000 portion of the claim. The trust also owes $28,000 to his doctor. But that payment was still pending Monday, and UMC hadn’t received its check yet.
All he can do is wait and see.
Contact reporter Trevon Milliard at firstname.lastname@example.org or 702-383-0279.