The following testimony was provided to the PEBP Board by NFA Legislative Liaison Kent Ervin, on behalf of NFA:

The Nevada Faculty Alliance (NFA) is the statewide association of faculty at all eight NSHE institutions, most of whom participate in the Public Employees’ Benefits Program along with other state employees.

The NFA greatly appreciates the hard work of the PEBP staff and the PEBP Board to maintain our health insurance program in the face of rising costs and budgetary constraints. It is a difficult task to balance diverse interests in a program with many moving targets.

Regarding the HMO options (agenda item 10), we recommend caution. Although we understand that the HMO option is in distress due to rapidly rising costs, it is difficult to evaluate the proposed self-funded Exclusive Provider Organization (EPO) alternative because neither estimates of the rates nor the methodology to set the rates have been provided. The Board should ask for a better understanding before proceeding. We are also concerned about the rushed implementation of an entirely new program.

Our biggest reservation is that the higher risks requiring a $10M to $15M increase in the Catastrophic Reserves are proposed to be absorbed by Excess Reserves from the CDHP program. Those Excess Reserves were created on the shoulders of CDHP participants and, arguably, retirees who were moved along with their higher risk pool to the Medicare Exchange. The Excess Reserves from the CDHP should not be used to fund the Catastrophic Reserves for a new EPO plan. Instead, if an EPO is implemented, it should be priced to fund its own share of the Catastrophic Reserves over an appropriate phase-in period of several years. To reduce the rate impact, the confidence level for the EPO catastrophic reserves could be phased in, reaching the desirable 95% level after a few years. That is what would necessarily happen with a completely new self-funded program, or if there were no excess reserves in another program. The existing Catastrophic Reserve does provide a buffer in case of poor EPO experience during the phase-in period.

Thank you.