Proposed state employee health insurance cuts leads to state workers pushback

Tabitha Mueller
Tabitha Mueller
LegislatureState Government

Amid a slew of cuts attempting to mitigate projected budget shortfalls in a state largely dependent on tourism and gaming for revenue, state employees are protesting proposed changes that would reduce health care coverage options provided by the state.

The proposed cuts in the Nevada Public Employees' Benefits Program (PEBP) budget would reduce life insurance benefits from $25,000 for an active employee to $15,000 and from $12,500 for a retiree to $7,500, eliminate long-term disability insurance and lower Medicare Health Reimbursement Arrangement (HRA) contributions from $13 to $11 a month per year of service. Though Gov. Steve Sisolak in his State of the State address touted only a 2 percent state budget cut, programs such as PEBP are feeling the cuts more deeply than others.

The proposed cuts will affect worker retention and place an undue burden on essential workers who rely on long-term disability coverage as a safety net, College of Southern Nevada professor Maria Schellhase said during a Monday meeting of a legislative budget subcommittee.

"From September to December of 2020, three full-time faculty members in my department passed away — two related to COVID-19 complications and the other to breast cancer," Schellhase said. "Now is not the time to eliminate or reduce any aspects of faculty health benefits. Any changes affecting the health related quality of life, or well being, of any employee group would be a mistake."

The Nevada Public Employees' Benefits Program (PEBP) offers health plans for state workers, retirees and non-state entities, including municipal government and Nevada System of Higher Education (NSHE) employees. The program serves 72,000 active or retired employees, and did not take the proposed cuts lightly, according to PEBP Executive Officer Laura Rich.

"No one wants to make these cuts but there's only so much revenue coming into the state. The governor had a lot of really difficult decisions. I mean where do you cut? Do you cut Medicaid? Do you cut education?," Rich told The Nevada Independent. "Unfortunately you have to cut all of them. And there were very, very tough decisions to make."

During initial preparation for the budgeting process, the governor's office called for PEBP and other state agencies to prepare for 12 percent budget cuts that for PEBP would total about $72 million over the two-year budget cycle. However, when state budget projections indicated that the state was on more stable financial footing than expected, PEBP only had to reduce its budget by 6 percent.

But the cuts have received a cold reception from state employee unions. The American Federation of State, County and Municipal Employees (AFSCME), which represents more than 6,000 Nevada state employees, condemned the proposed budget in a public statement released on Friday. State workers were given collective bargaining rights in 2019, but health insurance is excluded from potential negotiations.

“These cuts put Nevada state employees, who don’t have Social Security protections, in real jeopardy,” said Harry Schiffman, an electrician at UNLV and president of AFSCME Local 4041. “These are significant cuts to our health plans, forcing more out-of-pocket costs and putting needed health care services out of reach for thousands of front-line heroes.”

The governor's recommended budget is not finalized and PEBP officials and legislators can still make changes, Rich said.

PEBP board members weighed in on the governor’s recommended budget during a meeting on Thursday, noting that protections to long-term disability insurance are vital for workers, and eliminating the insurance was not in the original proposal submitted to the governor’s office.

Though the board ultimately approved the governor’s recommended budget, members emphasized that PEBP did not have the authority to change the budget proposal and the budget is now in the hands of legislators.

Board members Michelle Kelley, Tom Verducci and Marsha Urban opposed approving the recommended budget. Kelley called the elimination of long-term disability insurance “short sighted” and “premature,” warning that without the support of benefits, vulnerable state employees will end up relying on other state services such as Medicaid. 

Kelley also asked staff to research the standard charge to cover every employee at 50 percent up to $5,000 for long-term disability insurance, so that information can be presented to lawmakers in future budget discussions.

Reducing barriers to access to care is at the top of the program's priority list, Rich said, explaining that restored budget items from the prepared 12 percent cuts focused on reinstating "first dollar coverage," or reducing deductibles or premiums that members have to pay right away. 

When adding money somewhere, Rich said money will inevitably also have to be subtracted, which is what happened to the long-term disability coverage. That coverage acts as a safety net for employees who, for one reason or another, become disabled and can no longer perform their job duties. There are 117 PEBP enrollees on long-term disability.

Individuals on long-term disability will continue to receive benefits. Still, no new enrollments will be allowed under the current plan, Rich said, adding that the number of people on the long-term disability program usually fluctuates by about 20-25 people and hovers around 100 each year. 

"The global perspective here is that by dedicating the dollars to medical coverage during a global pandemic, it helps everybody receive the care they need and it doesn't create additional barriers to accessing medical services," Rich said. "Unfortunately, yes, everything comes at a cost and … long-term disability benefits, there was relatively low utilization ... and it comes at a big cost."

For people who want long-term disability benefits, there is an option to purchase it through a voluntary buy-in option expected to be available by the next open enrollment period, if not sooner, Rich said. Employees can also buy it on their own or tap into PERS' disability retirement benefits as long as they have five years of service.

None of those options are ideal, Rich said, but there is not much choice given the global pandemic.

During public comment at the Monday meeting, workers participating in the program criticized the cuts.

Eliminating long-term disability insurance is "dangerous and cruel" for workers who are not covered by Social Security, said Doug Unger, a member of the Nevada Faculty Alliance and UNLV employee benefits advisory committee.

Buying voluntary insurance will consume about 1 to 3 percent of higher education faculty salaries, Unger estimated. He said there are not many options if someone gets in an accident or becomes sick and is no longer able to work. 

"This is asking teachers to do their jobs on a tightrope without a net," Unger said, adding that actuarial statistics about the number of workers on long-term disability may not account for COVID-19 side effects that could have ramifications for workers.

This story was updated at 2:02 p.m. on Jan. 28, 2021 to include details from the Thursday PEBP board meeting.


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