PEBP board told state health plan subsidizing private plans

The Public Employee Benefits Program has been subsidizing other health plans offered by Nevada’s two HMOs.

The PEBP board was told last week that calculations by staff show that the rates the state of Nevada is charged by Hometowne Health Plan in the north and Health Plan of Nevada in the south are generating a higher profit margin than federal law allows.

Under the law, HMOs are required to spend 85 percent of what they rake in premiums on claims. PEBP Executive Director Jim Wells told the board Thursday that HHP in the north spent just 73.8 percent of premiums on claims in 2012 and 79.2 percent in 2013 while HPNs rate was in the low 80s this past year.

“Again, this means that our rates were set too high,” Wells said. “We’re subsidizing their book of business.”

Paul Dolan representing HPN in Las Vegas said overall, the company is meeting the 85 percent requirement.

“The mandate doesn’t apply directly to individual groups,” he said. “It applies to the whole block of business.”

“That means our employees are subsidizing some other employers in this state,” said board member Jacque Ewing-Taylor.

Wells said when the HMOs asked for higher rates again this coming plan year, he tried repeatedly to negotiate with them, arguing that, according to his calculations, they shouldn’t get any increase in rates this time.

“We renegotiated this year and were able to get some concessions but not the concessions I feel we should,” Wells said. “We’ve tried and they’ve pretty much said these are the rates.”

Member Bob Moore added that the HMO plans are being subsidized by the Consumer Driven Health Plan — the PPO used by about two-thirds of state workers. He said a total of some $14.8 million has been diverted to the HMO plans.

Member Mike Torvinen said the bottom line is that “the excess reserves from the consumer Driven Health Plan are going to the HMO’s bottom line.”

“What’s happened here is the excess premiums generated in the HMO plans are not coming back to the participants,” Torvinen said pointing out that the premiums are paid not just by the state but by the workers as well.

The Consumer Driven plan is actually working well enough that its rates are going down for the coming year, not up.

Asked what their options are, Wells said the state could consider creating its own HMO program, running a self-funded HMO through HHP in the north.

“We don’t have a lot of leverage except that it doesn’t seem to be required that an HMO even needs to exist,” said member Jeff Garofalo.

Taylor pointed out that when HMOs were created in 1974, the federal government mandated that public plans provide that option if there was a federally approved HMO in their area. She said that mandate expired in the 1980s but that dropping the option altogether “would be very disruptive to employees.”

Linda Ash-Jackson representing Hometowne Health said they are willing to work with the state to resolve the issues including ensuring the state gets money back if the ratio is less than 85 percent. But she pointed out that there are good and bad months. The latest numbers for the first quarter of this year, she said, show that Hometowne Health paid out 113 percent of premiums to cover state medical bills.

“If you want a self-funded plan by July 1st we can do,” she said. “We’re comfortable administering our self-funded clients, however you would like to do it.”

HHP currently administers the Consumer Driven plan for the state.

Member Romaine Gilliland asked Dolan if the state was, in fact, subsidizing other HPN plans.

“We never look at it that way,” said Dolan. “In prior years you’ve had above 85 percent but we don’t go back and ask for additional premiums.”

That prompted staff to remind the board that the northern HMO did, actually come back in a bad year and ask for a premium increase when the medical bills were dramatically higher than expected.

Gilliland said he objects to how the southern HMO was handling the new taxes imposed by the Affordable Care Act. While the northern HMO was having the state simply pay those taxes, including $5.25 per member per month, the southern plan was billing for more than the actual taxes.

“I’m concerned that you take what is a pass through of a government tax and add a profit to it,” Gilliland said. “I get the impression the state of Nevada is not necessarily being fairly treated.”

The board instructed Wells and his staff to work with the two HMOs now that they’ve made it clear the state is upset enough to be considering dropping them.

Chairman Leo Drozdoff also directed Wells to look into options including a self-funded HMO and elimination of the option.

Both Dolan and Jackson indicated they got the message and promised to raise the state’s issues with their bosses and work with Wells and his staff to resolve them fairly.

But for purposes of Thursday’s meeting, Wells told the board there is little they can do except approve the program for the coming year.

“The rates before us are our choices today even if we were to get concessions,” he said.

The board approved staff recommendations for the coming year including the increases in basic rates for the HMOs, but made clear those issues will be reviewed once staff has studied what to do in the future. Both HMO contracts are basically entering their final year with the state.