Nevada interim committee hears warnings of PEP shortfall as board weighs plan‑design scenarios

The Interim Retirement and Benefits Committee heard public comment and a PEP staff briefing on Jan. 28 about mounting fiscal pressure in the Public Employees Benefits Program (PEP), including a projected reserve shortfall and a range of plan‑design options the PEP board will consider for plan year 2027.

Public commenters urged the committee to act on behalf of lower‑income state employees and retirees. "Our health plans could effectively go bankrupt within 5 years if these issues are not remedied," said Stacy Walters, a College of Southern Nevada professor and state president of the Nevada Faculty Alliance, citing an actuary report presented to the PEP board. Terri Laird, executive director of the Retired Public Employees of Nevada, said retirees had previously lost benefits during past transitions and called for an increase in retiree health reimbursement arrangements (HRAs) and legislative attention.

Why it matters: PEP covers state active employees, retirees and dependents for medical, dental, vision and basic life insurance and is funded primarily by employer contributions and employee premiums. Staff presented utilization and financial metrics showing that only the high‑deductible consumer plan currently brings in more revenue than it expends; other plans (low‑deductible PPO, EPO, HMO) are operating at losses, driving an overall FY26 operating deficit noted during the presentation.

Teresa Karsten, PEP executive officer, told the committee that slides shown to the PEP board in January included an "illustrative" scenario that would recoup reserves in a single year — a table that showed what would be required to cover every penny of cost. "It was by no means a recommendation for the board to implement that new set of rates," Karsten said, repeating to committee members that the 84% figure was intended to illustrate the scale of the funding gap, not to prescribe an immediate rate hike.

What PEP is proposing next: Karsten said the board has asked the program's actuary to model multiple plan‑design scenarios — changes to coinsurance, copay amounts, deductibles and maximum out‑of‑pocket caps — and to show how those options would alter actuarial values and member premiums. Board members discussed a phased reserve‑replenishment plan (staff reported interest in a 3–5 year approach rather than a single‑year fix); PEP staff also said the program will present additional scenarios in a special February board meeting so rates can begin to be set.

Limits on interim fixes: Committee members and PEP staff emphasized that because PEP is not funded from the state's general fund, PEP cannot access contingency funds in the interim without legislative action. Chair Monroe Moreno and other members urged PEP to seek Interim Finance Committee permission before accessing reserves and called on the 2027 legislative session to consider any statutory funding changes needed to stabilize the program.

Public concerns and next steps: Callers and in‑person commenters asked that premium increases be phased and that retiree HRAs be revisited (Tess Opherman, representing retirees, summarized the current HRA formula as "$13 per month per year worked for a maximum of $260 per month"). PEP staff said it will provide the committee and stakeholders with actuarial scenario outputs as soon as they are available, and the board expects to take rate‑setting votes in March after February design decisions.