Discussing the cost of health insurance lately at some schools has caused astonishment and frustration.
The reason? School districts pay millions for health insurance each year, but the cost is going up another 12 percent in 2012-13.
That’s another expense on the rise, on top of the increasing cost of pensions and salaries. As revenue continues to decrease for districts, insolvency could become inevitable.
School officials are frustrated. Health insurance costs are rising beyond the rate of inflation and the expense is hard to control.
Finding cheaper alternatives is difficult, which leaves school districts in the position of cutting programs, laying off staff and raising school taxes to pay for increases in the budget.
Taxpayers who attended budget meetings were flabbergasted at the cost of health insurance, and some have expressed scorn over the amount school employees pay for those benefits.
In Glens Falls, the district expects to pay at least $5 million for health insurance in 2012-13. The proposed budget is $38.9 million.
This year, family coverage through a Matrix Indemnity Plan — the most expensive plan at the district — costs $21,828. There are roughly 53 employees and 10 retirees on this plan, while most are on a cheaper plan — the Preferred Provider Option, which costs $18,300 in 2011-12.
Employees contribute between 13 and 20 percent.
At Queensbury, the district’s $53.3 million budget includes $8.5 million for health insurance for fewer than 500 employees. Lake George, with a budget of $20.5 million, plans to spend nearly $4.3 million for coverage.
“It’s absolutely crazy,” said James Clark, a Glens Falls school board member, on the amount of money the district is spending on health insurance.
Clark expressed his view at a March 29 budget meeting, at which residents in the audience also shared their frustration.
Now, during a period of fiscal trouble, districts want employees to contribute more for health insurance. It’s a tough task, and has caused some negotiations to stall or reach an impasse.
Some districts have succeeded, but the increases in employee contributions have been marginal when compared to other public jobs or private-sector employees.
Last year, the Manhattan Institute for Policy Research, a think tank, put out a report on the cost of health insurance, which showed public employees contributed an average of 15 percent, compared to about 25 percent in the private sector.
During budget meetings at Glens Falls and Lake George in March, taxpayers asked if their district could find cheaper options for health benefits.
Officials said they are getting the best deal available. Even if a cheaper alternative was found, they said, switching would be difficult for various reasons.
Still, residents have demanded change, saying districts are paying too much.
“Somebody is making a lot of money on these (health insurance) premiums,” said David Klein, a Lake George resident, during a March 27 Lake George school budget meeting.
Pooling their money
Thirty local school districts, including the area BOCES, form an alliance to buy health insurance.
The consortium was created in the 1980s, and has grown over the years. South Glens Falls joined this year.
The group has thousands of individual members, including employees and retirees. As a group, the consortium has more buying power than a single school district, officials say.
If one person needs medical services that are more expensive than usual, the consortium foots the bill, softening the cost for that employee’s school district.
“I think we are receiving the best price that we could possibly receive for our health insurance by going through the consortium,” said Douglas Huntley, superintendent at Queensbury. “I’ve had experience where districts have self-funded, and that’s not a good situation for school districts to be in today because the potential liability is great when you are self-funded. Having the larger numbers helps spread the share of claims.”
Consortiums like this one exist across the state, although some school districts do obtain health insurance on their own.
Of the 31 local school districts, only Hudson Falls and the Abraham Wing School in Glens Falls are not in the local consortium.
Hudson Falls is part of the Capital Area Schools Health Insurance Consortium, which has 13 districts including Cohoes, Guilderland and South Colonie.
A school district must have at least 50 participants to join a health insurance consortium, which is why Abraham Wing, a k-6 district with only 200 students, has to buy its own insurance.
At Abraham Wing, a company is hired to research health insurance plans, then the school board picks the best option, a process it performs each year.
Judy Hemingway, the treasurer at Abraham Wing, said the district had wanted to join the local consortium because the rates were better.
But in recent years, the consortium’s rates have increased and are now similar to what Abraham Wing pays, she said.
“For us, it has worked out very well,” Hemingway said.
How consortium works
The consortium is called the Washington-Saratoga-Warren-Hamilton-Essex Counties Health Insurance Consortium Trust, and it’s a nonprofit organization.
The superintendent at each district in the consortium is a trustee. An executive committee decides whether to seek changes such as new health insurance plans or increases to the cost for districts, and recommends them to the trustees.
The executive committee is made up of school business officials, BOCES leaders, one school board member from one of the member districts and one representative from the New York State United Teachers. The trustees select the committee members.
The trustees and executive committee meet monthly to discuss issues and meet with a representative from Green Mountain Associates, a consulting firm.
The consultants also try to secure better rates by negotiating with Empire Blue Cross and Blue Shield, the health insurance provider for the consortium.
Once the rate is determined, the executive committee decides how much the districts need to pay.
When districts budget for health insurance, the money goes into a trust fund that the trustees oversee. Using the fund requires a vote from the trustees.
This year, the fund is projected to have $105 million, said Timothy Place, chairman of the executive committee and the assistant superintendent for administrative services at the local BOCES.
When it’s time to pay Empire, the consortium writes the check using money from the trust fund.
Money is also used from the trust fund to pay the consultant, an auditor and attorney, Place said.
The trust fund was created in 2006, so Empire could bill the consortium instead of each district.
Around that same time, the districts were using up to 40 different health plans. By 2010, it was narrowed to two.
Over a five-year span, starting in 2007-08, districts paid an average of 3 percent extra a year for health insurance.
While the cost for claims was higher, the trust fund used a surplus to reduce the increases for the last two years.
Empire charges a rate based on claims for medical services. The more claims, the higher the rates. The rates are increasing, partly because districts have been laying off younger employees, leaving an older work force that is more likely to seek medical services.
Earlier this year, Empire wanted to raise the 2012-13 rate by nearly 16 percent, which was negotiated down to below 12 percent, said Jack Macica, of Schuylerville, who is the school board representative on the executive committee.
But this time, the surplus was not enough to cover most of the increase. Trustees voted for a 12 percent increase, which includes money to replenish the surplus.
Place said the surplus needs to be built up to avoid a greater year-to-year increase in the future.
As a result, the districts are paying an amount in line with the cost of their claims.
“Now it’s coming back to bite us a little bit,” Macica said of using the surplus.
The consortium is now offering two new cheaper options for health insurance: a second PPO and a health reimbursement account.
But districts cannot force their employees to use a certain plan. Unions have to agree to any changes in health benefits.
In recent years, districts have asked unions to leave the expensive Matrix plan in favor of the original PPO plan.
Some labor contracts specify that Empire must be the health insurance provider.
Officials say there are few vendors that can match the plans offered by Empire. But the consortium is still exploring what it would take to obtain health insurance from another company.
“It may need contract changes,” Place said.
At recent budget meetings in Glens Falls and Lake George, some taxpayers suggested their districts leave the consortium.
Paul Jenkins, superintendent at Glens Falls, said some school leaders have talked about leaving the consortium and forming a group of three or four districts, and buying health insurance from another company. But their research has shown that staying in the consortium saved more money.
“I’m finding it as frustrating as everyone else is,” Jenkins said during a March 29 budget meeting.
“There are superintendents who want to change. It is very frustrating. There has to be something out there that’s better than what we are getting now.”
Even if cheaper health benefit plans were found, the unions have to agree to the change, officials say.
“Even if I were to say, ‘We are going to go out and find our own,’ I have to make sure all five unions agree to the plans we are looking at,” said Jenkins.
Macica, in his fourth year on the executive committee, said his “gut feeling” is the consortium may not hold together unless cheaper coverage is found and labor contracts are revised.
While districts save money over the long term by staying in the consortium, some may leave if they can save money through another company, even if it’s for a year or two, Macica said.
“I really don’t know how schools can sustain it,” Macica said of the increasing cost of health insurance. “Everybody is cutting to the bone. We have cut absolutely everything we can without hurting kids. The next cuts will hurt the kids. We are cutting programs just to pay for employee benefits.”