Finding affordable health insurance for the 475 employees of the Dripping Springs school district in Texas has been a fruitless task for Superintendent Mary Ward.
In 2000, only two insurance companies expressed an interest in covering the 3,200-student suburban district located outside Austin. Even the better of those offers forced the schools and their employees to absorb a 24 percent rate increase. This academic year, only one company put in a bid. Monthly premiums shot up again, this time by 21 percent.
“We had to take that bid—we didn’t have a choice,” Ms. Ward said.
Districts across the country are finding themselves in similar binds as the cost of private health insurance soars. Many districts are desperately looking to state governments, their employees, and each other for solutions.
Between 2000 and 2001, premiums for employer- sponsored health insurance rose by 11 percent, increasing the average monthly cost to $221 for single coverage and $588 for families, according to the Kaiser Family Foundation, a research organization based in Menlo Park, Calif., that tracks health-care issues. The average increase in premiums was the largest since 1992.
But many school districts were hit with far bigger increases.
The Bourbonnais Elementary District 53 in Illinois saw a 45 percent rise in the monthly premiums for family health-insurance coverage this year for 50 of its teachers. In the Spearfish, S.D., school district, officials recently warned employees to expect as much as a 33 percent rate increase in February, after a 15 percent jump in premiums just last March. And the Boulder Valley, Colo., schools are bracing for cost increases of 25 percent to 30 percent by the end of this school year.
“It’s a national problem,” said John D. Musso, the chairman of the human-resources and labor-relations committee of the Association of School Business Officials International in Reston, Va.
Based on his experience as a deputy superintendent of the 17,500-student Pueblo, Colo., district, Mr. Musso said the cost increases stem from a myriad of factors—some within districts’ control, some not.
“The insurance companies say [the employees of] schools have a higher propensity to use their [insurance] plans than other types of businesses, ... and school districts generally have a high usage of prescription drugs, from ulcer medicine to depression medicine,” he said. “But they also say the cost of doing business in the medical field is soaring.”
Getting Together
The budget-busting health-insurance increases are forcing some districts to get creative.
Mr. Musso’s district is considering forming an insurance cooperative with other government agencies in Colorado’s Pueblo County.
The larger the insurance pool, the better it absorbs catastrophic claims like those for heart-attack and cancer treatment that drive up rates dramatically for small employers, Mr. Musso said.
A similar plan is under way in Pima County, Ariz., where four Tucson school districts have bought into a common health-insurance pool to dodge yearly rate increases ranging up to almost 90 percent.
The Amphitheater, Catalina Foothills, Flowing Wells, and Sunnyside districts are each paying into a single plan called Arizona School Health Insurance Programs.
The districts withdraw money to pay for employees health-care expenses, and employees are given a choice between an HMO-style option and a more expensive preferred-provider plan.
Not only did the new insurance approach offer lower rate increases—50 percent, compared with the 89 percent increase a private insurance company had offered the 17,000-student Amphitheater district—but district officials also say they have more detailed information about how employees are using the plan.
“We were faced with absolutely astronomical rate increases this year, but we never really saw the kind of utilization information that would have explained why,” said Todd Jaeger, the general counsel for the Amphitheater schools. “The insurance company just told us they didn’t have that kind of information.”
Thanks to regular, detailed reports from an outside consultant, “we are now in a position where we know exactly what we are spending our money on,” Mr. Jaeger said.
Those details should help the schools find cost-cutting measures, such as buying popular prescription drugs in bulk or creating wellness plans that stress preventive measures like flu shots, proper diet, and exercise, Mr. Jaeger said.
As for whether the new plan will shield the districts from the vagaries of the private-insurance industry, school administrators are taking a wait-and-see approach.
“I think we need to take baby steps, and make sure we can get this to work and provide the quality care our employees are used to,” said Stuart J. Meinke, an assistant superintendent at the 6,000-student Flowing Wells district. “And we’ll need to find out [this summer] what the rate increases for neighboring districts look like compared to what we’re experiencing, and decide what to do from there.”
States Step In
With no end in sight to the current jump in health-insurance costs, some state governments are intervening to help districts.
In Texas, the legislature opted late last year for a $1.24 billion school employee benefits package designed to ease the health-insurance woes of small school systems and eventually bring all 1,040 districts into one statewide plan. (“Texas Gets Closer to Health Plan for Teachers,” May 9, 2001.)
Districts with fewer than 500 employees—like Ms. Ward’s Dripping Springs schools—will have to join the new plan when it kicks in next fall. Districts with 500 to 1,000 employees will have the option of joining in the fall, and larger school systems will be allowed to join in the fall of 2005.
The plan requires every district to spend $150 a month per employee on health insurance. The state will contribute $75 a month toward the monthly premium costs and give every teacher and school employee an additional $1,000 a year to use for additional health insurance costs, a medical savings account, or a pay increase.
Texas’ plan will be designed and administered by the state teachers’ retirement system.
Although employees must pay extra for family coverage, the new law won the support of the Texas State Teachers Association, an affiliate of the National Education Association. The sheer size of the pool of insured individuals under the plan may help control rate increases and lessen the impact of catastrophic claims, union spokesman Richard Kouri said.
“There are going to be 572,000 employees and [their] dependents in that plan, and that should hopefully have a substantial impact on the market,” Mr. Kouri said. “The rate increases have been anywhere from 10 percent to 20 percent, ... and school employees were picking up substantial portions of their health insurance—some up to 50 percent or more in smaller districts.”
But some superintendents, including Ms. Ward, are wary of the state’s plan.
“It’s a good idea conceptually, yes, but in actual practice I think it’s going to be a nightmare,” the Dripping Springs superintendent said. “Teachers will not have as good a plan as they do now, and the state will have to go for the big insurance companies because they are the only ones who will be able to handle such a big group.”
Still, she said, “this is a beginning for the state to take responsibility. Maybe in the future, [school employees] will have a plan as good as the one state employees have. If we don’t ever start, we won’t ever get there.”
The National Education Association is taking a similar view of the insurance problem.
The spiraling costs, combined with districts’ tendency to pass at least a portion of those rate hikes on to employees, have led to stalled contract negotiations and teacher strikes in a number of districts.
Teachers in the Middletown Township schools in New Jersey, for example, walked off the job late last year after district officials proposed increasing the amount employees pay for their medical insurance. The plan was expected to save the district an estimated $200,000 in the first year. (“End of Strike Opens Jail Cells for N.J. Teachers,” Dec. 12, 2001.
Educating Affiliates
Convinced that the insurance problem cannot be solved at individual bargaining tables, the NEA is trying to educate its affiliates about the reasons for the rate increases and possible solutions.
“Our view is we have to somehow weigh in on containing the costs,” said Don Morabito, a senior associate in the NEA’s collective bargaining program.
One plan the 2.6 million-member union is pushing for is districts or states to form larger insurance pools that can range in size from just three or four districts, like the arrangement in Arizona’s Pima County, to every school district in a state.
The idea is also beginning to take hold in states such as Idaho and Maine, Mr. Morabito said, where local unions and district officials are meeting to hash out the details.
The NEA is also trying to educate its members about less costly alternatives to the brand-name drugs they see advertised on television. Prescription drugs account for a large portion of the insurance increases that districts and other businesses are seeing, and NEA officials stress the purchase of generic drugs and wellness education as just two ways of cutting those expenses.
For any of the potential solutions to work, “the biggest challenge is we have to convince our members,” Mr. Morabito said. “What we think is working is that [school districts and local unions] have finally gotten tired of knocking heads, and we say, ‘Look, this isn’t our problem, this is a bigger problem, and we need to work together to deal with it.’”
