Earlier this summer several questions were posted on the Superintendent’s Discussion BLOG that related to the school district’s health benefits. Nothing seems more dynamic today than issues related to health insurance and how we are affected by raising premiums, changes to insurance coverage, and national health care reform. The purpose of this new BLOG, is to address the questions that were previously asked, provide up to date information, and to provide a place where you can ask questions, discuss related issues, and receive current information focused on our health benefits.
As you read this first posting, keep in mind that there are multiple factors, opinions and complexities facing, not only AUSD and individual staff members, but with the nation as a whole related to Health Care Reform. We have attempted to provide the best information that we have available at this time and continue to work together as a team to evaluate and consider changes, options and alternatives as more information becomes available.
We hope you will participate in this important ongoing discussion.
Health Insurance Purchasing for AUSD:
When purchasing medical insurance for employees, AUSD must purchase benefits that best suit the needs of the entire District population as a whole, rather than individually. While it is true that some of our employees may be able to find less expensive medical benefits through the individual marketplace, the plans that correspond to these rates are not suitable for the general population of AUSD. The individual plans discussed are a high deductible PPO plan ($5,000 deductible), which is considered to be catastrophic coverage. Plans offered by AUSD offer richer benefits and therefore have a higher premium attached to them. It should also be noted that when purchasing individual insurance, the plans are rated based on the applicant's medical history and geographic location. Therefore, not everyone would receive the same rate and in some cases, an individual may not qualify. Overall, it is typically best to purchase insurance through a group plan, rather than an individual plan.
AUSD purchases medical benefits through one of the largest self-funded purchasing pools available to school districts - SISC (Self-Insured Schools of California). SISC is a Joint Powers Agreement administered by Kern County Superintendent of Schools Office. By purchasing our medical benefits through SISC, AUSD is able to eliminate carrier administrative fees and premium taxes on the PPO plans. The HMO plans through Blue Shield and Kaiser are part of a large fully-insured pool with SISC, thus allowing AUSD to benefit from lower administrative costs and pooling point charges due to the larger population we are rated with. You can learn more about SISC on their website: http://sisc.kern.org/.
SISC requires employees to be enrolled in a medical plan as a way to stabilize the SISC pool; all SISC participating districts are required to mandate medical enrollment for all employees. This spreads the risk amongst high users and low users, which allows for the most stability in rates and renewals. If opt-outs were allowed, it is likely that only those who "need" medical insurance would enroll, thus causing utilization costs and rates to increase. SISC has agreed to permit AUSD to continue allowing employees who have group sponsored medical insurance elsewhere to opt-out and enroll on their spouse's plan. Proof of other group sponsored insurance enrollment is required by AUSD and SISC. Additionally, employees have the option not to elect family coverage. AUSD employees can enroll as employee only coverage under one of the plans offered by AUSD and then opt to purchase individual coverage for his/her spouse and/or dependent children elsewhere. In this case no additional proof of coverage is required. It is not required to purchase family coverage through the District if an employee chooses to purchase it elsewhere.
Currently there are a total of 562 employees covered under the District’s medical program, 366 AUSD are enrolled in an HMO (249 in Blue Shield and 117 in Kaiser) and 191 are enrolled in a PPO.
The High Deductible Health Plans (HDHP) mentioned previously in the blog are PPO-based plans. There are substantial plan changes for people moving from an HMO to a HDHP; this is a change that cannot happen immediately and is something that would need to be done over the course of 2-3 years. The District and Insurance Committee will continue to explore this type of option.
As mentioned in #1, the individual HDHP options have approximately a $5,000 deductible, meaning that for services other than preventive care, employees are responsible for 100% of the costs up to the $5,000 deductible before the medical plan will kick in. This includes prescription drugs, as well.
These plans work great for families and individuals that are healthy and only visit the doctor once a year for annual preventive exams, but will likely be a financial burden to those who use and need more frequent medical and prescription drug services.
As you are aware medical premiums are increasing. The trends currently being reported by the medical carriers are 15%-18% increases for this year. AUSD’s lower trend is due to the participation in the SISC pool. The higher trend is due to a couple of factors. Please click here for more information.
Arcadia Unified School District has experienced lower trend increases in health insurance premiums than average medical trend. For example medical trend for 2010-11 is being reported to be 15% to 18% for one year. Arcadia Unified School District premium increases for this year is below this trend as noted in the chart below. Over the last 3 years totaled 19.5% for the Low Option PPO and 22% for the HMO or an average per year of 6.5% for the Low Option PPO and 7.3% for the HMO. The table below shows the actual premium increase each year.
Low Option PPO
COBRA (District health benefits that are available for purchase to employees who separate employment with the district) subsidy - ARRA (American Reinvestment and Recovery Act) passed and made COBRA benefits available at a lower premium for those employees that were "involuntarily terminated" (i.e., laid off). People are now able to enroll on COBRA and pay only 35% of the premiums, rather than the full 100%. This caused more people to enroll on COBRA and since the job market was unknown, people were using their COBRA benefits more than actuaries or what underwriters had seen in the past. This increased utilization in COBRA benefits caused the carriers to cover more claims than expected, thus raising premiums.
Health Care Reform - there are many changes that will be occurring over the next few years in regards to Health Care Reform. Carriers however are starting to adjust their prices for the anticipated increase in their costs due to Health Care Reform. The two additional immediate changes are: 1) a requirement to continue to insure dependents up to age 26 and 2) the expanded definition of "preventive care" that will be covered at 100% (no cost to employees). These changes are causing the insurance carriers to make several administrative updates to their plan documents, contracts, systems, etc., thus also contributing to the increasing benefit cost trend.
Health Care Reform is and will continue to have an effect on our group plan coverage as well as individual plans employees and their dependents may purchase outside of AUSD. Please click here for more information.
Many of the initial changes under the Health Care Reform legislation address creating coverage for those Americans currently without medical insurance coverage. To allow this, high risk pools are being created and when ready, will be available to those with pre-existing conditions (asthma, cancer, etc.) who have been without medical insurance coverage for the last 6 months. These high risk pools will stay in place until 2014, when the government-run insurance exchanges become available and health insurance will be a requirement for all Americans (to avoid tax penalty). It should be noted, however, that pre-existing conditions have been waived for dependents under age 19, effective for plan years beginning on/after 9/23/2010. Determining premiums of individual plans did change – the Department of Health and Human Services is in the process of developing a review process for "unreasonable increases in health insurance premiums." This process will cause insurance companies to justify unreasonable increases, prior to implementation. It does not, however, disallow the insurance companies to stop determining premiums based off of utilization (how often you use and your cost of that use). Another change to rating due to Health Care Reform is that insurers must not discriminate in setting rates for an individual. Currently, individual plans increase significantly in rate as you age, Health Care Reform restricts the difference an older individual pays vs. a younger individual. The older population cannot pay more than 3 times that of a younger individual. To accommodate this new law, young people looking for individual insurance plans will likely see a large price increase for individual insurance coverage in order to subsidize the older population enrolled in these individual plans. Rates for individual insurance coverage can vary by:
Individual or family coverage
Rating area (geographic regions)
Age, except the rate shall not vary by more than 3 to 1 for adults
Tobacco use, except the rate shall not vary by more than 1.5 to 1
The District strives to provide the best possible medical insurance coverage and service to AUSD employees while keeping costs affordable and stable.
Balancing the Needs of All Employees and Cost Savings at the District Level:
The AUSD Health Benefits Insurance Committee was formed many years ago and is composed of representatives from all employee groups. They review carrier proposals, rates and plan designs on an annual basis and make, in a relatively short period of time, challenging recommendations based on what is believed to balance the needs of all employees. This year the Insurance Committee discussed at great length how to balance premium increases for all employees vs. making benefit changes for the 2010-2011 plan year. The Committee recommended and the District agreed to balance cost increases over both premiums (better for those who use medical more often) and plan design changes like increasing deductibles (better for those who rarely use their medical). If plan design changes were not implemented, premiums would have increased at a significantly higher rate. For example the HMO employee only would have increased 10.4% without plan changes versus our current increase 4.2% with plan changes (for Kaiser a 9.0% increase versus a 5.0% increase).
AUSD joined the SISC Pool in January 2009. SISC’s philosophy, goals and interest matched that of AUSD as they offer plans similar to those employees had in the past, at lower premiums and allowed AUSD to continue the opt-out option (when proof of group sponsored medical coverage is provided). Please click here for more information.
SISC is a large pool specializing in schools, and therefore provides for competitive group plan rates. The pool currently has 382 school districts and 38 county members for a total of 235,253 members covered. The pool has more than doubled since AUSD joined 2 years ago with approximately 90,000 members. SISC is growing and continues to be competitive.
An excerpt from SISC’s philosophy of “Schools Helping Schools” addresses the issue of why it is important that all members participate in the plan:
i. Pooling resources provides schools with a more stable long term insurance solution than purchasing from commercial carriers that may be competitive today and out of reach tomorrow. SISC provides a very cost effective rate environment which reflects its commitment to preventing losses and controlling costs. This keeps millions of dollars in the classroom that would have otherwise been paid out in premiums.
In an attempt in 2008-2009 to further increase the cap (the amount of money that is committed annually for employee health insurance premiums) for ATA to $5,500, the bargaining unit requested and the District agreed to calculate the cost savings of maintaining the old cap for those who opted out of medical coverage (thereby not increasing their cash back) and adding that savings to the cap for only those employees who were actually purchasing insurance therefore helping to control out-of-pocket costs. In an attempt in 2008-2009 to further increase the cap (the amount of money that is committed annually for employee health insurance premiums) for ATA to $5,500, the bargaining unit requested and the District agreed to calculate the cost savings of maintaining the old cap for those who opted out of medical coverage (thereby not increasing their cash back) and adding that savings to the cap for only those employees who were actually purchasing insurance therefore helping to control out-of-pocket costs. Click here for example.
Employee A opts out of medical in 2007-08 and again in 2008-09 because they have proof of coverage elsewhere. The cap in 2007-08 was $4,955 with a maximum cash back after purchase of dental and vision of $4,660. It was agreed not to increase the cash back to those employees opting out in 2008-09 and use it to help offset increasing cost of benefits for those purchasing their medical through the district. Therefore, the maximum cash back for an employee opting out continues to be up to $4,660.
Employee B purchases medical, and in 2007-08 and the district contributed $4,955 to offset their cost. Beginning in 2008-09 the district contributes $5,500 to the cost of benefits to help offset increases.
For many years the District has offered group health care meetings to provide data related to current medical trends, discuss issues and answer questions. Recently attendance has been low at these meetings (as few as 10 or less staff in attendance). Therefore, we did not hold a meeting this year. However, we would be glad to do so if more interest comes forward and we intend to use the blog and this posting as an alternative means to provide information and answer questions.
People have had questions about job-shares and part-time employees being eligible for full benefits. We will be talking about this more fully to address the many components and points of view related to this subject.
SISC, the Health Benefits Insurance Committee, and the District are committed to reviewing premium cost and plan designs to continue to balance the needs of all employees while trying to maintain insurance that is reasonable and competitive in future years. Tomorrow’s options and choices may be very different than today, depending upon the constantly changing dynamics of the health care industry.
Balancing Individual Needs and Cost Saving Ideas:
Consider utilizing Flexible Spending Account for higher co-pays, etc. As a reminder, AUSD has a health care Flexible Spending Account (FSA) available for employees to elect. This is a one way for employees to set aside pre-tax dollars to use on qualifying medical expenses such as prescriptions, doctor's office visits, ER visits, hospitalization, etc. By using a FSA employees may be able to better manage changes in their medical benefits and related expenses for 2010-2011. Note that the FSA is a "use it or lose it" option so if you elect to join, you must plan carefully for any upcoming medical expenses that may occur over the next plan year.
Consider purchasing a less expensive dental plan. The difference in premium can save as much as $420 per year for single to $1,789 for family (for teachers).
Consider purchasing single coverage through the District’s SISC plan, and purchasing family coverage on your own if less expensive rates are available to you. Do ensure that you understand the coverage you are purchasing. Many employees have found this to be a viable option. Lastly as you are making this decision, please consider that when purchasing insurance through the District, you are paying the premium with pre-tax dollars (you do not pay taxes on the amount you are paying through payroll deduction resulting in a savings depending on your tax bracket).
We realize this is a long response; however, the issues and questions brought forth are complex. We will continue to communicate and make every effort possible to keep staff up to date about our various health benefits and how changes might affect them. Balancing the needs of employees who utilize health insurance and those that do not often access it, is a difficult challenge. We are committed to addressing this challenge and involving you in this process.