October 09, 2013 - In a discussion by the Mehlville Board of Education about how to address the mounting cost of health insurance claims and a $2.4 million shortfall in the district's self-insured fund, President Mark Stoner suggested eliminating the district-run health insurance program entirely.
Instead of changing insurance providers and replenishing the district's claims fund, Stoner suggested at the Sept. 26 board meeting that the board end the district's insurance program and give monthly stipends to employees, who would then buy their own insurance. The cost to the employee would be about the same, Stoner added, but the district could save about $4 million a year by not providing its own insurance.
"The district is not equipped to make long-term decisions in a complicated and unpredictable area of health care, involving a significant and rapidly rising area of the budget," Stoner wrote in his proposal.
In his motion, Stoner suggested that board members and administrators study the issue over the next month and decide on insurance plans in October. Stoner's motion was defeated 5-2, with Stoner and board Secretary Rich Franz in favor.
The 17 employee, retiree and union representatives that comprise most of the Insurance Committee have a "strong conflict" when proposing solutions, Stoner said, and the board has delegated its responsibility to fix its insurance issues to that panel.
"So the same organization (the National Education Association) who paid for the people to get elected that gave us 'Obamacare' ... are now telling taxpayers that they have to pay the additional premium because of 'Obamacare,'" Franz said.
One board member, Elaine Powers, sits on the Insurance Committee, and Stoner is an alternate member.
Under Stoner's plan, the district would pay employees yearly stipends of $2,500 for an individual, $5,000 for families and $1,000 for retirees, divided over 10 months, to purchase their own insurance coverage. After the first year, retirees would not receive a stipend under the plan.
The board voted 4-2, with one "present," to accept the Insurance Committee's recommendations and switch from Coventry to CIGNA, which results in a $235,000 savings this year to the district and its employees. Stoner and Franz were opposed, while Ron Fedorchak voted "present."
In the same vote, the board also accepted the committee's recommendation that the increased insurance premiums be split with the district paying 40 percent and employees paying 60 percent — an additional $800,000 expense to the district and an additional $1.2 million paid by employees and retirees.
"... From an outsider looking in, it's a pretty decent plan. It's a fairly low deductible. It's fairly low co-pays," Powers said. "... It's still an increase over what there was, but I think that as discussion progressed, there was some understanding among the members of the committee that, yeah, I mean costs are going up in health care regardless. And this isn't anything that is targeted toward employees. This is the reality of what we're living in right now in this country ..."
That extra $2 million contributed by employees and the district, plus $500,000 the district will add to the fund, will make up for the rising cost of coverage for the upcoming year and replenish the district's self-insurance fund. The fund has declined each of the past five years due to the rising cost of health claims, decreasing by $660,000 this year after an especially difficult claims period. Since the recommended fund balance target is $2.2 million, if nothing is done, the district will be $900,000 short of that target this December.
In addition, the school district's insurance advisers project that Mehlville's health insurance costs will increase by 13 percent, or $1.5 million, next year.
In introducing his proposal, Stoner said, "Health insurance costs are rising dramatically with the implementation of the Patient Protection and Affordable Care Act, otherwise known as 'Obamacare.' According to the U.S. Supreme Court, the costs associated with 'Obamacare' are considered a federal tax ... Additionally, the Mehlville School District has suffered repeated negative claims experience. Due to the additional tax burden and repeated negative claims experience, the district needs to look at an alternative solution for this portion of the compensation package."
Superintendent Eric Knost questioned why Stoner did not provide details of his plan in advance.
"What do we do in the meantime as far as going forward for this year?" Knost asked. "This is extremely time-sensitive ..."
Meetings to enroll employees in the new health plan will start Oct. 21, in anticipation of starting the new health plan Jan. 1, Chief Financial Officer Marshall Crutcher noted.
"So the assumption is that the board is going to approve this, before the board has even been delivered this?" Stoner asked.
"... Are we under any legal obligation to provide health insurance?" asked Franz.
"Are we seriously talking about this?" Knost asked.
The board is not required by law to provide health insurance, Crutcher later noted.
Although Franz and Stoner requested a month to look into the issue, Knost emphasized that district staff have to use this month to prepare for the new insurance plan.
Powers had urged the Insurance Committee to study the issue and meet again in October before making a decision, but the committee went ahead and approved its recommendation at its September meeting.
"Why is it urgent tonight?" asked Fedorchak, who suggested having a special meeting in two weeks about the issue.
The Insurance Committee already made its recommendation and that should be respected, although the board should look at other options that may be available for next year, Powers said. She noted that major revisions to the calendar year had also been presented too close to the time they needed to be approved to be overhauled, as some board members wanted.
"... This may be one of them, but this may not be the only one," she said. "And in the meantime, I believe we do need to move forward with a more traditional approach so that we get it moving. Does that mean the conversation stops? I don't think it has to. But I do not — cannot support stopping what's been done on just this ..."
While he appreciates the work of the Insurance Committee, Franz said the board is under no legal obligation to approve its recommendation.
But any delay in deciding on employee health insurance worried Knost.
"... So if we can't get it done, you're OK with our employees going without insurance come January?" he asked.
Stoner clarified that employees' health benefits would not end — they would just buy their own choice of insurance through the marketplace using the stipend from the district.