Prepared Text for Board Meeting  September 24, 2007

Marc A. Schare,

614 791-0646 Home

614 791-0067 Work. 

marc9@aol.com

 

Tonight, we vote on whether or not to accept the administrative recommendation for employee health care. While perhaps not obvious from the agenda, this single item is the second largest expense that we as a school district has and the recommendation calls for increasing that expense from roughly 9 million dollars in 2007 to roughly 11.5 million dollars in 2008, an increase of approximately 2.5 million dollars.

 

The administrative recommendation calls for an increase that more then doubles the amount projected in the forecast that this board approved only 4 months ago. In very rough numbers, this is an unplanned, unforecasted 1.25 million dollar transfer of funds that could have been used for programs that directly benefit kids and enhance our product in  favor of an item that clearly does not directly benefit children.

 

Quoting from the Superintendent’s Task Force report in 2005,

 

The current benefit plan is very rich, and although in line with that offered by many

comparative school districts, the benefit plan is much more generous than private

employer plans.

 

So I think it is fair to characterize the existing plan as a Cadillac health care plan.  Given the fixed nature of a school district budget, I think it is important to first focus on the choices that we are making this evening.

 

For the unforecasted increase of 1.25 million dollars, we could offer full day kindergarten at no expense to the parent.

 

For the unforecasted increase of 1.25 million dollars, we could offer a different foreign language in each of our elementary schools.

 

For the unforecasted increase of 1.25 million dollars, we could offer 25 “start up” grants of 50K each to teams of teachers for new and innovative programming throughout the district.

 

Now, this item was presented on the agenda as being fairly routine, so much so that y’all are probably wondering why I am talking about it. We as a board agonize over whether to spend $15,000 on middle school baseball, we debate endlessly the wisdom of whether to spend $10,000 for the opportunity for start up grants but when an item comes up that costs us 11.5 million dollars, because it is “health care”, it is expected to be rubber stamped.

 

I acknowledge that this is very difficult to talk about. Discussing health care issues in a public session is very emotional, especially when you consider that we are talking about people – our employees – who enable us to strive for absolute excellence every day. As a member of this body, however, I must, as distasteful as it is for me personally, consider the issue in the abstract. In doing so, I’m going to make a special request this evening. It will be very easy for my comments to be misinterpreted as “Marc wants to take away our health care”. I do not. What I want to accomplish is to maximize the value obtained from every taxpayer dollar while we strive to deliver the best product we can at a price that is affordable and sustainable to the Worthington taxpayer. This is, I believe, a goal we all share. Please take my comments in that spirit.

 

So let’s talk about it.

 

We know that health care is a societal problem and is in no way confined to Worthington Schools, however, as the governing authority for Worthington Schools, we have to address the issue. Let us start with some statistics from the 2007 Kaiser report. As you might have read in the Dispatch, Kaiser conducts a rather extensive annual survey of employer provided health care. This year, Kaiser reported the average premium for an HSA type plan was $9666 (Page 135) and the average increase between 2006 and 2007 for a high deductible plan was 6.3% (Page 17). In addition, according to the National Conference of State Legislatures, the average plan increase for public sector health care benefits between 2005 and 2006 in Ohio was 15%.

 

We as board members were presented with a spreadsheet that showed 4 quotes for employee health care for calendar year 2008. The highest quote was from the incumbent carrier, United Health Care, at 11.5 million dollars. The lowest quote was from Medical Mutual, coming in at 11.05 million dollars, a difference of roughly 450K. These quotes represent percentage increases between 23% and 28%.  These quotes are all public record. In addition to the quote, the bidders all submitted fairly lengthy responses to a questionnaire by the district’s insurance committee which stated, in part, that there were no significant plan deviations, meaning that we would essentially be buying the same plan from each carrier.

 

 This leaves us with at least three questions that we need to explore. First, the increases of 23% to 28% are well above the averages, either for the country as a whole or for public employees in the state of Ohio. In fact, the recommended increase is over 4 times the national average and almost twice the state average for public employees. Is this really the best that can be done?  Second, the administrative recommendation is to accept the highest of 4 bids. As I mentioned, the difference between high to low is $450K and that is real money that we could be using to fund other programs. Why are we not accepting the low bid? Finally, the premium in the administrative recommendation is a whopping 19% higher than the average for HSA plans in the Kaiser report.

 

Let’s start with the question about the rate of increase and the overall cost of the plan. Here, we get a partial answer on Page 36 of the United Health Care proposal. Quoting their response to question 3 which read: Please provide additional strategies for insuring/funding Worthington’s medical coverage for the next 36 months, UHC, who was in a position to know, writes:

 

Evaluate the current plan design and funding levels of the Health Savings Accounts. The significant contribution by the school district into the Health Savings Account coupled with a 100% plan once the deductible has been satisfied has resulted in increased utilization and has not changed member behavior.

 

This statement is important for two reasons. First, it implies that the cost of the plan is directly related to member behavior, thus, we *can* do something about the health care crisis if we can muster the will to do so  and second, it proves that the policy embedded in the 2005 negotiated agreements of swapping higher salary for hoped-for changes in health care behavior has not yet worked.

 

Turning our attention to the second question – why are we accepting the highest of 4 bids, Mr. McCuen has already partially explained the administration’s rationale. It can be summed up in five  parts:

 

1) If we go with the lowest bid every year, eventually, no one will want to bid on our contract.

2) United Health is throwing in a “wellness care” program for free

3) The other carriers are low-balling their rate to get the business.

4) There will be transition costs associated with the switch

5) There will be health care disruption associated with the switch

 

Here are my responses. First, the administration cites the experience that Hilliard had when they started accepting the lowest bid every year, but Hilliard is one district out of 612. We should have more than one anecdote before abandoning a policy of accepting the lowest bid. Second, while UHC is throwing in a wellness program, the other carriers also have  wellness programs so this should not serve as a differentiator. Third, to the issue of other carriers low-balling their rates, this may or may not be true, however, I’ll note that UHC, by definition, low-balled their rate last year to win the business. Fourth, I did attempt to get a measure of the transition costs associated with the switch and was told that the number was to difficult to even estimate and finally, the health care disruption caused by different plan doctors would be, according to actual claim data analyzed by the carriers and reported in the various proposals, less than 10%.

 

There are two other options which, if considered for 2008, were not surfaced to the board for consideration.  The first is self funding the plan. Worthington taxpayers deserve to at least understand the cost  of that option. The second is changing the deductible, not as far as the employee is concerned but as far as the insurance company is concerned, and seeing what impact that might have had on premium.  

 

So, where is all this going. Based on the limited information that has surfaced to the board on this issue, we are expected to rubber stamp this proposal based on the say-so of our insurance committee, their advisor and our treasurer. I have concerns about the process by which we have come to this point, and I fully acknowledge that my concerns originate because I don’t understand the process. In the three weeks since the BOE received the recommendation, I’ve tried to peel back the layers and while progress has been made, the process is still very murky. Here are some concerns. There is no taxpayer representative/advocate on the insurance committee. Perhaps  a member of the board of education could be appointed annually at our organizational meeting to participate in the insurance committee function. The insurance committee is a creature of the board, and created by board action, therefore, their meetings should arguably be subject to the sunshine law. The insurance committee has made an 11.5 million dollar recommendation and there isn’t a person in this room other than committee members that understands the thought process behind that recommendation. The entire process needs to be de-mystified.

 

As to tonight’s vote, here is the problem. Aetna says they need 60-90 days for full implementation, Cigna proposed a timeline of 3 ˝ months and Medical Mutual’s proposal indicated at least 6 weeks. If we were going to do this and wanted to guarantee a smooth transition, we had to do it a month ago. I would prefer to table this item for 2 weeks and request a presentation from our insurance advisor or our own insurance committee, but I am not sure if we have the time to do that. If our treasurer says we do not have the time, I am going to vote in favor of the administration proposal only because we no longer have any choice. If we do have the time to arrange those presentations and perhaps develop a comfort level with the administrative recommendation, that would be my choice. Either way, I want to summarize what we need to do in my opinion moving forward.

 

1) We need BOE representation on the insurance committee.

2) We need to understand in far greater detail the correlation between member behavior and plan cost and we need to impress upon our employees the importance of reducing claims through wellness programs and other methodologies.

3) We need to analyze our claims data to arrive at the optimal plan design

4) We need to analyze whether self funding is desirable.

 

Folks, failure to do this will have a negative effect on kids in the district. Here is why. Sometime in 2008 or 2009, we are going to put an operating  levy on the ballot. If we do not get a  handle on this spiraling expense, it can be correctly stated that a large part of the dollars raised by the levy, perhaps all of it, will be going towards paying for health care costs for employees. I do not believe the citizens in the Worthington School District will vote for a levy whose primary justification is the continuation of a superior health care benefit that those very citizens can no longer afford for themselves. We need to meet them half way if we expect them to support us.

 

I thank the board for its indulgence.