School health coverage rates take big jump
By Julia Silverman, AP Education Writer
SALEM - School districts across Oregon are bracing for an unexpectedly steep increase in health care costs for the 2007-2008 school year, triggering higher out-of-pocket costs for nearly 29,000 teachers and other school employees.
The 17.84 percent increase will hit the 182 districts that participate in the Oregon School Boards Association health insurance pool, plus a handful of community colleges, charter schools and education service districts.
And the big increase has raised some eyebrows around the state Capitol, especially since the school board group's rate increases have been markedly lower for the past three years - including just 1.4 percent in 2006 - while they were fending off a Democratic proposal to absorb all school employees into a single statewide health insurance pool, aimed at saving money.
“It does seem odd that starting in 2004, after we introduced legislation, their rate increase was in the single digits, but both before and after it was in double digits,” said Jim Sager, Gov. Ted Kulongoski's education policy adviser. In 2005, the rate increase was 8 percent; in 2004, it was 9.26 percent; in previous years, it has hit highs of 26 percent.
With both the House and Senate under Democratic control this year, the statewide educators' benefits pool passed this session. The new system expects to absorb nearly every district in the state by 2010, putting the OSBA pool out of business.
That's a big blow for the school boards association, which uses the money to help local districts during contract negotiations and to lobby on education funding and policy in Salem. The group got about 50 percent of its budget from the fees districts paid to belong to its health insurance trust; about 64 percent of the state's districts participate.
Now, that revenue source is ending, said Ron Wilson, OSBA's associate executive director, which is partly why, though OSBA expects to have about $50 million in savings from its health insurance trust by the fall, the group's board decided not to spend any of its reserves to buy down the 17.84 percent rate increase.
“Given that the program is ending, and it's a nonrenewable resource, their decision was to preserve those dollars,” Wilson said. The reserves will be earmarked for helping districts with the long-term costs of health insurance and with government policy, he said, while interest on the reserves will be used for the group's operating budget, including helping school districts with negotiations.
Krista Parent, superintendent of the South Lane school district, said the higher-than-expected rate increase means that her district is facing $300,000 more in health care costs than they'd planned for.
“We weren't really expecting this,” Parent said. “The last three or four years, historically, things have been pretty good. We will have to make adjustments - we are considering reducing various programs, but we haven't finalized anything.”
Teachers and school employees could particularly feel the bite, since many districts have sought to cap the percentage of health care costs that they'll cover, leaving it to employees to pick up the remainder. Others have asked employees to accept higher deductibles.
Tonya Arnold, a language arts teacher at the St. Helens school district, said her district's ongoing contract negotiations have been based on estimates that coverage rates would increase about 10 percent, not nearly 18 percent.
“I knew when we went in that insurance was going to be a big-ticket item,” Arnold said. “But from what is happening with the pool, insurance will play an even larger role in where we will go from here. We need to get the members the coverage they need, at a price they can afford.”
The ongoing fight against the statewide pool was “discussed” when the health insurance trust board members met to set the low, 1.4 percent rate in 2006-2007, Wilson said. But the real drivers of that unusually low rate were overly optimistic cost estimates by trust members and the group's insurance carrier and consultants, he said, and a decision to spend some reserves to keep rates down, given that the reserve fund was growing.
Craig Prewitt, a Phoenix-Talent school board member who chairs the OSBA's health insurance trust, said rates have gone up since because the pool added new members who made more claims.
And he argues that not spending the reserves will keep the school boards group viable for any future eventualities.
Wilson and Prewitt both said that using reserves to buy down this year's rates could have created eventual trouble for the statewide pool, because of a statutory requirement that in the first year districts won't pay higher rates than under their old plans.
“If you go into (the statewide pool) with an artificial low, in the second year you'd force them to balloon costs on the district,” Wilson said.
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