W. PENNSYLVANIA Expense shakes consortium of schools

Two members of the insurance consortium have already said they want out.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- Jamestown Superintendent David Shaffer said his school district has saved a lot of money by being part of a health care consortium.
Jamestown has been a member of the Western Pennsylvania School Health Care Consortium for seven years and has saved about $8,000 on insurance costs for each of its 70 employees, about $560,000, over that period, Shaffer said.
At a time when health insurance costs in the nation were going up about 15 percent a year, the school consortium's costs rose only about 9 percent a year, Shaffer said.
Even so, the consortium is in a legal battle to keep itself intact.
Two of the 12 school districts that are members of the consortium, Sharon and Reynolds, said they will leave the group at the end of its fiscal year June 30, citing displeasure with its performance this year and with their inability to get answers on how a consortium cash flow problem resulted in a special $4.6 million midyear assessment against its members, including $163,000 for Shaffer's district.
The consortium has asked Mercer County Common Pleas Court for an injunction to prevent Sharon and Reynolds from leaving, arguing that neither followed consortium bylaws requiring six months' written notice of their intent to leave.
Their leaving now would mean additional expense for the remaining members to cover operating costs in the new fiscal year, the consortium said. The case is pending.
Sharon, Farrell and Reynolds had to borrow money to cover their shares of the special assessment and that cost can be expected to be passed on to their residents in the form of higher taxes.
Sharon officials said the consortium saved their district about $734,000 in health insurance costs over its seven-year participation. However, Sharon's share of the special assessment was $681,000.
Dr. Anthony Trosan, Reynolds superintendent, said Reynolds also saved money through the consortium, though he had no estimate of how much.
The school board feels it is paying too much now, particularly with its $412,000 share of the assessment and projected premium increases next year, he said.
Both Sharon and Reynolds have voted to join the Midwestern Health Combine, and though Trosan said costs will be about the same, Reynolds feels it will have better control over future costs with the new group.
Staying put
While no one was happy with the additional assessment, officials of some of the seven other local districts in the consortium agree with Shaffer's assessment of its performance and value.
"We're staying," said Commodore Perry Superintendent Oliver Rodax.
His school board had no discussions about leaving, he said.
It's unlikely schools can get a better deal elsewhere, he said, noting that Commodore Perry saved money through the consortium and put some of it in reserve for an emergency. It tapped that reserve to cover its $138,000 share of the assessment.
People need to realize that self-insurance carries the risk of an occasional bad year, Rodax said, adding, "Those who weren't prepared for it are having a bad time."
"We have had savings with the consortium. This happened to be the unusual year," said Dr. Michael Hink superintendent of Neshannock Township School District in Lawrence County.
Neshannock, which had to come up with $276,000 for the special assessment, joined the consortium four years ago and the rules say members must stay in the group at least five years, Hink said.
On the bubble
A couple of other consortium members, Hermitage and West Middlesex considered dropping out of the consortium, but Hermitage officials, who had to come up with an assessment share of $623,000, now say they expect to stay.
In West Middlesex, school board president Tom Hubert said officials haven't decided whether to stay or leave. West Middlesex had to kick in $247,000 for the assessment.
West Middlesex looked at other insurance programs but found all had higher costs than what the consortium will charge them next year, even with a proposed 28 percent increase, he said.
Richard Rubano, Farrell superintendent, said the school board hasn't decided what it will do, but noted that the board wasn't happy having to borrow money to pay the district's $520,000 assessment.
Factors
There were several factors that caused the consortium's financial problem, necessitating the assessment, said James Wolf, Sharon's business manager.
* An unusually high number of claims, including about a dozen approaching the $125,000 mark, ate up the consortium's $1.2 million reserve fund, Wolf said.
* A six-month delay in assembling a new network of health-care providers willing to give group discounts meant paying full prices and resulting in about $1.2 million in unanticipated expenses in the first six months of 2002
* A new claims administrator came on board in November and reduced the 30-day turn-around time on paying claims to two or three days, depleting the consortium's cash more quickly.
Raising payments
The consortium took steps to try to improve its cash position in November 2002 by instituting a one-time mandatory annual contribution of $100 per employee, implementing a $10 copayment for visits to doctor's offices and raising prescription copays from $5 and $10 for generic drugs and $10 to $20 for brand name drugs.
That generated about $1.2 million in new revenue, but it wasn't enough to cover the cash flow crunch.
Fees will change again beginning July 1with office visits rising to a $15 copay and prescription copays rising to $15 and $25 for generic and brand name drugs, respectively.
About 94 percent of the employees are participating in the consortium's PPO managed care plan and they will see the implementation of a $125 individual and $375 family annual insurance deductible for the first time, if they use physicians and hospitals in the service plan.
Those deductibles will be $250 and $750, respectively, for using out-of-network providers. Out-of-network deductibles were $250 for individuals and $500 for families this fiscal year, which ends June 30
The remaining 6 percent of the employees are in the consortium's traditional insurance plan and can go to any physicians they wish, but their up-front deductibles will rise from $100 to $300 for individuals and from $300 to $900 for families.
The new changes are expected to cut consortium costs by about $1.6 million.