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School district faces large health insurance premium increase
By Denise Dick
Youngstown
City school district officials are exploring ways to address a 37.5 percent increase in the health- insurance claims this year.
The district is self-insured for health insurance. Money is set aside to fund health-insurance claims.
The school board plans a special meeting next week to review options for dealing with the increase.
“We’ve got to go over it,” said Richard Atkinson, school-board president. “We’re going to be looking at everything to see what’s possible, and we’ll depend on our superintendent and treasurer for recommendations.”
Treasurer James Reinhard said the increase is one of the problems of being self-insured.
“We need to get out of the insurance business,” he said. “In my opinion, we’re too small to be a self-insured entity. You have to be able to handle the fluctuation of ups and downs.”
An entity’s health plan should be funded 100 percent to 125 percent of the expected claims amount. Underfunding the plan could result in the district’s lacking money to pay claims. That would mean the district would have to transfer money from its general fund to cover the costs.
Changing the plan isn’t something that can just be done, however, Reinhard said.
First, an insurance company would have to take it over.
The treasurer said the plan design is outdated, and he’s not sure a company would be able to match it. He said it’s custom-built for the district, and he likened it to a plan from the 1980s with lower deductibles and lower out-of-pocket maximum costs for employees.
Coverage is negotiated as part of employee contracts, however, and changing it would require the unions’ consent, the treasurer said. Unions have been informed of the premium increase.
The contract with American Federation of State, County and Municipal Employees expires this year, but the teacher contract doesn’t expire until 2016 so a reopener would be required if the district wanted to change coverage.
“They aren’t required to negotiate with us,” Reinhard said. “We can’t force them to.”
This year’s 37.5 percent increase is because of a combination of an increase in the number of inpatient admissions and an increase in the expense of claims.
In 2012, the district increased by 30 percent the amount set aside for health insurance. Last year, however, the amount of the increase was only 5 percent.
“With the benefit of hindsight, if we would have raised it 15 to 20 percent last year, we wouldn’t be so behind now and have to play catch-up,” Reinhard said.
The district does have a contract with an insurance company for what’s called stop loss, or a second layer of insurance, if claims exceed certain amounts. At that point the insurer pays the claims. That amount is $225,000 for an individual claim and $17 million for the aggregate.