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Report recommends insurance pooling for school districts

Posted: December 11, 2013 - 10:45pm

JUNEAU — A new report commissioned by a Senate committee recommends a state-managed health insurance program for public school employees that it said could save up to $33.7 million.

Critics question the numbers — and how long any savings might be realized — and worry about how such a change will infringe upon bargaining rights. Ron Fuhrer, the president of NEA-Alaska, a major teachers’ union, also said mandating that every employee participate in a pooled program would be “blatantly unfair.”

The report by the Hay Group was commissioned by the Senate Finance Committee, which is considering a bill that would put all school district employees under a state-managed plan as a way to save districts money. The legislation was introduced by Sen. Mike Dunleavy, R-Wasilla, and held over from the last session for further review.

The committee received the report during a meeting Tuesday in Anchorage. Committee co-chair Kevin Meyer in a statement said the panel plans to continue reviewing the report with two main objectives in mind: finding efficiencies and cost savings and directing more financial resources into education “without jeopardizing the health of our teachers.”

The idea behind the legislation was that a larger insurance pool would put the state in a position to negotiate a “more favorable” insurance plan, and the state and districts would benefit from “the economies of scale,” according to Dunleavy in the statement he made supporting the bill.

Some school leaders voiced support for the bill shortly after its introduction earlier this year, citing concerns with soaring health costs.

According to the Hay Group report, health care costs for the state’s 53 public school districts total about $264 million for about 16,000 employees, with an average of 16 percent of district funding spent on those costs. The four biggest districts account for much of the overall figure, $166 million, and saw an average of 14.2 percent of district funding spent on health care costs, the low end of the spectrum among districts.

The report recommends an alternative that it says would offer employees plan options more in line with current district offerings and provide potential savings of $22.7 million to $33.7 million. It notes some uncertainty, however, in the financial impact of such a change given the variability in plan choices, which range from a high-deductible plan with no employee cost share to an enhanced plan with a 15 percent employee contribution.

The report cites consistent benefit offerings to all districts and efficient health management as positives of this alternative. It cites among the negatives elimination of district decision-making and restricted collective bargaining.

It listed another option — one that it said would give districts discretion in setting premium cost share levels and have a much wider range in potential savings, $9.4 million to $64.9 million — as a “suitable alternative” to the recommended program.

Fuhrer said in places like Anchorage, the local union selected a lower-cost plan. He said school employees want to be able to continue negotiating such benefits. Even as Dunleavy and other lawmakers are talking about providing parents greater choice in where they send their kids to school, Fuhrer said lawmakers are looking at limiting choice for school workers.

Rhonda Kitter, chief financial officer for the Public Education Health Trust, said the potential savings cited in the report appeared to be one-year savings, and she questioned some of the numbers. For example, she said in her initial review of the report, she did not see the inclusion of $100 million for a claims reserve. That item was included earlier this year as a fiscal note — or attached cost —to the legislation introduced by Dunleavy.

She said her main concern with the legislation is whether it will actually increase costs.

The Public Education Health Trust, which was created by NEA-Alaska, provides insurance to school employees across Alaska, representing 17 districts, she said.

Online:

To read the report and other documents associated with SB90: http://bit.ly/1aWwEVf

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