Holding down the cost of health insurance for employees is a major issue for all employers. Michigan schools are no exception, in fact the situation is probably more profound than for most private sector employers. But we have the tools to address our problems…with several important caveats.
Let’s start with three important premises:
- We want school employees to have good health care plans;
- At the best possible price;
- The price of health care should be sustainable in the context of other costs of education and compensation for our employees.
Note that I didn't mention MESSA anywhere in these premises. It isn’t that they're unimportant, in fact they're crucial. Think about this ... if MESSA provides the best health insurance available, at the best possible price, with reasonable costs (given our revenues and other expenditures), does it really matter if MESSA or another health insurance carrier has our business?
The problem is that costs for MESSA and other high quality, broad coverage health care products are not sustainable. I won’t even go into the reasons why, you know them, and describing them would take another article, if not a book.
So what do we do about it? The solutions seem to fall into two categories:
- Change the model by which we approach health insurance; or
- Change the coverage
Changing the Model
We can alter the way we provide health insurance to help reduce/restrain costs. Major insurers have taken some important steps in a variety of ways – wellness programs, better managing the system through preferred provider organizations, mail-in prescriptions and so on. Additionally the recent introduction of health savings and retirement accounts (HSA’s and HRA’s) has had a positive impact on the private sector, and on non-unionized portion of education in Michigan. Other ways we could change the model for schools in Michigan is to provide for more competition and/or different ways to spread the risk … better ways to pool.
Change the Coverage
Outside of changing the delivery model, the major way employers deal with excessive health insurance costs is by shifting more expenses to employees. While schools have begun shifting costs to employees we are still far more generous than private sector employers.
The 2006 Kaiser Family Foundation Employer Health Benefits Survey indicates that for all surveyed firms the average cost of family coverage is $11,480 per year. Of that, employees paid an average of $2,973, or about 27% of the premium. Single subscribers paid an average of $627 per person or 16% of the cost.
While we don’t have good comparable data on the cost-sharing of health insurance for school employees, I think it's easy to say that school employees bear much less of the cost of insurance than their private sector counterparts.
Why should we care if school employees pay less for coverage than in the private sector? First, because our costs have become unsustainable. Even if you grant that employees have made bargaining decisions to take increased fringe benefits rather than pay increases we have problems. Putting all available dollars into health care isn’t fair for all employees, especially young people and those without families, it means less salary dollars which affects both current lifestyle and retirement payments in the future.
The second reason this difference is important is because we lack the ability to control other solutions to the spiraling price of health care in schools. Because our unions are so effective in resisting change to the way health care is delivered (the model) as well as changing the coverage, which means schools are left with no other option. And if recent efforts to require the release of claims data for groups of 100+ insureds, schools are still in a position of negotiating the carrier and benefit structure.
Capping Insurance
So the solution seems straightforward, though not simple: if you can’t get claims data, and your union isn't open to negotiating cost saving alternatives, schools should put a cap on what they'll pay for insurance premium. If you're skillful at negotiating a cap you can forget about claims data, forget about the carrier, forget about the benefits structure and focus on your costs.
Putting a cap on insurance is technically simple. Working with your attorney or labor relations experts you decide on an appropriate dollar amount for your district to pay, then craft contract language that accomplishes the goal. Put a dollar cap on insurance in your contract even if it covers the cost and is just for one year. If you have a multi-year contract it becomes a business necessity to have some sort of cap. Either way, get a cap and begin the process of raising employee awareness and interest in the cost of their insurance.
While technically simple, a cap is politically difficult. Employee groups won’t like it, and they will apply intense political pressure to avoid it. But school boards and school managers need to develop a long-term approach to bargaining, and to act collectively in order to gain this needed cost containment mechanism. We need to be open with our communities and employees about what we are doing and why. Schools districts managers need to join together and act in concert district managers to provide support for one another.
A possible “message” to our staff and community goes like this:
“We want to provide excellent fringe benefits to our employees, but costs are getting out of hand. Our budget is tighter than ever and resources are limited. We currently provide benefits that are greater than what most people in our community have. We have to balance the interests of our staff, with what seems fair in our community and with the many other expenses we have for providing education. In the spirit of balancing the needs and interests of all we are proposing a dollar cap of $______ (fill in the amount) per month, which comes to $______ (fill in the amount) per year that our district will pay for our employees health insurance premium. How much employees pay out of their own pocket for health insurance will depend on what plan they agree to through the collective bargaining process. We feel our responsibility is to be fiscally responsible with tax payers dollars and we must be fair in how we distribute scarce resources in our budget.”
Of course it isn’t this simple but you get the point. If schools are businesslike and open with their communities and staff, and if we can endure the initial bargaining and political “heat,” then we can control our costs. Schools need a public relations plan, and should consider working collectively in geographic areas – by counties or within ISDs – to provide political support for one another and help spread the work and expense of this important effort. None of this works without administrators and boards deciding to get serious about taking on this difficult issue.
Capping insurance premiums in contracts isn’t a solution to the national health care expense crisis we all face. It is, however, a viable alternative to waiting for help from the Legislature, or going through the complex and expensive process of creating new alternatives. When people are paying a part of the cost of their coverage they are far more open to new ideas and willing to become part of the solution instead of part of the problem.
Important Links:
Kaiser Annual Employer Survey
Kaiser Health Care Primer