The March 8th article below describes the upcoming decision by the Lake County School Board to establish budget priorities, and it seems they may not move to control excess increases (my opinion) in health insurance costs.
Last year, the staff ran a 17% increase in health insurance costs by the Board, which approved it. At a recent meeting, staff said this year costs would be up 12%. Employees do, however, pay quite a bit for family health coverage, so we are just talking here about the health insurance coverage over actual employees.
At a Board meeting tonight, the Board approved a long overdue negotiation with the health insurance broker to move to a self funded health insurance program, which should save them up to $2.5-million according the article below. The Lake County government already has a self funded program.
Although the Board has been acting to control various cost centers, this is not one of them. No business I ever worked at would have approved an increase much more than for cost of living, and approving 17% or 12% increases is ludicrous. The suggested cost increases could be considered to be the result of employees not controlling their demands on health insurance, and excess cost increases would be passed on to employees in increased employee share of the costs.
Currently, from statements made at the Board meeting by the CFO and in the following article, it seems that taxpayers, through the School District, are paying 100% of health insurance costs for the primary employee, which has not been done by most employers in 10-20 years. The CFO even said at one meeting that Lake County is one of the last of 60+ County School Districts to still be paying 100% of the costs. (Employees apparently do have a small deductible charge per doctor visit, but do not pay anything towards the $400+per month for health insurance, when other employers do require a contribution). Additionally, they apparently don't pay a 10-15% (or more, if the doctor is not in the official health plan) share of total medical billings, like the Federal government and other employers do. Both cost "sharing" concepts above are designed to provide an incentive for employees not to excessively use health insurance because it is "free" to them.
So, most employers in business and government require employees to pay a percentage of the monthly cost, plus a percent of each medical invoice, and the doctor visit minimum co-payment. However, Lake County Board members seem to have either taken staff recommendations without dissent, or sided with employee unions over the years and don't follow those normal procedures to control health insurance costs. Thus, it is a hidden additional cost per employee that other counties do not pay.
I would like to see the Board require the staff to complete an analysis of 10+ other counties and provide a comparison of health insurance subsidies and coverage requirements to see if Lake County is exceeding the norms for other Counties and Businesses. I would like to see the same study performed for the top 20 non government businesses in Lake County to also see how the District compares to local business practices. Since the staff has been bringing the large increases to the Board without cost reduction plans, I don't think they are oriented to a businesslike analysis, and I would prefer that the District auditor or third party be asked to do the study.
And, if the economy is DROPPING, there is no reason to authorize ANY increase in health insurance benefits. The Board needs to require good, professional, objective data like described above and make an informed decision free from emotion or because employees are writing them emails.
The Board needs to understand THEY are the only people who are in a position to defend the taxpayers from excess demands on tax funding. If they don't start now, it will be worse next year. Additionally, if there are no cost sharing incentives for employees to keep costs DOWN , and the District moves to self funding, their costs could skyrocket requiring larger reserves in the future.
Additionally, if the County moves to self funded health insurance, they should make sure that required reserves are evaluated each year before the new rate is set. In comparison, apparently the County did NOT do so, overcharged taxpayers by some $11-million by not adjusting reserve limits, and the staff only recently divulged the overfunding of the health insurance reserve account when funds were needed recently to offset State revenue losses. (If that isn't clear, let me know, and I will rewrite it during a more lucid moment!)
To recap what is needed to rein in apparent out of control health insurance costs:
- Employees should be required to contribute at least 10-15% of monthly health insurance costs, so they have an incentive to use more cost efficient health insurance providers.
- An objective study is needed to compare Lake County School District health insurance costs and cost sharing practices to at least 10 other Counties and 10-20 of the largest Lake County businesses to define a baseline of normal practices to follow. In business, this would be forced on an employer by competition, but when government is a monopoly, strong analytical studies are needed to establish insurance practices. The Board needs to ensure this is done in an objective manner, and not just accept staff or insurance broker recommendations.
- Employees should continue to be required to pay co-pays. Since some health scams attract employees by stating "co-pays are waived", periodic audits are needed to ensure all employees are actually paying co-pays.
- Employees should be required to pay a minumum 10-15% of invoiced hospital charges as an incentive to ask consumer questions and control costs. The amount could be set based upon an objective study.
- Health insurance annual increases should be established in a well documented baseline study, then any costs over that amount should result in reduced coverage or transfer of costs to employees. Employees need to have dollar incentives to choose lower cost options.
- The Board and the Unions meet in CLOSED DOOR sessions to negotiate salaries and benefits, including health insurance. This is a one sided meeting where taxpayer representatives are not allowed to view the proceedings or submit public input. More transparency is needed to make these meetings public, including the publishing on the website of all documents discussed and decisions made.
- The Board needs to seriously consider retaining an independent insurance consultant like the City of Eustis did recently. Their consultant did NOT sell insurance or have an interest in any brokerage. He created the RFP's, then compared their contents and made a recommendation to the City Council. Inc contrast, the School District uses a local insurance broker who may have vested interests in his recommendations.
- The Board should establish a period of time, such as every three years (which they may be doing - I don't have info on this), when the insurance broker agreement is up for bid to ensure competitive bids are received, including advice on how to reduce costs through judicious selection of various coverage levels.
- The Board needs to resist the tendency to say that 100% coverage is an incentive to attract or retain employees. In my opinion, that practice acts to attract people who are not healthy or who are not interested in minimizing health insurance billings. Additionally, in the current economy, such subsidies are not needed because the School District is getting enough teacher applications they do not need such a subsidy.
PS: If any of my facts are incorrect or need revision, readers are encouraged to post a comment on this blog entry on www.FiscalRangers.com or email the information to me at FiscalRangers AT comcast DOT net .
Below, at the link is the recent Orlando Sentinel article.
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orlandosentinel.com/news/local/lake/orl-school-employee-clinics-030809,0,2215800.story
OrlandoSentinel.com
Lake school district looks at saving money with employee health clinics
By Denise-marie Balona
Sentinel Staff Writer
March 8, 2009
TAVARES — Lake County's largest employer may still offer free health insurance next year to teachers, bus drivers and other employees despite the giant funding cuts that administrators fear.
And within a few years, the public-school system could open up its own medical clinics, where employees could drop in for fast and possibly even free doctor visits.
School-district leaders have been researching ways to cut employee medical costs because state funding could fall drastically in 2009-10 and health-insurance prices will spike again.
Right now, the district is considering becoming "self-funded" as it relates to health-insurance coverage, a move that would save $2.5million, said Chief Financial Officer Carol MacLeod.
Officials have discussed making the district's thousands of employees start paying at least part of their premiums. Lake is one of only a few districts in Florida that cover the entire cost. Even employees who work just several hours a day qualify for free insurance in Lake. Employees do, however, have to pay for their dependents' coverage, which can get expensive.
Becoming self-funded would let Lake keep offering free insurance for its workers. But MacLeod stressed that the issue would need to be worked out with the unions.
However, School Board member Larry Metz wants to keep the free insurance — a perk that he said helps attract job candidates and retain employees.
"Considering we are not in a position to do much with our budget except cut it right now," he said, "we want to try to maintain the level of benefits for them."
At their meeting Monday, School Board members probably will give MacLeod the nod to start negotiating with Blue Cross and Blue Shield of Florida.
Becoming self-funded would save money because, instead of working through an insurance company, the district would start paying employee medical claims directly, officials said. Right now, the cost of the claims often is less than what is paid out in premiums. When that happens under a fully insured arrangement, the insurance company keeps the difference as a profit.
The district would be able to pocket that difference if it becomes self-funded. The district plans to buy extra insurance to protect itself from unexpectedly large claims.
Employees may not notice a difference. Their insurance-coverage options might not change. Blue Cross could still provide their benefits.
Other districts study clinics
If the district makes the change, it would be in a good position to eventually open its own medical clinics — a quick-growing trend among government agencies in Florida.
During the past year, several cities in Orange and Brevard counties have opened doctors' offices for their employees and hired private agencies to run them. Officials in those communities say they have seen tremendous success. Not only have they saved cash but employees have been taking less time off from work.
Ocoee, which has about 300 employees, has saved about $350,000 in medical costs since it opened a clinic about a year ago, said Ocoee's human-resources director, Jim Carnicella.
Employees save money, too, Carnicella said. In addition to free office visits, Ocoee employees get free medical tests, X-rays and prescription medicine.
They also save time. Office visits are so quick — they usually take an hour or less — Ocoee lets its employees go while they're at work.
Paul Fronstin, a director with the Washington-based Employee Benefit Research Institute, said the main drawback is that the employee clinic is still a relatively new concept among government agencies. So there's not a lot of data to study.
But, he said, if an agency has 5,000 or more employees, it makes sense to introduce clinics. Lake has 5,400 district employees.
"If you think about it, most people are healthy, and the stuff most people suffer from isn't life-threatening and you can treat these things for a low cost," Fronstin said.
He said the clinic needs to be centrally located and easily accessible, however. The savings an agency will achieve is based largely on how many employees use the clinic, and how often.
Interest strong in Florida
A number of cities in the region are considering opening clinics. Interest is particularly strong among school districts across Florida, said Bill Montford, chief executive officer of the Florida Association of District School Superintendents.
In fact, a consultant that helps governments set up clinics will be on hand to answer questions during an upcoming meeting of the state's 67 school-district superintendents, Montford said.
All but one of Central Florida's seven school districts are researching the issue. In Osceola County, officials said they are finishing up a feasibility study that will be presented to their School Board later this month.
Brevard County school officials are planning to visit a city clinic in Palm Bay this week.
Last week, board members here in Lake asked the district's top administrators to bring them details soon.
Lake would need at least three clinics to serve employees in a county that spans 1,156 square miles, an official said.
"I am interested and I think the board would be," said board chairwoman Kyleen Fischer. "We certainly have vacant buildings."
Teachers see convenience
The idea sounds good to Lake's Teacher of the Year, Kevin Von Maxey, a language-arts teacher at Tavares Middle School.
Von Maxey has seen the same doctor since he was a kid. But he said he would consider switching if he, his wife and two children could all see a doctor for free.
Being able to run to the doctor in an hour or less would be much more convenient.
"Probably the most difficult thing for me, being that I have to be at school at 8:30 and don't leave until 4:30, is that appointments are almost impossible to work around my day," he said in a Friday e-mail to the Orlando Sentinel. "I have to take a day off most of the time to go to the doctor; clinic visits that last an hour would probably let me go on my plan period or lunch."
Sarah Baltunis, the music director at Leesburg Elementary, would love to find a doctor with quick office visits that fit her schedule.
"That would definitely save a lot of time — and stress — especially for employees that have small children," she said in an e-mail interview. "Believe it or not, many teachers do not like to miss school and offices that cater to our schedules would save greatly on sub [substitute teacher] expenses."
Denise-Marie Balona can be reached at [email protected] or 352-742-5928.
