Tuesday, September 24, 2013

TOP STORY >> Teacher insurance mess angers lawmaker

Leader staff writer

The self-funded health-insurance plan for public school teachers needs $54 million just to stay solvent this year and $110 million to sustain itself. This is after lawmakers gave it $8 million, according to state Rep. Doug House (R-North Little Rock).

If the state doesn’t step in and do something, teachers will see their health-insurance rates jump as much as $500 a month, starting in January.

The information came to light during joint meetings last week of the Senate Committee on Education and the Senate Insurance and Commerce Committee.

House and other lawmakers were “angered and disgusted to learn last week that the Teachers and State Employee Benefits Board, the very body that is supposed to manage health-insurance benefits and rates for teachers, knew of these problems earlier this year: that the Gold Plan was paying out way more in benefits than it was taking in premiums, and did not alert us, the Legislature.”

House said, “This level of irresponsibility really angers me.” Simply put, House explained, “The Gold Plan has crashed.”

“We also heard testimony last week that the State Employees Gold Plan is about two years away from similar trouble; too much going out and not enough coming in. The only solution offered to us by the Teachers and State Employee Benefits Board at the recent committee meetings was ‘give us more money,’” House said.

There is a lot of discussion about calling a special session to deal with the critical shortfall, but there’s no guarantee that state lawmakers can come up with a consensus or agreement in order to call the session. “We are going to do something,” House said. “I just don’t know what at this point.”

Paul Brewer, the human resource director for the Pulaski County Special School District, said the teachers’ health options are managed by JT Financial. “We have three meetings scheduled to let employees know what their options and costs will be and answer any questions they may have,” he said.

The meetings are set for 5 p.m. Thursday at the Sylvan Hills High School auditorium and 6:30 p.m. Monday at Mills High School’s auditorium.

Gov. Mike Beebe has delayed the open enrollment period for the teacher’s health insurance to give more time to calm fears and work out a possible solution, said his spokesman, Matt DeCample. Teachers normally have to select their insurance choice for the year between Oct. 1 and Oct. 30. This year teachers will make their decisions between Nov.1 and Nov. 20.

DeCample said the governor is willing to call a special session to deal with an insurance shortfall. “However he wants consensus on a solution before calling the session,” DeCample explained. “He wants to avoid legislators spending a month or a month and a half debating on the taxpayers’ dime.”

Beebe has spent the past week talking to superintendents, teacher groups and legislators and feels something could be in the works by mid-October, according to DeCample.

He added that it would take the state benefits division a couple of weeks to prepare for any changes in the insurance program.

The state teachers’ health plan has three tiers: Gold, Silver and Bronze. Because of earlier hikes in premiums about 20,000 teachers opted out of the Gold, selecting one of the cheaper plans. “That leaves the older, sicker teachers in the Gold Plan, and it is paying out more than it is taking in,” House said.

All tiers will see significant increases in January. For example, the Gold Plan for families will cost the employee $1,538 a month, up from $1,029.
The cost of the cheaper Bronze Plan will go up significantly, from $245 to $374 a month per school employee. Coverage for an individual in the Gold Plan will go up from $227 to $341 a month, and, for the Bronze Plan, from $10 to $50 a month. That represents only the cost to the teacher or school employee. The school districts that employ them will also see increased costs.

For House, this problem hit home as his wife Anita is a retired school teacher and pays for insurance through the faltering health-insurance fund.

He said that the first indication of a major problem didn’t come up until meetings last week. “The board that oversees these funds and the DFA knew late last year the funds were in trouble, and didn’t raise any flags. They could have come to us during the last legislative session,” House said.

“If the Legislature had been told by the executive branch during the session, we could have prevented this. We can’t solve a problem we do not know about. Now, we do know about it, and we will solve it,” he continued.

House said that lawmakers learned that the board had spent its reserves. “They did not reduce benefits or raise premiums enough to help keep the plan solvent. They gambled with keeping and spending their reserves, hoping they would avoid big claims, instead of buying reinsurance. In the private sector you could go to prison for letting an insurance company lose its reserves,” he said.

In the 2013 regular session, the legislature voted to raise the minimum contribution that districts must make for each school employee, from $131 a month to $150 a month.
About half the districts in Arkansas contribute the minimum $131 and the others contribute more. The $150 minimum contribution starts Jan. 1.

Brewer said PCSSD pays out almost $300 a month per employee to help cover health insurance as well as dental, vision and short-term disability.

“The individual cost of our lowest plan is $242 for the Bronze Plan, and we cover that cost entirely,” he noted, adding, “Our employees are very fortunate that we are able to contribute so much.”

Since the state is the district’s school board, it is doubtful that the district will increase its contributions anytime soon unless money comes from the state itself.

He said the district will have an open enrollment period starting Oct. 1, after the informational meetings, and he expects a number of employees in the Gold Plan will move down to Silver or Bronze.

The state subsidizes teacher health insurance with about $50 million a year in funding. That amount has stayed the same for several years, even though the number of teachers and dependents has risen. Therefore, it doesn’t go as far as it used to in alleviating health- insurance costs for individuals.

When the legislature meets in fiscal session in February 2014, there will be a push to increase state funding to defray more of the costs of health insurance paid by school employees, if it’s not dealt with before that.

House said the teacher health insurance fund went through the last of its $10 million to $12 million in reserves last year. Four claims, alone, cost the fund $10 million. He said the fund has about $30 million left to cover claims it knows are coming in.

House said part of the problem was that the fund managers did not reinsure the fund to protect it against catastrophic losses.

At last week’s meeting, the state and fund representatives asked for just $8 million to help cover the Gold Plan expenses. “But it was much more critical than we were lead to believe,” House said.

State Sen. Jason Rapert (R-Conway), the Senate committee chairman, who is in the insurance business, has asked for actuaries to take a close look at the fund and its needs.

House said, “Most of us are not insurance experts, and we need to see exactly what is needed. Once we hear from the experts, we will have a better idea what can and should be done.”