Oregon districts brace for unexpectedly steep increase in health care costs
School districts across Oregon are bracing for an unexpectedly steep increase in health care costs for the 2007-08 school year, triggering higher out-of-pocket costs for nearly 29,000 teachers and other school employees. The 17.84% increase will hit the 182 districts that participate in the Oregon School Boards Association (OSBA) health insurance pool, plus a handful of community colleges, charter schools, and education service districts. The increase has raised some eyebrows around the state capitol, especially since the school board group’s rate increases have been markedly lower for the past three years while they were fending off a recently adopted Democratic proposal to absorb all school employees into a single statewide health insurance pool, aimed at saving money. In 2005 the rate increase was 8%; in 2004 it was 9.26% percent; in previous years it has hit highs of 26%. The new system expects to absorb nearly every district in the state by 2010, putting the OSBA pool out of business. That’s a big blow for the school boards association, which uses the money to help local districts during contract negotiations and to lobby on education funding and policy in the state capitol. The group got about 50% of its budget from the fees districts paid to belong to its health insurance trust; about 64% of the state’s districts participate. Now, that revenue source is ending, says Ron Wilson, OSBA’s associate executive director, which is partly why, though OSBA expects to have about $50 million in savings from its health insurance trust by the fall, the group’s board decided not to spend any of its reserves to buy down the rate increase. "Given that the program is ending, and it’s a nonrenewable resource, their decision was to preserve those dollars," Mr. Wilson says. The reserves will be earmarked for helping districts with the long-term costs of health insurance and with government policy, he says, while interest on the reserves will be used for the group’s operating budget, including helping school districts with negotiations.
Mr. Wilson says the ongoing fight against the statewide pool was "discussed" when the health insurance trust board members met to set the low, 1.4% rate in 2006-07, but he believes the real drivers of that unusually low rate were overly optimistic cost estimates by trust members and the group’s insurance carrier and consultants and a decision to spend some reserves to keep rates down, given that the reserve fund was growing. Craig Prewitt, a Phoenix-Talent school board member who chairs the OSBA’s health insurance trust, contends rates have gone up since the pool added new members who made more claims. He argues that not spending the reserves will keep the school boards group viable for any future eventualities. "In the future, (the new) Oregon Educators Benefits Board may fall flat on its face," Mr. Prewitt says. "Then we can ride in on a white horse and save the day with a product that provides districts some choice." He and Mr. Wilson both say that using reserves to buy down this year’s rates could have created eventual trouble for the statewide pool, because of a statutory requirement that in the first year districts won’t pay higher rates than under their old plans. "If you go into (the statewide pool) with an artificial low, in the second year you’d force them to balloon costs on the district," Mr. Wilson says.
Salem Statesman Journal
By Julia Silverman (Associated Press)
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