By ALICIA LEONARD
News of a rate increase brought to the Walton County School Board (WCSB) during their July 21, 2015 regular board meeting prompted a request by Board Vice-chair Mark Davis to workshop possible alternatives to the increase.
The district’s insurance representative for Blue Cross Blue Shield, Brad Hoard received the unanimous approval of the board at the regular meeting for the policy renewal. He met with the board on Aug. 4 at 3 p.m., to disseminate more information on the policy, causes for the increase and possible alternatives.
Facing increases due to rising number of claims, expanding numbers in retiree policy holders, and members’ increasing visitation to emergency rooms rather than physician’s offices, many districts larger than Walton as well as those similar in size have started looking into self-insuring in order to keep overhead cost of administration lower than when going through a company. In the case of self-insurance, nothing changes for the policy holders. Their insurance works just the same, but the district takes a gamble on whether they will have a low claim year or one much higher than expected.
Hoard has been negotiating policies for the board and district for 17 years now. He provided a monitoring report on the utilization of the policy for the board showing the board paid through April 2015 almost $8 million in premiums. Out of that number, employees utilized close to $6 million in claims. “That’s almost a one million dollar increase in claims in one year,” Hoard said from the year prior. The premiums during that time span increased $425,000.
Over the last four years the district has paid close to $29 million in premiums. With claims being deducted from that four-year total, administration of the policy the last four years totaled around $5 million in costs, after the district received around $1.3 million back at the end of the 2012-2013 coverage from a co-share agreement.
Hoard told the board when he started to analyze the increase he saw an increase in claims of over $50,000 from 12 employees the year prior to 25 employees with claims over $50,000 this year. The payout the year prior for those 12 employees went from $1.3 million to the 25 employees with total claims of $2.7 million. The biggest number difference was in coverage of prescription medications. The year prior the 12 high claim employees purchased 475 prescriptions, but in the latest year, the 25 high claim employees purchased 1,352 prescriptions through their policy, tripling the number of prescriptions purchased in one year. Around 1,475 employees and family members are covered by the policy, meaning $2.7 million of the $6.4 million in claims were from 25 people covered by the policy. Sixty-six of those covered by the policy are retirees of the district.
Davis responded, “That’s the whole point of insurance,” to which Hoard replied, “That’s exactly it.”
Hoard told the board the increase was not due to the way people utilized their care, or accidents, “We just had a bad year.” Adding, “Can you plan for that? No. Those things are going to happen.”
Hoard told the board from the numbers he could see the district was looking at a 15-20 percent rate increase in the future. Around 2005-2006 the district faced a 24-percent increase before drastically changing the plan for employees, Hoard said.
Hoard said according to the formula used the district was facing at least a 14.39-percent increase in costs. The district has in the past had one rate decrease and two rate holds.
Hoard said they were looking at other options like Health Savings Accounts(HSA) or reducing benefits, but the second option would raise rates because employees that purchase the “buy up” plan contribute more to premiums, than those on the second tier plan.
According to national numbers a rate increase of 5.7 percent over five years is the national average.
Hoard said education for employees such as facilities that charge policy holders less can help with the cost of claims. Healthy employee programs where nurses visit the workplace for routine testing could also help, he added.
Out of the premium, Blue Cross keeps 10.25 percent, state tax is 1 percent, and ACA fees for transition insurance and medical research are 3.5 percent.
Anderson said that she thought the district had always paid 100 percent of employee premiums, and it was a negotiated item, adding the district considered the premiums paid a part of their compensation.
“The employee wellness incentive will be a wonderful thing for the district and employees,” Hoard said, adding it will help employees avoid using the emergency room for primary care, and catching problems before they become an issue.
Other ideas discussed included a district clinic, or district physician, but since the county is so large, it would work better for a district that was more centrally located.
If the district decided to self-insure, they would by law have to pay an administrator or third party to handle the claims. Hoard said that an informal quote he worked up shows the district would save a little over $200,000 with hiring a third party to administrate the claims. Overall the district might be able to trim anywhere up to $800,000 or more being self-funded unless they faced a catastrophic year in claims.
Board members discussed that the insurance carrier had not suffered a loss and were increasing premiums to insure they do not suffer a loss, and those premiums could be reabsorbed by the district to shore up the insurance account for possible bad years.
The board after more discussion requested Hoard to look into the issue more, bringing back examples of other districts that are self-funded, and more precise costs associated with being self-insured to look at all options for the district.
