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Districts Ponder Costs of Health-Insurance Reforms

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School districts that for years have felt powerless against skyrocketing health-care costs last week expressed a new sense of uncertainty as President Clinton launched his long-awaited reform campaign.

Rising health-care premiums have pinched school budgets across the nation in recent years, taking a painful toll as a stagnant economy forced widespread program and personnel cuts.

Even as many school administrators agreed that the system needed revamping, though, they also expressed skepticism last week that the federal government could cure what has become one of their biggest financial headaches.

A study of national school-operating expenditures between 1983 and 1993 found that benefits accounted for the largest rise in any education category. While professional salaries rose by 70 percent, health coverage and other benefits jumped 116 percent, according to the study by Research Associates of Washington.

While they were not ready to back the details of the plan outlined by the President before a joint session of Congress last week, many school officials said they were eager for lawmakers to confront the issue.

"Relief is probably too much to expect,'' said W. Gary Harmer, the business administrator of the Salt Lake City schools. "We don't know enough about the plan to say how it will affect us, but if it will just steady the cost we would be happy.''

Questions on Coverage

Like many districts, Salt Lake City has reduced benefits and forced teachers and other school workers to pay a greater share of their insurance costs as premiums have risen by as much as 10 percent each year.

The district covers 2,000 workers for $8 million, with benefits equaling about 10 percent of teacher salaries.

Mr. Harmer said the President's speech, which focused on the Administration's broad goals and principles for reform, left many of the issues the district is concerned about "still in a fog.''

Officials would like to know, for example, whether they would be expected to cover temporary and part-time workers who are currently not eligible for the district's health network. They are also curious about whether the plan would cover procedures that are not now insured.

Mr. Clinton's plan seeks to cover every American and would require employers to pay at least 80 percent of the costs for regional coverage plans. A prorated contribution would also be required for part-time workers who spend more than 10 hours a week on the job.

The future status of currently uninsured workers is chief among educators' concerns, as many districts hire bus drivers, maintenance workers, and cafeteria helpers who log only a few hours.

In Guilford County, N.C., where school workers are insured under a state-run plan, about 500 of the district's 8,000 employees currently cannot buy into the state benefits.

Loretta Changery, the associate superintendent of the 54,000-student district, said many people want to work for the district to tap into its comprehensive benefits package, which also includes dental and life insurance coverage.

Most of the uninsured part-time workers, she said, are college students or have no dependents.

In many communities, observers noted, school health plans are already among the best insurance packages. As a result, the most costly aspect of the President's plan will come from the requirement that currently uninsured workers be covered.

"In general, large districts would not be affected financially, because it is mostly the smaller districts that have employees they don't cover,'' said Bruce Hunter, a lobbyist for the American Association of School Administrators.

Some Bare-Bones Plans

Although North Carolina has a centralized insurance program for schools, the health-coverage picture in states that do not varies widely.

In Texas, for example, the state requires its 1,040 districts to provide a health-insurance plan, but says nothing about how much they should contribute. So benefits programs range from comprehensive plans that come with few costs to employees to bare-bones plans in which schools pay little.

"We're not philosophically opposed to paying for health care,'' said Patricia Pope, the superintendent of the Commerce, Tex., district.

The 1,650-student district's $5 million budget allows only a $25 monthly contribution to employees who sign up for the district's coverage. Even so, salaries and benefits alone already consume more than the $3 million in local property taxes the district raises each year.

"We know we need to increase our contribution because the way we have it makes it even harder to find an insurance company to take us on,'' Ms. Pope said.

A survey by the Texas Association of School Boards found that Commerce and a number of other districts contribute less than 20 percent of the cost of insurance premiums. So President Clinton's plan could easily quadruple the amount the district spends on employee health care.

"We have just not been able to see ourselves clear to pay this, but if we were told we have to do it, we would find a way,'' Superintendent Pope said, pointing to the benefits issue as another area where poor districts suffer from disparities in state funding formulas.

Because of the small employer contribution, Ms. Pope said, some district employees decide they cannot afford health insurance, or opt for a cheaper personal policy.

Cooperative Brings Savings

Other districts, meanwhile, are already working to combat soaring premiums and find affordable plans that will offer comprehensive service.

Officials in San Diego County, Calif., expect 22,000 school employees from several districts to join an insurance cooperative called a Voluntary Employer Benefits Association. San Diego Unified, the county's largest district, is considering joining the plan, which could push its membership to 40,000.

Like the plan proposed by Mr. Clinton, the San Diego effort attempts to lower costs by increasing enrollments. Administration of the plan is handled by an outside contractor, freeing central-office employees for other tasks.

Insurance costs are 5 percent to 10 percent lower for participating districts that had been purchasing their own coverage, according to Ralph Van De Moere, a consultant who helped set up the cooperative.

Those potential savings are attractive to San Diego Unified officials, who say they can barely afford the coverage they have generally provided.

The district now offers three medical-plan options and three dental-plan options, including the district's own self-funded indemnity plan. Rising costs have pushed the expenses of the indemnity plan "to the point where we have to do something about it,'' said Betty Ormsbee, the district's employee-benefits supervisor.

Flexibility Sought

School administrators in Ann Arbor, Mich., also are not waiting for federal action before launching a new health-care plan.

"If a national plan creates a floor of coverage, we're going to be above that floor anyway, so we could not afford to do nothing,'' said Ron Whitmore, the district's executive director of employee relations.

"The roots of our plan are in the 1950's and 1960's,'' he said. "It has served us well, but with the cost of the full package pushing $7,000, we know that a number of people don't need that kind of coverage, and we need to become more flexible.''

The district spends about $9 million of its $104 million budget on health-care premiums for about 2,500 workers.

"The most important issue in our minds is not cost but structuring coverage,'' Mr. Whitmore said. "We have to consider what we will do relative to what we are doing now.''

The Ann Arbor changes must win approval from eight separate bargaining groups, a consideration that may prove one of the most important aspects of national health-care reform. Labor and management experts noted that health-care plans have become the most contentious issue in collective bargaining.

The Bigger Picture

Beyond the direct costs of providing health care to teachers and school workers, analysts said, other fiscal benefits could be wrapped up in the way Congress and Mr. Clinton structure the new system.

Observers note, for example, that universal health care and a system in which poor people receive more preventive medicine should produce healthier children, which could reduce special-education costs and limit other programs meant to assist unhealthy children.

More directly, by getting a handle on health-care spending, states and localities should find more discretionary funding that could be devoted to schools.

Education analysts were quick last week to warn, however, against envisioning more cash for schools.

"It is going to take a while for folks to get a handle on health costs, and in the meantime a lot of new state and new federal dollars are going to be going to health care,'' said Mary Fulton, a research analyst for the Education Commission of the States. "There are big questions about whether money is going to be saved or just shifted.''

"I heard the President saying that a lot of money and time are not going directly into serving patients,'' Ms. Fulton said. "That's a lot like the way we talk about money not going to students. I think people may look at this in terms of savings instead of extra money.''

As local districts witness savings and are forced to deal with mandated coverage, collective bargaining may shift to wider spending issues.

Tom Mooney, the president of the Cincinnati Federation of Teachers, noted that if a district opted to provide the basic mandated health plan, unions might negotiate either for higher contributions and wider coverage or push to use the local savings for other spending, such as salary increases or classroom programs.

"Health-care costs are hemorrhaging and keeping raises to a minimum and depriving kids of the services they need,'' Mr. Mooney said. "Hopefully, by going to a new system, we can clear out some mental space and political space to talk about educational issues.''

"It is not in teachers' interest to see employers shovel more money into a broken system,'' he added.

Officials of the National School Boards Association said they will begin looking at how the program would change collective bargaining, what it would mean for schools with self-insurance pools, and the range of services that would be offered.

"We are very nervous,'' said August Steinhilber, the organization's general counsel. "We have to make this work for three million teachers out there, as well as bus drivers, cafeteria workers, and substitutes.''

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