Student Well-Being

Proposal Seeks Health-Insurance Savings

By Linda Jacobson — September 27, 2007 5 min read
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Hoping to save money for his state on health-care costs—and to hold down local property-tax rates used to pay for benefits—Pennsylvania Gov. Edward G. Rendell is proposing to bring all school employees under one insurance plan, rather than have individual school districts continue to provide their own.

Centralizing health insurance would cut administrative expenses for districts, make the state “a partner” in paying health-care costs, and allow the state’s districts to better focus their attention on improving education services, the Democratic governor said recently when laying out his initiative to members of the legislature, now in its 2007-08 session.

Under Gov. Rendell’s plan, all of Pennsylvania’s 501 school districts, except the 17,000-employee, 184,000-student Philadelphia system would be required to participate in the state’s plan.

If lawmakers go along, Pennsylvania will be among the latest states focusing on health insurance as they seek to lessen the impact of escalating health-care costs on both public workers and their employers.

This past summer, Massachusetts Gov. Deval Patrick, also a Democrat, signed a measure allowing local municipal employees, who include teachers and other school staff members, to take part in the state’s Group Insurance Commission for state employees.

The state teachers’ union in Pennsylvania has not fully endorsed Mr. Rendell’s plan, however.

“We’re being cautious in our approach to it,” said Wythe Keever, a spokesman for the Pennsylvania State Education Association, an affiliate of the National Education Association. “Obviously, health care is a very important issue to our members.”

He added, though, that it is clear that “the status quo is not working for the majority of our locals,” and that health benefits have become a “contentious issue” in contract negotiations.

Other states—particularly in the South, where there typically is no collective bargaining by public employees—have long opened state-employee health plans, often on a voluntary basis, to teachers and other school workers, said Richard Cauchi, the health-program director at the Denver-based National Conference of State Legislatures.

Such arrangements, he said, have existed for roughly a decade in a number of states, including Alabama, Georgia, and New Jersey, preceding recent huge spikes in health-care expenses. “It was not done as a major policy shift,” he said.

Now, “I think there is a new recognition that pooling of negotiations is a useful and important and workable value,” Mr. Cauchi said.

In Pennsylvania, Gov. Rendell said costs under the state health plan increased by just 1 percent over the past three years, while they have jumped as much as 24 percent for school districts.

John Abraham, the deputy director of research for the American Federation of Teachers, said that the financial savings are not necessarily realized in insurance claims, but more in administrative costs and possibly brokers’ fees. He said it is more common for districts that are not big enough to self-insure to join state employees’ plans.

Bay State’s Approach

In Massachusetts, Gov. Patrick has promoted the law passed July 25 as a way to help cities and towns cut local property taxes.

An August report by the Boston Municipal Research Bureau, a watchdog group, and the Massachusetts Taxpayers Foundation, said localities in the state could save as much as $100 million next year if they took advantage of the plan. Total costs now are more than $1.6 billion annually and projected to increase.

Keeping the program optional for the state’s roughly 350 municipalities, however, was a key aspect of the plan for the Massachusetts Teachers Association and the American Federation of Teachers-Massachusetts, both of which were closely involved in crafting the legislation.

“Making it mandatory would have been a deal-breaker,” said Anne Wass, the president of the Massachusetts Teachers Association, a National Education Association affiliate. “This isn’t a one-size-fits-all solution. It is going to be a great benefit in some places, but in other places it could be a step backwards.”

Cities in Massachusetts had until Oct. 1 to let the state know whether they were participating, with many having to weigh whether their employees would gain or lose under the state’s plan.

One Massachusetts district already has had experience with it. In January, the city of Springfield joined the plan as a way to escape the high costs of health insurance that had been shifted to employees by a state-run control board, said Timothy Collins, the president of the Springfield Education Association, an NEA local.

While coverage through the state is more affordable for active teachers, he said, retirees don’t have as many options for their care under the state plan. He added that while cities can still negotiate over the percentage of costs that are paid by the employee, which can range from 10 percent to 50 percent, they no longer have a choice in what the plan covers.

Still, he added, he expects many Massachusetts cities to go the same route as Springfield.

“My sense is that as time goes on, more and more communities will opt in,” Mr. Collins said. “The larger the group, the better you can slow down the increases in cost.”

Multiple Concerns

In Pennsylvania, the governor tied his proposal both to tax concerns and to labor issues.

“We must act now to protect taxpayers, preserve the quality of benefits our educators receive, and safeguard students by making strikes far less likely once health care is no longer part of contract negotiations,” Gov. Rendell said Sept. 18.

A legislative committee has said districts throughout the state could save more than $500 million a year overall if the plan is adopted. Districts now spend about $1.5 billion overall on insurance annually.

But to calm teachers’ worries over whether their best interests will be considered, Gov. Rendell would create a 12-member board to oversee the program and give four of the seats to representatives from the Pennsylvania State Education Association. Other members would represent local school boards and the state.

The governor also doesn’t intend to dismiss existing collective bargaining agreements. If the plan is approved by the legislature, districts will switch to the new health coverage once their existing contracts expire.

Mr. Keever, of the teachers’ union, said the governor’s toughest sell might be to the Republican-controlled state Senate. He added that he hopes the plan gets an “extensive legislative review” before it moves forward. Pennsylvania’s districts would have employees covered by state’s plan to reduce costs, conflicts

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