BSS Employee Healthcare

To provide a better picture of how this is handled at BSS we asked the school treasurer, Mr. Liming, for a breakdown of line item 3.020 of the budget. These are the numbers he gave us. For FY 19 (that is the 2018-19 fiscal year of 7/1/18 - 6/30/19) the Benefits line 3.02 of the forecast "Employee Retirement/Insurance Benefits" is broken down as follows:

• Health Insurance is $2,790,587. 

• Dental, Life, Vision Insurance is $240,556. 

• Total STRS and SERS Retirement contributions are $2,880,367.

• Worker's Comp/Unemployment Insurance is $98,631. (Required by state)

• Coursework Reimbursement is $16,149.

• For a total of $6,026,290

Let's start with the state auditor's look at these line items. Recommendation 7 states that BSS’ cost for health and dental insurance is in line with Greene County school district averages but they should reduce how much they are paying for vision insurance. They’ll save $12,600 annually by bringing down how much BSS is paying for vision insurance to be comparable to the rest of Greene County School districts. Retirement and Worker's Comp/Unemployment were not compared since they are the same for every school and are required by law for the school to fund. Recommendation 6 says that tuition reimbursement, while currently less than comparative districts, is not legally required so it is an area that cuts could be made in.

That said, we dug a little deeper into what kind of insurance the BSS staff has access too. To ensure everyone's on the same page, let’s go over some of the basics of healthcare itself before we go into the specifics. Here’s an explanation of what a PPO is versus an HMO. This next link gives a brief comparison of high deductible plans and low deductible plans. BSS offers all its employees a PPO, low-deductible plan. As pointed out, this is more expensive option to purchase, but it provides much better healthcare to those receiving it. There has been some discussion as to why BSS is still on such a low deductible plan and it is a reasonable observation. $100 per individual and $300 for a family appears incredibly low but there are several factors at play that need to be kept in mind.

First, let’s look at the alternative. A high deductible health plan with an HSA is financially a better option for an employer, but as pointed out above they don’t tend to be the better option, care-wise, for employees who are more prone to using their insurance. Realistically, this is anyone with families, people with chronic health issues, or older folks. In certain circumstances, high deductible plans can end up being more expensive to the employer in the long run, because employees are less likely to seek medical care early, or at all, due to the high cost to them. This in turn may mean that costly accommodations need to be made for that employee. For example, teachers that are less prone to seek medical care for themselves or their families because they can’t afford it would end up being out of work more often, thus causing the school to pay for substitutes on top of the instructor’s sick leave.

Here are a few resources that discuss high deductible health plans. In them, you’ll see that traditional PPO plans, like BSS’s, are still the most common type of insurance used. This one is from the CDC and this one is from Kaiser Family Foundation. When we posted this originally, there was some confusion regarding what the 'most common' meant. This does not mean that over half of all employees are on a PPO, it means that there are more employees with a PPO than other types of plans. Kaiser's breakdown was 44% have a PPO (the highest percentage), 30% have an HDHP, 19% have an HMO, 7% have POS, and 1% have a conventional. There is also the possibility that HDHPs may not ever over take PPOs as the most common plan type. This article from 2018 points out that not all companies are seeing the benefit of putting their employees on HDHPs and why.

There is also another reason why BSS may be able to provide such a low deductible plan without the premiums being astronomical. They share the risk pool with MANY other schools. BSS is not buying the staff’s insurance directly from Anthem, or any of the other insurance providers. They’ve contracted with a consortium to greatly reduce the cost of providing insurance. “The EPC Benefit Plan started in 1983 with a health insurance pool. We have grown into self-funded plans for medical, dental and vision covering over 20,000 employees. We also offer a life insurance program through Unum. Over the years, the EPC Benefit Plan has become the most economically efficient way to provide a quality benefit plan for employees. Through self-funding, we have reduced the administrative cost of insurance to the lowest possible level. By offering in-house consultation services, we eliminate the need for broker and consultant fees…The EPC plans also provide the most district flexibility at the lowest cost.”

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By pooling the risk across many districts, the cost to each school goes down, the same way costs go down in the private sector for massive companies. The way EPC works is that they adjust the cost of benefits yearly. They do this in three-year rotations. Two years in a row they adjust based on the overall usage of every participating district. On the third year, they adjust based on the district’s specific usage. This last year was BSS’s specific adjustment and due to some recent heavy usage, the district’s cost went up. What this translates into is that some of the BSS staff REALLY needed their insurance recently. People don’t spend lots of money on healthcare for fun, so whatever these folks went through must have been rough.

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In response, BSS did make at least one change that we could see to the staff plan that would help to reduce costs to the school. They increased the maximum out-of-pocket expenses from $2k individual and $4k per family to $2.5k/$5K, respectively, as of October this year, in order to bring down premiums. We also know that the plan was changed from 90% of premiums paid by BSS and 10% paid by the staff to an 80%/20% share in the past for the same reason. Given that the benefits sheet available on the above website began in October of 2011, we’re making an educated guess as to that being the year they raised the percentage paid by the employees. So, the school is making adjustments to the healthcare plan in order to keep the costs down while still making sure their employees have access to insurance they can afford to use.

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These out-of-pocket expenses are also part of the cost to an employee, above and beyond their deductible. While their deductible may be $100/$300, their insurance does not fully cover anything until these additional “out of pocket” figures are met. This is called a “coinsurance plan.” This means that an individual must pay $2.5K and a family must pay $5K before the insurance kicks in and covers everything. Up until that point they pay a percentage of every medical bill they accrue. So, unlike our personal plan, which we pay a higher deductible for but then have all further medical expenses covered after it’s met, the BSS staff must continue paying after they meet their low deductible. When considering this, their low deductible seems nice, but not some amazing deal. If they actually end up really using their insurance they will end up paying a total of $2.5K or $5K for their coverage.

To further expand the idea that what BSS is providing its employees with in terms of insurance, we'd like to share the plans available to the employees that are working in the school districts who are in direct competition with BSS for staff. The auditor listed these as Centerville(page 165), Beavercreek(page 120), Kettering, Xenia, and Wayne. When you compare the six districts is is clear that BSS employees are not coming out ahead. Of the PPOs, theirs is the highest. The 4 HDHPs available cap out at $4,000. As we pointed out above, BSS employees have to pay $5,000 before their insurance fully kicks in. What we didn't point out earlier though, is that this doesn't include prescription benefits. The HDHPs all include drug costs as part of their deductible total. BSS employees have a separate out of pocket expense from their medical care, of up to $10K (family) for medications. BSS doesn't even have the same dental coverage as the other schools on this list that offer dental coverage through the consortium.

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It is important to compare BSS benefits to the benefit packages of their competitors because that is part of how they hire and maintain their staff. That is business, no matter the industry. This leads us to another important factor in how benefits are determined, since this goes beyond basic numbers. Any industry must remain competitive to hire employees. Schools are no different and the availability of employees drives that competition. There are several things to consider here. There are fewer employees going into the public sector and the ones there are aging. No where is this trend more obvious than in teaching. Here are three resources we found discussing the importance of competitive benefits when an employer is trying to hire and maintain skilled/valuable employees. www.dpath.com, www.shrm.org, and www.monster.com. 

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There are hidden costs to benefits plans too and the KFF article we linked above brings up a big one toward the end:

“How to best assure affordable access to care for individuals and families is really the main theme in the debate about public plan options, and our polling suggests this issue raises important questions about the adequacy of employer-based plans. In a recent survey conducted by KFF and the LA Times, 40 percent of non-elderly adults with employer-based coverage said that they or a family member had difficulty affording health insurance or health care or had problems paying medical bills.6 Roughly one-in-two said that they or a family member had skipped or postponed getting health care or prescriptions in the past 12 months due to costs. Among those with employer-based coverage who say that someone under the plan has a chronic health condition, roughly three in five say they are confident that they have enough money or health insurance to afford the cost of a major illness; this percentage falls to just one-in-three for those in plans with the highest deductibles ($3,000 for single coverage; $5,000 or more for family coverage).”

What this would mean to BSS is that raising the cost of insurance for employees would likely mean fewer healthcare needs would be met. This is the concept that's examined in the insurancejournal.com article above. The cost of covering sick employees or employees that have to take care of sick family members goes up when healthcare is not affordable. People are less likely to seek help right away and the problems get worse. This leads to higher amounts of sick leave being paid, and in the world of teaching, more substitutes to pay.

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As a thought experiment, though, we did a little math to find out potentially how much of a savings switching to an HDHP would be, without looking at the above hidden expenses. The amount they’re spending this year is $2,790,587, which represents 9.30% of the school’s entire budget. We’re using this article to look at the theoretical savings, since we don’t know the exact amount it would change going through the consortium. This site references a Kaiser study that indicates the average difference between an HDHP and a PPO in terms of cost to the employer is 10%. In the chart they provided for a single business, it averaged about a 26% difference. So we ran both scenarios. A 10% reduction in healthcare costs would mean BSS would still be paying $2,511,528.3 and would drop it 8.37% of the budget. A 26% reduction would have BSS still paying $2,065,034.38 and would drop it to 6.88% of the budget. So by switching from the current plan that the entire staff can afford, including all the hourly employees, to a HDHP, the school would only be saving somewhere between 1-2.4% of the overall budget. That is a very small amount of savings in a budget line item that the state auditor found to be well within expected standards for the Greene County area, with two minor exceptions.