There have been a lot of soundbites in the media regarding the savings of $26m if we move teachers healthcare to a statewide contract. Unfortunately things are not always as they initially appear.
A bit of background on this issue. The Governor's proposal relates to a change happening to teacher health plans throughout the State. This change is not dependent upon, nor due to the Governor in any way. It is a byproduct of the Affordable Care Act requiring that we move away from Cadillac plans. The four new healthcare plans (originally there were 26) being offered to teachers are already set. Teachers must pick a plan by mid-November. They are cheaper because they are less generous plans with lower premiums and higher out of pocket costs. The administration asked VEHI (the organization that administers the healthcare plans) to provide a few cost models that put potential cost savings at $75m. Then VEHI was asked to estimate the costs if districts provided out of pocket coverage that covered an average of $400 per person. The cost was estimated at $49m - leaving us with the potential statewide savings of $26m. The healthcare contracts begin on January 1, 2018. That means that only half the fiscal year would be included. In other words, the FY2018 potential savings is not $26 million but $13 million.
The Governor's plan, that was in front of the Senate and failed by a vote of 19 to 10, was to divide this potential savings into thirds. One third was to cover the teachers retirement fund, one third went to the general fund and one third went to property tax relief. The relief would be distributed evenly across all school districts no matter how much each individual school board saved.
The amendment in the House (referred to as the Beck amendment), which failed with a tie vote, was a bit better. It allocated all the savings to the education fund, but again, the savings would be evenly distributed across all school districts no matter how much each individual one saved. That is why I voted no.
What the House passed, and what I voted for, was a provision that makes no change in bargaining, but directs 100% of the savings that actually occur in teacher healthcare to be directly returned to the local community in the form of reduced property taxes. The money saved would be returned to the local community only after budgets were voted upon and approved. It can go to only one place, and that is to directly reduce Essex property taxes.
All of the savings, rather than just the 30% in the Governor’s plan would come back to your property taxes. And there will be savings but no one, not even the Governor, knows how much.
Personally, I believe the $26 million is inaccurate. Where do the “savings” come from? We have been told that because these plans are high deductible plans with HSAs or HRAs, teachers and their families will use fewer healthcare services. One could argue whether that is a good idea or bad idea, but the underlying question is whether data on this issue is generalizable to teachers. Here we have a highly educated group. The have been, and will continue to be, their own risk pool for pricing insurance plans. They are a low usage group for healthcare service, that is why their plans are already cheaper than exchange plans. I am extremely skeptical that there will actually be the decrease in utilization predicted.
I voted to keep the savings in Essex.
The leadership and Governor are now working on a path forward.
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