Medford school district to take health insurance premium hike rather than change plan options

School district employees and their families will get a pass this year as Medford School Board members voted Monday night to accept the renewal increase rate and keep the overall plan the same as last year.

Medford Area Public School District offers its employees a three-tiered health insurance plan that gives employees options on where they can receive medical care. Under the plan, the district has 281 people enrolled in that plan and under the agreement signed with Aspirus when the district switched to them last year, the district’s renewal was capped.

Becky Gorst, an account executive with Spectrum Benefits Solutions told members of the district’s finance committee that based on the district’s usage ratio Aspirus could have gone to a 12% increase but instead gave the district a renewal rate of 9.5% which equates to an annual increase of $566,670. The total premium with increase for 2022 will be about $6.19 million. Expecting the rates to come in higher, school district finance director Audra Brooks had built a 10% increase into the budget.

Overall, the district picks up about 89% of the premium expenses with the employees responsible for the remainder as well as the out-of-pocket costs from the deductibles. The district offers two levels of deductible plans with those at the $1,500 individual/$3,000 family paying a higher premium than those at the $5,500 individual/$11,000 family deductible plans. In addition to its share of the insurance premiums, the district pays $670,250 into employee Health Savings Accounts (HSAs) which can be used by the employees to cover out of pocket medical expenses.

The driving factor in the insurance increase was the district’s usage rate which currently sits at 98.4% as of September 29. This is the ratio between what the district pays into premiums to care provided. The lower the loss ratio, the better the district sits in regard to premium rates.

At last month’s school board meeting, the board referred the insurance discussion to the finance committee for a more in-depth look at plan options and opportunities to lower district expenses. The finance committee of Steve Deml, Brian Hallgren and Dave Fleegel met on Monday afternoon before the regular board meeting and reviewed the options presented before coming to a recommendation.

Account manager Cory Tothe-LaPointe and Gorst presented the options to the board with the potential cost savings. The first was to impose an additional copay on prescription drugs after the member’s deductible was met. This option would have reduced the increase by $136,935. The benefit of this option is that it had very small overall impact to the group but resulted in savings.

However it drew concern from Hallgren and others on the committee in that it targeted higher users who don’t have the option to choose less expensive generic medications and would increase their out of pocket costs by $500 to $1,000 a year.

Committee members also discussed the option of raising deductibles for the lower tier from $1,500 individual/$3,000 family to $2,000 individual/$4,000 family. This would impact a significant number of the members with additional out of pocket expenses even with the district increasing its HSA contribution to soften the blow.

Hallgren questioned why they would only look at increasing the lower tier deductible. It was noted that only one individual and one family has met the deductible currently on the higher plan and that it is about the highest that they can go under the insurance rules. This option would have resulted in $163,523 in savings off the renewal rate.

Another option presented was to switch to an Aspirus-only narrow plan and eliminate the option of using Marshfi eld Clinic entirely. Tothe-LaPointe noted this option would reduce the increase in insurance premiums by $439,989. However this would be a significant disruption to many district employees.

Other discussion focused on the potential savings to the district by switching from HSAs to a Health Reimbursement Arrangement (HRA). Under an HSA, the money is put into an account that is owned by the employee and is theirs. In a HRA, medical costs would be submitted for reimbursement from the employer up to the limits set. The advantage of this from the district’s perspective is that it keeps all the funds and only pays out for claims with the option of any unused amounts going back to the employer rather than rolling over to be used by the employee.

Brooks noted that switching to an HRA would require additional staffing in the finance department to handle the additional workload it would create. Tothe-LaPointe also noted that it would not result in a significant savings to the district based on its current usage rates, would have to plan on having to set aside between 60% and 80% of HRA funds just to cover the projected payouts. It was noted that to make an HRA worthwhile for the employer, the reimbursement payouts would be much lower.

“I don’t know if the juice is worth the squeeze,” said Charlie Heckel, administrator of the Rural Virtual Academy program, noting the savings would be minimal after taking into account additional workload.

Hallgren agreed to drop consideration of switching to an HRA at this point, but said he would like to at least look at it again next year.

On the premium options Fleegel noted that if the district wanted to save money and shift more cost to the employees it would be easier to just cut the amount of money going into the HSA contributions rather than raising the premiums.

District administrator Pat Sullivan spoke up for the district employees noting that the increase was within what was budgeted and questioned if the savings on any of the options would justify the changes especially when looking at what pay increases will be next year. “I don’t know that there is enough savings,” he said.

One of the broader issues when it comes to insurance cost is what goes into the usage ratios. Fleegel asked about the possibility of Spectrum providing cost comparisons for the five most common billed items between providers as part of next year’s insurance renewal discussion.

Gorst said he was concerned with the request because she doesn’t think the providers legally have to give that information. “The government and the whole world has been asking for it,” Gorst said, noting that having information such as that is what needs to happen to control the cost of care.

“I think it is time to start asking,” Fleegel said.

After a lengthy discussion, committee members voted to recommend renewing the insurance without any plan design changes at this point and accepting the rate increase. Later that evening, the members of the full school board approved renewing the health insurance with the premium increase to be divided based on past percentages between the employer and employee.