Lots of pain, little to gain

Medford schools says no to self funding after seeing cost projection

Faced with no real savings and the potential for significant financial risk to taxpayers, the Medford School Board on Monday put a stop to exploring self funding health options, at least for now.

The district has been considering switching to a self-insurance model for healthcare as a potential way of reducing overall expenses and over the summer has explored options which involve employees to utilize lower-cost independent providers rather than healthcare systems. In this model, the employer would set aside what it pays in premiums and pay a third party administrator to review and pay out claims. The hope is that when there is relatively low usage percentages, the employer is able to retain the funds that remain after claims have been paid to be used for other purposes. The risk is that if there are more claims than what was set aside, the employer, in this case the See SCHOOL on page 4 school district, would be on the hook for those additional expenses. Under self-funded policies, there would be a need to purchase stop-loss insurance to protect against extraordinarily high claims.

Cory Tothe-Lapointe of Spectrum Benefit Solutions, who works with the school district on their insurance, said the district has a current loss ratio of 81.45 for claims incurred through May 20 and paid through July 31. She noted there were two claims at over $100,000 with both expected to go over $200,000 by the end of the year and that there were five claims over $50,000 so far this year. She noted this was not bad for a group the size of the Medford School District.

Currently, the district pays $7,291,491 in premiums for the year.

Tothe-Lapointe said she approved vendors to serve as third party administrators for a self-funding option including Security Administrative Services, Benefit Plan Administrators, and Prairie States.

Security is affiliated with the district’s current insurer Security Health Plan and has access to all of the claims records for the district. Based on this data, Security Administrative Services said the annual projected cost to the district would be $7.18 million with an maximum cost of $8.65 million.

Benefit Plan Administrators projected cost of $7.83 million to maximum of $9.52 million. Prairie States project costs of $7.75 million to $9.43 million.

“What I was hoping for is that annual projected to be in the 6 [millions],” Tothe-Lapointe said noting that she hoped for the maximum to be closer to what the district is currently paying for premiums.

Tothe-Lapointe said she could not see a benefit to the district to going with self-funding at this point noting that if they went that route they would need to budget for the maximum amount each year which is significantly higher than what is currently being paid.

She said the district may not be in the best position to go with self funding for healthcare at this point. She also noted some major differences with the quotes she received with two of them being on 12 months of incurred costs with an additional three months of run-out for claims to come in which the third only will pay out claims during the 12-month period.

“It is time to bring this self funding thing to an end right now. We are just wasting time,” said board member Brian Hallgren. He noted that the discussion over switching to self-funding for healthcare has caused a significant amount of anxiety and stress among staff in the district. He called on the school board to officially end looking at it as an option. “For right now it is dead so that these people can relax,” Hallgren said.

Tothe-Lapointe agreed that for this coming year it did not make sense for the district to switch to self funding.

District administrator Pat Sullivan noted that any time they talk about health insurance people become anxious and that he gets more feedback from employees about health insurance benefits than other topics.

Board vice president John Zuleger, who was running the meeting in the absence of board president Dave Fleegel wasn’t ready to nail the coffin shut on ever considering self funding healthcare in the district.

“It is scary to talk about something you don’t know about,” he said. He said something needed to be done to address the rising cost of healthcare coverage, noting that it is gobbling up any new money the district is able to get and prevents them from doing things like raising salaries. He said he would like the district to revisit the idea in the future in the next year or two.

Tothe-Lapointe noted there is a cyclical pattern to self-funding with some good years and some bad years. “You are not always going to have a good year,” she said.

Zuleger said he did not want to burn up three years of low usage for when the pendulum swung the other way.

While self funding is off the table at this time, the door was cracked open for a hybrid model which would allow those covered by the district’s insurance to pay a reduced flat rate at Taylored Family Care Clinic and have it count toward their deductibles.

Tothe-Lapointe said that Security Health was willing to offer this with the district retaining a portion of the premium to pay Taylored Family Care. It was noted that this would in-effect save the insurance provider money because of the reduced claims. The estimated cost for 20% usage would be about $330,000.

Board member Steve Deml noted the benefit of this would be to give people a choice to go there versus selffunding which he said is more forced.

“I like that we have the option to dip our toes into this,” Zuleger said.

The board directed Sullivan to survey staff members on potential for usage of this. One of the major selling points of Taylored Family Care is being able to get in for visits within a day or two.

Any change would be made as part of the insurance renewal which will occur later this fall.

In other business, board members:

  Received updates from building administrators on staffing and plans for the start of the school year. After having a hybrid block schedule in recent years, the decision was made at the high school to go back to an eight-period day every day. Principal Jill Lybert said the number of Ds and Fs has been trending upward in recent years and they wanted to make sure students saw each of their teachers every day. She also presented a video and talked about their “Compassion, Resilience, and Integrity” effort to help build a positive culture in the school.

  Accepted the bids for workers compensation, general liability, crime and cyber insurance. Finance director Audra Brooks noted there were increases in the cost for these in line with increasing value of property in the district.

  Approved a policy change that eliminated having to bring approval for the sale of school property to an annual meeting. The change is the result of revisions in state laws.