Splitting the health insurance bill

The effort to control health care expenditures has taken Michigan public schools and their employees down many roads: from $5/$10 drug copays to $10/$20 plans, no deductibles to deductibles and "free" office visits to out-of-pocket co-pays. In some cases, districts have joined insurance pools or initiated health savings accounts.

Though not as common, a number of Michigan's conventional public school districts also have adopted an approach now routine in the private sector - arrangements under which employees pay part of their annual insurance premium.

This consumer-driven approach makes sense for several reasons, superintendents told Michigan Education Report. First, paying out of pocket gives employees an incentive to pay attention to the cost of their health care and frequently to play a greater role in deciding coverage. Second, capping or otherwise limiting the district's share of the annual premium takes some guesswork out of school budgets and helps limit exposure to increasing insurance costs.

Employee contributions to health care costs are likely to be part of the public debate surrounding House Speaker Andy Dillon's recent proposal to combine school and other public sector employees into a statewide health plan. Some school districts had that debate years ago.

"We knew that to be fiscally responsible, we needed to have employees share in insurance costs," Superintendent William Pearson, South Lyon Public Schools, said in a telephone interview. The South Lyon district began sharing premium costs in the late 1990s.

Under longstanding contract language, the district pays the first 5 percent of the increase in health insurance premiums in a given year, while employees pay for any further increase. In 2008-2009, teachers and administrators paid a total of $1,235 per person, Pearson said.

The Mackinac Center for Public Policy conducted a survey in 2007 which showed that 75 of the 150 public school districts that participated had bargained contract agreements in which teachers or other employees paid a share of their annual health insurance premium. The Mackinac Center publishes Michigan Education Report.

At the time of the survey, the teacher share ranged from $20 a month to more than $125 monthly.

Some of those payments reflect only employees who choose voluntarily to "buy up" to a more expensive health care plan, typically the Super Care plan offered through the Michigan Education Special Services Association.

MESSA is a third-party insurance administrator affiliated with the Michigan Education Association. It sells Blue Cross Blue Shield of Michigan health insurance plans to a majority of Michigan's conventional public school districts.

But in other districts, employees are paying part of the annual premium cost of MESSA's less-expensive Choices II preferred provider plan.

Like South Lyon, some districts cap their expenses in the form of a "first 5 percent" limit.  Others negotiate a dollar cap, sometimes benchmarked to state funding, while others split the total premium with their employees in 90/10 or 85/15 arrangements. One example is the Traverse Bay Area Intermediate School District, which recently settled a contract that includes a 10 percent annual premium contribution from employees.

"Like many organizations, we're trying to create stronger wellness programs and consumer-based health care," Traverse Bay ISD Superintendent Michael Hill said. "When you're paying out of pocket, you pay attention to wellness."

Traverse Bay ISD employees will switch from Super Care to Choices II, the preferred provider plan, and now will be responsible for certain copays in addition to the premium contribution. They will pay a deductible if they choose out-of-network providers.

However, their monthly premium contribution will decrease, Hill explained, because the total annual cost for Choices II is about $257,000 less than Super Care. That savings made possible a 2.25 percent pay increase retroactive to the beginning of the 2008-2009 school year, and a 2 percent increase in 2009-2010, he said.

"Any percent (salary) increase was based on movement to find that revenue," he said. In researching pay scales and health care plans in other districts, "We knew we had to hold firm with our 10 percent. We didn't see a lot of districts doing that."

Elsewhere in northern Michigan, Sault Sainte Marie Area Schools and its teachers recently negotiated a contract that puts a dollar cap on the amount the district will pay. Teachers will pay the difference between the cap and the premium total, Superintendent Daniel Reattoir said.

Teacher payments toward annual premiums have been a longstanding arrangement in Sault Sainte Marie. Employees as a group affect their own contribution level by deciding what level of coverage they want.

"Our goal was not only to control the cost, but to put ownership in their (employee) hands," Reattoir said. In 2009-2010, teachers will pay about $118 in each of 20 pay periods for Choices II, or about $60 for dental and vision coverage only.

"This way it requires everybody to get involved, because if their co-pay is increasing, they want to know why," he said.

That's the point that administrative law judge Donald Burkholder made when he recommended that Leslie Public Schools and its teachers come to terms on sharing costs for health insurance. Some of the anticipated savings should be spent to give teachers a raise, he wrote.

"(N) ot agreeing to some form of limit when selecting a preferred (health) plan would be irresponsible and illogical," Burkholder wrote last fall as the fact finder in a case between the school district and the Ingham County Education Association. "An additional advantage is that it motivates more attention to plan selection and use by the insured."

Teacher contributions in Leslie Public Schools rose significantly in 2007-2008 and 2008-2009, due to contract language requiring them to pay any premium increase in the interim period between contracts. When their contract expired in 2007, teachers were paying about $780 a year toward the MESSA TriMed plan. By 2008-2009, with no new contract in place, some teachers were paying up to $2,460 a year, according to Scott Blankinship, the district's former business manager.

The district and teachers signed a four-year pact early in August that puts teacher contributions at $1,040 per year and includes higher copays and deductibles.

Capping costs or sharing premium increases has the advantage of allowing school districts to predict costs, school officials said.

"Without that cap, or some control, we're very vulnerable," Blankinship said.

Lansing Waverly also has negotiated an agreement with its teachers that caps the district's premium contribution, according to business manager Rob Spagnuolo. In the coming year, the district will pay a maximum of $1,280 monthly for a two-person plan and a maximum of $1,375 monthly for family coverage.

Nationally, most workers who have insurance coverage contribute to the premium, according to the 2008 Employer Health Benefits survey conducted by The Kaiser Family Foundation. Only 7 percent of workers with family coverage and 20 percent of workers with individual coverage work for a firm that picks up the total cost, the survey showed.

On average, workers with family coverage pay about 27 percent of the premium, or $280 monthly, while those with single coverage pay about 16 percent, or $60 a month.

As an occupational group, public school teachers "cost" more than other occupational groups in state and local government, according to the latest National Compensation Survey of the U.S. Department of Labor.

According to the March 2009 survey, all state and local government workers combined cost an average of $39 for every hour worked, made up of $26 in wages and $13 in benefits. Primary, secondary and special education school teachers cost an average of $52 an hour, made up of $37 in wages and $15 in benefits. Benefits included insurance, retirement, paid leave, supplemental pay and legally required benefits.


Lorie Shane is the managing editor of the Michigan Education Report, the Mackinac Center’s education policy journal. Permission to reprint in whole or in part is hereby granted, provided that Michigan Education Report is properly cited.