Taxpayers and school districts could save tens of millions of dollars if school staff were insured on the Vermont health care exchange or through a single payer system, according to a new report.
Districts could see a $39 million statewide drop in health care premium costs if school districts offered gold level insurance plans to school staff under the exchange, according to the report, which was commissioned by the Vermont School Boards Association.
Under a single payer initiative, school districts could save between $83 million and $119 million in premiums, and taxpayers would see a drop in property tax rates of between 8 cents and 12 cents per $100 of assessed property.
Steve Dale, executive director of the association, says health care costs for school district employees contribute to increases in property taxes, which are used to fund education.
“Money we spend on health care is in direct competition with other needs,” Dale said. “School districts provide very generous health care benefits that are among the most generous an employee can receive in the state of Vermont and any change in the health care system which brings teacher benefits more in line with the majority of Vermonters is likely to result in substantial savings.”
Dale commissioned the analysis in anticipation of an annual meeting of school boards this week. Scott Mackey, a partner with the lobbying firm KSE Partners and a former economist for the National Conference of State Legislatures, conducted the report.
Earlier this year, KSE Partners formed a pro-single payer 501c4 advocacy group, Vermont CURE, to promote single payer in the Vermont Legislature.
The Vermont School Boards Association announcement highlights a confluence of two hot-button issues a week before the election and on the heels of widespread constituent complaints about high property taxes. House Democrats held a press conference earlier this month pledging to reform the statewide property tax system. Gov. Peter Shumlin’s single payer health care initiative has also come under criticism because the governor doesn’t plan to release his financing plan for the program until after the election.
Dale says a change in the way school staff members are insured is inevitable. That’s because if Shumlin’s single payer initiative is successful, school staffs will be part of the universal health care system. If it fails, districts will still be required to use the federal exchange to insure staff under the federal Affordable Care Act within four to five years.
Insurance is currently offered to districts through the Vermont Education Health Initiative, which is managed by the Vermont School Boards Insurance Trust and the Vermont-NEA. A grandfather clause under the federal law allows entities to use insurance outside the federal exchange unless substantial changes are made to benefits or cost-sharing. While most schools have retained their grandfather status, that’s likely to change over the next few years.
Another factor in play is a 40 percent federal excise tax that will be imposed under the ACA on so-called Cadillac plans in 2018. Most school district plans would be hit with the tax.
Gov. Peter Shumlin has made a single payer health care system his No. 1 priority, and lawmakers are expected to address implementation of the plan this legislative session. A plan for raising taxes to pay for the government financed program have not yet been released by the Shumlin administration.
Mackey modeled three scenarios based on assumptions from Prof. William Hsiao’s 2011 report to the Vermont Legislature. Scenario one used a 9 percent employer payroll tax with a 4 percent employee payroll contribution; scenario two was based on a 13 percent employer tax with no worker contribution; and scenario three with a 9 percent payroll tax and the balance raised through General Fund taxes. Scenarios one and three reduce property taxes by 12 cents; scenario two brings taxes down by 8 cents.
Benefits packages under the single payer initiative have not yet been determined.
Under VEHI, school staffers get top shelf insurance plans with an actuarial value of 94 percent and out of pocket costs of no more than 6 percent.
The big question is whether school employees would have access to comparable benefit packages under the exchange or a single payer initiative. Mackey describes the current plan as the equivalent of “platinum plus.” It costs $22,000 a year to insure a family at the “platinum plus” level.
The VSBA study shows savings of $39 million if schools offered gold level insurance plans to employees through the exchange. Gold level insurance plans have an actuarial level of 80 percent, meaning that employees can pay as much as 20 percent in out of pocket costs.
Only 14 percent of Vermonters in the exchange are enrolled in plans with a higher actuarial value than the gold plan.
If the quality of benefits for employees is reduced, employers stand to gain, according to Joel Cook, executive director of the Vermont-NEA. Any plan considered by the VSBA should insulate employees from financial losses associated with additional out of pocket costs in the transition to the exchange or single payer, he says.
There are ways to make the shift from VEHI to the exchange or single payer in which “everyone wins,” he says.
“To the extent that policymakers want to use the 80 percent level and do so in a way that doesn’t provide insulation to the employees in the transition, the entire edifice will lose support,” Cook said.
Cook says the Vermont-NEA supports the single-payer initiative and has been working with the Shumlin administration for three years to “ensure this significant potential savings is available to both employers and employees.”
In the 2012-2013 school year, districts paid about $855 million in wages to staff and $272 million in benefits for 19,000 employees, according to the Vermont Agency of Education.
Editor’s note: This story was updated at 8:50 a.m. Oct. 28. CORRECTIONS: Scott Mackey was misidentified in the original story. VEHI is run by VSBIT and the Vermont NEA, not the VSBA nad the Vermont NEA as originally reported.
