Health Care

Valley News: Big differences in Vermont town, school insurance plans

Editor’s note: This story by Matt Hongoltz-Hetling first appeared in the Valley News on Sunday, Jan. 17.

HARTFORD — Brenda Lamphere, administrative assistant at the Hartford Planning and Development Department, knows when she gets out of bed each morning that she’s going to face some pain from her chronically bad back and her fibromyalgia, a disorder that causes widespread body pain and fatigue.

Lamphere has aggressively pursued treatment, including a variety of medications and, once or twice a year, radiofrequency ablation, which temporarily kills the nerves that are causing her pain.

Lamphere says she is grateful to have the costs of treatment covered by the Blue Cross Blue Shield insurance plan she has through the town of Hartford. She said could never cover the cost of her treatments herself.

“For me, it’s a great plan,” Lamphere said.

She offered that assessment before she heard the details of the health care plans for administrative assistants at the Hartford School District, where workers pay less toward their premiums and significantly less out-of-pocket.

That two groups of publicly funded workers — who do similar work for similar pay — have such different health care plans was a surprise to Lamphere.

“I would have thought it would be comparable,” she said.

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Hartford hardly is unique in that regard — across Vermont, even as school officials argue that they can’t meet state targets for limiting spending increases because of increasing health care costs, school districts continue to offer more generous plans than their municipal counterparts.

Critical Care

Nearly all Vermont’s public schools pool their purchasing power through the Vermont Education Health Initiative, a nonprofit that announced in September that health care costs would go up almost 8 percent for the 2016-17 school year. Also in that year, school districts may, for the first time, face significant financial penalties if their spending exceeds targets set by Act 46, a major legislative reform bill passed last year to control per-pupil spending. The amount of increase allowed varies by school, but the average is 2 percent, and many schools are held to increases of less than that.

Brad James, education finance director at the Vermont Agency of Education, said the most common complaint from school boards about Act 46 has been having to simultaneously deal with spending caps and increasing health care costs.

At Rivendell Interstate School District, for example, the $80,000 in growth allowed under the law is entirely wiped out by the insurance increase, School Board member David Ricker said.

David Baker, superintendent of the Windsor Southeast Supervisory Union, said the Legislature was caught off guard by the increase.

“What else has gone up by over 8 percent this year?” he said.

The backlash led many, including Gov. Peter Shumlin, to call for the Legislature to back down on the spending thresholds, at least temporarily. Lawmakers in the House and Senate are considering two proposals — one to ease the caps, and one to abolish them.

Dramatic Difference

In Hartford, school and town employees are both covered under Blue Cross Blue Shield, but the fiscal year 2017 plans are starkly different.

For education support staff workers who put their families on the dual option plan (the most common plan used in the district), the school district pays for 94 percent of a $23,800 premium.

By contrast, for town employees on the family plan, the town pays 85 percent of a smaller $13,800 premium.

The difference in premiums can be seen across the board for the various school and town plans, though the percentage shouldered by the school varies from as low as 75 percent for some workers, to as much as 100 percent for others.

Along with the higher, taxpayer-supported premiums, school workers also have much lower out-of-pocket costs.

Lamphere and her town co-workers have a $6,550 deductible, though the town covers much of that with a health reimbursement arrangement. In the school district, the most popular plan, the Vermont Health Partnership, has no deductible.

Mace said her association funded a study last year that found that moving all Vermont’s school employees to the state exchange — where Hartford municipal workers now find themselves — would save what she called “real money,” $38.8 million.

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The high-premium health care plans enjoyed by school employees across the state are an artifact of a time when premiums as a whole were much less expensive, she said.

“At the time that the benefits were bargained, health care was pretty cheap,” Mace said. “It was like, ‘Yeah sure, we’ll add this benefit.’ But the cost has grown exponentially and yet the benefit has been maintained.”

Mace said the gap should be narrowed.

“We need to make progress in aligning school employee health plans with what’s available to the rest of Vermonters,” she said.

Mark Hage, director of benefit programs for the Vermont Education Health Initiative, agreed that the generous benefits are a holdover from a different time.
But the benefits help to offset wages that are, Hage said, beneath the market value for skilled, degreed education workers.

“I have no qualms saying I think my members deserve the plans they have,” Hage said. “A lot of my members, they have sacrificed salary gains in order to hold onto what they felt were fair and comprehensive health care benefits. Oftentimes, we would say, we will take less in money in order to hold onto the health care benefit.”

Changes in Motion

In Hartford, health care costs have also moved in dramatically different directions in recent years — costs have gone down for the town, and up for the school.

The school district’s total price tag for premiums — a projected $3.4 million in the 2016-17 school year — is up by more than $400,000 from the 2014-15 fiscal year, when health insurance cost about $3 million. The costs have also increased as a percentage of the total school budget, from 11.5 percent in fiscal 2015 to 12.1 percent in fiscal 2017.

The town is not as employee-heavy an organization as the school, and so the percentages of the budget spent on health care premiums are understandably smaller.

But they also improved significantly between 2015 and 2016, when costs dropped from $1.1 million, or 7.6 percent of the fiscal year 2015 budget, to $741,000, or 4.7 percent of the fiscal year 2016 budget.

Those percentages don’t include the roughly $380,000 the town of Hartford is budgeting to reimburse municipal workers for much of their deductibles and to subsidize employees who opt to obtain their health coverage elsewhere.

The town’s costs for premiums came down this year because Hartford joined the state health exchange created under the federal Affordable Care Act.

Meanwhile, schools have continued to stay off the exchange, at least for now.

Mace said non-union employers, including many towns, were able to react to rising health care costs by cutting back on benefits, but that such reductions have been staunchly opposed by teachers unions.

“The union has been unwilling to move to the exchange, because plans on the exchange have a higher out-of-pocket cost,” she said.

Hage said such sentiments have only begun to emerge as spiraling health care costs have brought tension to the bargaining table for teacher unions.

“We don’t have a school employee benefit problem. We have got an affordability crisis in health care,” he said. “Because of our inability to guarantee that every citizen has access to health care plans, you end up fighting each other and having these debates that ‘your health care plan should be like mine.’ ”

Statewide, Mace said, school districts pay for an average of 86 percent of the premium costs of their employees’ health plans.

“They were trying to get it to more of an 80-20 split,” Mace said. But, she said, because the Affordable Care Act guarantees that people can maintain their existing coverage, “they’ve been locked in at that 86 percent for the last six or seven years now.”

Change was also delayed in Vermont, Mace said, because VEHI and other providers waited to see what might happen with Shumlin’s drive for a single-payer health plan, which ultimately failed.

Hage said that the 36,000 school employees in the system have done well under VEHI since first pooling their purchasing power in 1993, with an average rate increase of about 4.5 percent. He said the plans for educators have changed with the times.

“The plans are not the same as they were in 1980,” he said. “You see higher premiums, but also higher out-of-pocket costs.”

Hage also said that, in the context of an ongoing shifting landscape, the plans are about to be replaced by a new generation of offerings.

“Those plans are closing,” he said. “They’re gone.”

The reason for the increases, Hage said, can be tracked back to providers. The projected 7.8 percent increase in education health care premiums was driven by a dramatic increase in pharmaceuticals, with specialty drug costs going up by 22 percent.

One option open to school districts is to simply leave VEHI and enter the state exchange, but they would need to negotiate those switches with their worker unions. Hage says that’s not happening.

“Virtually all public schools are still in VEHI,” he said. “We had one public school leave to go to the exchange.”

One of the appeals of VEHI has been relative stability in the rates, protecting schools from the kind of swings that prompted the town of Hartford to enter the state exchange, School Board Chairwoman Lori Dickerson said in an email on Wednesday.

“The town plan had some extraordinary premium increases and has had to change carriers due to those cost increases,” she said, referring to 2013 and 2014, years when Hartford’s health insurance rates, purchased through the Vermont League of Cities and Towns, went up by more than 50 percent.

The Future Of Health Care

When it comes to health care, different stakeholders agree on the problem — spiraling costs — even as they have different ideas about the solution to that problem.

State Rep. Sarah Buxton, D-Tunbridge, who sits on the House Committee on Education, said she would like to bring the state’s school employees into a single health care plan.

“I think this really comes down to a value judgment,” she said. “I certainly wouldn’t want to propose that our teachers be valued less than they are, because they do so much in this new education world that they deserve generous compensation.”

However, she said, “I think we need to have some equity that recognizes the risks we run with unpredictable health care costs.”

Buxton said she would seek to amend the laws so that stakeholders would be required to “make some proposals about how we specifically begin to get a handle on health care spending in the education world.”

Hage said VEHI is planning big changes to be more competitive with the exchange.
“VEHI is undergoing a transformation,” he said. “We have a whole new slate of plans coming on January 1, 2018. They’ll have higher out-of-pocket costs. They’ll have lower premiums.”

The group, Hage said, “is moving now in a direction that reflects the realities of the post-Affordable Care Act world.”

Dickerson said it could be time for the town and the school to work together to possibly narrow the gap between the two spheres of the public sector.

“Our negotiations with our bargaining units have never been in concert with the town and their bargaining, but I’m not saying that there might not be some benefit to starting conversations with them,” she said.

Dickerson referenced her own efforts to establish a regional bargaining council that would help school districts in the state to pool their knowledge about negotiations with teacher unions on wages and benefits, including health insurance premiums.

“I am a proponent of starting conversations with other school districts on collective bargaining and I would see value in the municipal-school conversation as well,” Dickerson said.

Ultimately, Hage said, as long as health care costs continue to be unreasonable, the types of coverage that individuals get will continue to be held up to scrutiny.

“I hope that, as a society, we’re going to address those bigger structural issues,” he said.

Matt Hongoltz-Hetling can be reached at [email protected] or 603-727-3211.

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