Confused about the debate over teacher health care contracts? Read this explainer

First grade teacher Emily Wrigley works with students at Union Elementary in Montpelier. File photo by Roger Crowley/for VTDigger

Since Gov. Phil Scott announced that he doesn’t want to leave Montpelier without up to $26 million in yearly savings from a change in teacher health care insurance, there has been a mad dash to learn about what has been called a “once in a lifetime opportunity.”

There remains a lot of confusion over whether there are savings to be had, how much those savings could be and whether they should all go to taxpayers.

Nearly every teacher contract in Vermont is under negotiation because of a change in the state’s health care plans for educators.

For several years leading up to this one, school districts have negotiated shorter contracts in order to switch to new plans that will begin on Jan. 1, 2018. This simultaneous renegotiation gives local school districts and the state an unprecedented opportunity to realize millions of dollars in savings for taxpayers on health care costs.

The Vermont Education Health Initiative, the pool that insures education employees, is offering four new plans that have identical benefits and networks as the plans they now offer. The insurance premiums are lower, but out-of-pocket costs for employees are higher. And many school districts are asking teachers to pay a higher percentage of the premium.

The question is whether the savings can be better realized through negotiations at the local level or through a statewide contract negotiated by the governor’s office. Scott says statewide negotiation is the best way to maximize savings. Senate President Pro Tem Tim Ashe says the same savings can be maximized by negotiations at the local level. Both Ashe and House Speaker Mitzi Johnson oppose what they see as a last-minute power grab by the governor. The Vermont NEA, the state teachers union, adamantly opposes statewide bargaining for health care benefits.

Contract negotiations over health insurance focus on what share of the premium taxpayers and teachers and education staff will pay and how much of the out-of-pockets costs teachers will pick up. The new plans include health savings accounts and health reimbursement accounts. The HSAs allow employees to keep the money put into them, but any unused money invested in HRAs would be returned to the school district.

Seven contracts with an assortment of arrangements have been settled. The premium shares range from a 86 percent/14 percent split to an 80/20 split. Out-of-pocket expenses are being treated differently, too. Some school districts are picking up 100 percent of the expenses and putting the money in a health savings account that allows the employee to keep any unused funds. Salary increases range from 1.7 percent to 4.3 percent with the average landing in the 3 percent range.

The complexity of the negotiations has spurred school board members to ask for the state to step in.

Tax Commissioner Kaj Samson said that if health care benefits continue to be negotiated district by district, savings can’t be achieved.

The Beck amendment, killed in a tie vote last week, would have put the governor’s plan into motion. The proposal would have rebased the education fund, lowered the statewide property taxes by a few pennies per $100 of assessed property value and saved money year after year. The provision would allow teachers to strike statewide if they couldn’t come to terms with the Scott administration.

The Webb amendment, which passed last week, allows local districts to negotiate and asks them to send any savings to the state. The money would be returned in the form of a grant. The plan would capture six months of savings. The savings would not be ongoing.

In fiscal 2018, the maximum savings under the Webb amendment would capture $13 million from the first half of the fiscal year.

The governor’s proposal banks on savings of $26 million year over year, based on an 80/20 split on premiums. The total savings is estimated at $75 million. The governor would put nearly $50 million into a health savings account to hold teachers harmless for out-of-pocket costs. The remaining $26 million would be available for tax relief.

In Scott’s original proposal, he wanted to direct one-third of the savings to taxpayers and use the rest of the money to pay for higher education and child care support. Some of the Democrats that supported the Beck amendment did so because taxpayers would get all the savings. At a press conference last week, Scott said he would support either approach.

Salaries and benefits constitute about 80 percent of school budgets. Statewide, taxpayers cover 86 percent of premiums on average. Health insurance costs taxpayers $217 million a year; teachers pay $35 million of the total. Teachers currently cover out-of-pocket costs of about $400 a year — co-pays, deductibles and co-insurance — without help from the school district.

The average premium cost split in prior years has been 86/14. If that ratio is applied to a statewide contract, the state would save $28 million and teachers would save nearly $4 million, according to past testimony by VEHI.

In February, detailed how VEHI estimated savings.

Democratic leadership has said savings will accrue automatically because of changes to health care plans that are already in motion.

But VEHI officials have said if local districts agree to pay 100 percent of teachers out-of-pocket costs there will be no savings.

An important feature of the VEHI plans are health savings accounts or health reimbursement accounts that would be used to defray out of pocket costs for teachers.

Laura Soares, president of VEHI, said in February that HSAs and HRAs give teachers some ownership in the costs of care.

“Our whole plan design is around people thinking more about the cost of health care and making more thoughtful decisions around how they use their health care,” Soares said in February. “If they don’t, if the employer pays those out-of-pocket costs for them, our premiums are underpriced and they will go up to cover the cost.”

Nicole Mace, executive director of the VSBA and proponent of a statewide contract, said HSAs “represent the best chance to realize continued savings over time.”

Jeff Fannon, head of the Vermont-NEA, disagrees. “It assumes people are using [health care] unnecessarily or imprudently and making a decision for a more expensive option,” Fannon said.

The Vermont-NEA does not support the new insurance plans proposed by VEHI. Fannon says the health care change is a manufactured crisis. While the union was part of the decision to change insurance plans, they didn’t seek it. “We tried to manage it and we thought this was the best outcome we could get,” he said.

The VSBA was not on the VEHI board when the new plans were adopted, but school boards were later given a seat on the board at VEHI’s annual meeting last October. At the same time, the Vermont-NEA lost one of two seats on the five-member panel. The union says they now feel as though they are outnumbered by management.

The four new plans offered by the Vermont Education Healthcare Initiative have the same benefits, same network of doctors, lower premiums and higher out-of-pocket costs compared with current teacher insurance plans. VEHI moved to the new plans to stay competitive with the state exchange and to avoid penalties related to the federal Affordable Care Act.

The Gold Consumer Directed Health Plan is the default insurance for teachers if contract negotiations are not completed by Jan. 1. For details on the plans see this power point:

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Tiffany Danitz Pache

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  • The complexity of the negotiations has spurred SOME BUT NOBODY KNOWS HOW FEW school board members to ask for the state to step in.

  • A very important note: there is a very big difference between school boards and the Vermont School Boards Association (VSBA).

  • Christopher Daniels

    I’m even more confused after reading this. Why include quotes from both sides? It stops being an ‘explainer.’

    • Moshe Braner

      Exactly. For example, the article makes these claims with neither substantiation nor attribution, and hardly any explanation:

      “The Beck amendment … would have … saved money year after year.”

      “The Webb amendment … would capture six months of savings. The savings would not be ongoing.”

  • Tim Vincent

    “The Vermont NEA, the state teachers union, adamantly opposes statewide bargaining for health care benefits”
    Why is that true?
    Because a statewide union can roll over local school boards – often composed of current or retired techers, activist parents and others sympathetic to the union.
    Finally, someone – Gov. Scott – has taken an interest in the taxpayer and the obscene property taxes in the People’s Democratic Republic of Vermont.

    • Moshe Braner

      I support the right of the taxpayers to collective bargaining.

  • Brian Machesney

    VT Digger: please stop calling it “health care.” The product for which people are paying is health insurance. Calling things what they are helps us identify and pursue solutions to problems. If people could afford to pay for “health care,” they wouldn’t need “health insurance.”

    Insurance is a betting game. By paying health insurance premiums, you bet that you’re going to get sick. By taking your bet, the health insurance company is betting that you won’t. But, in our capitalist society, there is an asymmetry built into the system: no one gives individuals a “grub stake;” just like backers of casinos, individuals and institutions invest in health insurance companies because investors believe the health insurance companies can run a game that will benefit the investors.

    The obvious way for health insurance companies to benefit investors is to create a gap between the premiums they receive from customers and the treatments for which they pay actual health care providers. Make no mistake – if the management of a health insurance company doesn’t pay investors what they expect, the management will be replaced and/or the investors will withdraw their money. Because no one in management wants to lose their job or see a decrease in their share price, do they do what the investors require them to do.

    The question we need to ask ourselves is this: can we afford, as a society, to have the equivalent of a casino control our access to life-improving and life-saving treatments? If we answer, “No,” then what? Then, just like the transportation system, agricultural subsidies and public education, we rely on government agencies to do what the profit-driven private sector will not: secure our future. This is the essence of every government expenditure. The imperfect execution of such programs is no more troubling than the wild disparities in medical treatments and outcomes across the country.

  • Dave Bellini

    Regarding ACA penalties: If you think the 26M discussion is confusing don’t delve into the possible excise tax. That tax may or may not happen. It has been moved from 2018 to 2020 and under the federal House plan to 2025. There are unanswered questions on application and calculation. I’m not sure the IRS has issued all the guidance and interpretations. Politically, it’s a loser and could get repealed. Wait and see is the wise course vs. panic about what MAY happen.

    • John McClaughry

      An ironic fact is that the Republican House has several times voted to repeal the “Cadillac tax”, one of the few provisions of ObamaCare that I thought made sense.

  • Edward Letourneau

    One solution is to give the union what they want and then permanently layoff as many teachers as need to balance budgets. When boards see how well it all works, they will layoff more to reduce taxes.

  • John McClaughry

    Thanks for this very well done analysis. My only quibble is over
    “any unused money invested in HRAs would be returned to the school
    district.” I don’t believe this is a requirement of Federal law. The
    employer owns the HRA, but may agree to let the employee or former employee
    keep using the funds.
    The end result of Scott’s proposal is highly desirable: Teachers would have a Gold-level plan, higher deductibles and copays, pay 20% of the lower premiums, and receive sizable contributions into their HSAs/HRAs to use as they choose for medical expenses not covered by the plan.
    My only problem is what I view as preserving an anachronistic fiction: “negotiations” between the VT NEA and the Governor.
    The State has a monopoly on coercion and confiscation. You can petition, but you can’t negotiate with the State. The only thing the union has to negotiate is whether
    to trigger a statewide public school strike, truly a “nuclear option”.
    Why not forget “negotiations” over health benefits (as VT-NEA strongly favored during the debate on single payer health care), give the union and others their chance to make their case, and let the Governor (possibly within limits set by the General Assembly) decide the outcome and instruct the school districts to comply?


  • J Scott Cameron

    As someone who is negotiating more than a dozen collective bargaining agreements on behalf of school boards (i.e., contract with both teachers and support staff), I have to say that despite the complexity of the subject matter this was one of the most accurate news articles I have ever read. It was also well balanced. Ms. Pache did an excellent job.

    I’m not going to comment on the ongoing political debate. I will say that, to date, a few school boards have made decisions to settle quickly and failed to settle well; they and the taxpayers in their districts will live with those mistakes for a long time. Settlements are just starting to come in which begin to reflect the political and economic realities faced by the real stakeholders, i.e., taxpayers and school employees. The potential ‘savings” represent monies that local property taxpayers have been over-spending for many years due to the design of the current health insurance plans and other factors, such as the inability to negotiate further premium increases without losing the grandfather status of the current VEHI health plans due to a little known provision of the Affordable Care Act. Personally, I would like to see those savings used for property tax relief and/or maintaining or strengthening school programs where needed.

  • rosemariejackowski

    This is just one more reason why health care should not depend on employment. Single Payer would eliminate messes like this.
    In the meantime: Why does it cost $19,000 per student to educate kids in Vermont? For that much money they should all be getting PhDs.

    • Edward Letourneau

      The total cost K to 12 in this state is over $250,000 per kid. And for that we have a graduation rate (as reported by the federal DOE) of 83%, while the national graduation rate for white students is 87%.

  • Robin Chesnut-Tangerman

    One clarification.This article says that the Webb proposal would only realize $13 million in savings because they are gained for a6 months instead of a year, But the same is true for the Beck proposal (the governor’s plan). Both are going after the same savings and both would be realizing them for 6 months, and then for full years after that. The difference is not in the savings but in where it is sent – the Education Fund (most of which would be spent on other things) or returned to the school districts.

  • Stu Lindberg

    I am quite surprised the VNEA and the Democrats don’t jump at the chance for a big government solution to their healthcare needs. It was the VTNEA that gave large amounts of money, paid for with union dues, to Shumlin and the Dems to support single payer in Vermont.
    If health care negotiations for the VTNEA members were settled at the state level the one stop shopping would be a great opportunity for the union to get quickly whatever they demanded from the Democrat controlled Senate and Legislature. The taxpayers wouldn’t stand a chance. How awesome would that be?