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, VTDigger.org 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: http://www.vehi.org/assets/Health/VEHI-EMPLOYEE-Presentation-09-02-16-Use.pdf