Vermont’s school districts could once again contend with double-digit increases in health insurance premiums hikes when they begin budgeting for the next school year.
The Vermont Education Health Initiative, a nonprofit group that provides health insurance to school employees, last week filed proposed premium rate increases with the state, ranging from 8.3% to 18.5%. The proposed overall rate hike for active employees for the 2021-22 fiscal year is 9.8%.
The nonprofit provides health insurance to public schools and some private schools as well. A total of 42,000 people are covered by VEHI plans — including 14,000 active employees, their dependents, and retirees.
The rates are subject to review by the Vermont Department of Financial Regulation before they are finalized in January.
In a memo explaining the hikes, VEHI officials say the bulk of the increase is attributable to factors that have been plaguing health insurance markets for some time now. A little over 6% of the hike is mostly the result of medical and pharmaceutical inflation, although utilization rates and administrative expenses also add to the cost.
“This year the increase is being driven by hospital budgets approved by the Green Mountain Care Board, which are higher than the recent average. Prescription drug spending is also projected to rise sharply again,” the memo states.
About 2% of the increase would go to replenishing the nonprofit’s reserves. The pandemic’s springtime shutdown led to a sharp decline in claims costs, saving millions for VEHI. But in the first quarter of the current fiscal year, July through September, claims returned to normal levels.
The group projects an increase in claims this year of about 3% due to delayed services and Covid-related claims, and estimates a loss by the end of the year of about $5 million.
Schools have long picked from VEHI’s health insurance plans, but Vermont’s first-ever statewide health insurance contract, which was hammered out last year in arbitration, now dictates how the cost is shared between all districts and employees. That new contract accounts for roughly 1% of the hike, according to VEHI.
Skyrocketing insurance costs are burdensome on school budgets, said Jeff Francis, executive director of the Vermont Superintendents Association — but at least they have become somewhat predictable.
Indeed, this year’s proposed rate jumps are a marginal improvement from last year, when they increased between 12.9% and 14.7%, depending on the plan.
Another element of predictability: Because the Covid-19 crisis was expected to cause dramatic swings in enrollment, lawmakers agreed to hold school districts harmless from enrollment drops when they calculate property taxes next year. That will go a long way to creating stability as school leaders begin to calculate their finances for fiscal year 2022, Francis said.
Otherwise, schools are still operating in a climate of massive uncertainty, budgetary and otherwise. And all eyes remain on Congress, where a second bailout for states — and schools — is still an open question.
“From my vantage point, I think we’re engaged in a ‘put one foot in front of the other’ activity right now,” Francis said.
