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School insurance takes a bigger bite

Three years ago, state lawmakers created the Oregon Educators Benefit Board, touting it as a way to pool resources and rein in skyrocketing health-insurance costs for the state's school districts.

But Jackson County officials unanimously say the mandatory OEBB insurance pool has not staved off higher costs and has limited their options for controlling costs. The only districts saving money on insurance are some self-insured districts that were allowed to opt out of the pool, including Ashland and Medford.

"OEBB is not saving anybody money; it's costing us money," says Prospect schools Superintendent Don Alexander. "If you were able to be self-insured, you are saving all kinds of money."

How much more OEBB insurance costs schools and their employees is hard to pinpoint. Districts often set a cap on how much they pay for each employee per month, leaving employees to pick up the balance.

Complicating the calculation are nine different plans available through OEBB and a different mix of those offered in each school district. The nine OEBB plans through ODS Health Plan, Providence and Kaiser offer a wide range of coverage, with out-of-pocket costs that range from $1,200 to $5,000 and deductibles that range from zero to $1,500.

The idea behind OEBB was that pooling resources would help soften the blow of high claims on districts, increase districts' negotiating power for lower premiums and save on administrative costs by reducing the number of plans in the state from 88 scattered between different school insurance pools to a lean nine now offered by OEBB.

Yet OEBB premiums have gone up between 8.3 percent and 28.6 percent this year, depending on which of the nine plans schools and their employees chose.

Between 2008-09 and 2009-10, rates climbed between 10.3 percent and 22.9 percent.

Before OEBB, the majority of school districts participated in a voluntary insurance pool administered by the Oregon School Boards Association. Others participated in a pool by the Oregon Education Association. Both pools died with the birth of OEBB in 2008-09, so it's unclear how their rates would have compared to OEBB's. OSBA, for example, never completed premium negotiations for that year, says Executive Director Kevin McCann.

Towers Watson, a global human resources consulting firm hired by OEBB, estimated school districts have saved about $37 million in administrative fees in 2008-09 as a result of streamlining and reducing the number of plans.

Geoff Brown, a Towers Watson senior consultant, says based on trends, the cost of insurance to schools would have been even higher had OEBB not existed.

Claims are the main cost driver in rates, about 91.5 percent of cost, says Denise Hall, OEBB's deputy administrator.

Use of OEBB plans by school employees is higher than comparable large private companies such as Target, she says. Ninety-one percent of participants use medical services versus 82 percent on average, she says.

The recession also has driven up the cost of medical services, she says. Practitioners tend to encourage treatment for those with insurance to make up for the reduction in patients who have either lost health insurance and/or don't have the money to pay for services.

"We just came at the time of the perfect storm," Hall says. "We got this economy, which does play a big part in health care costs."

Because mandatory membership in OEBB effectively wiped out other school district insurance pools, five self-insured districts are the only actual points of comparison of premiums, and the contrast is stark.

The 2007 legislation that created OEBB, Senate Bill 426, allowed five self-insured districts, including Ashland, Medford, Grants Pass, North Clackamas and parts of Portland, to opt out of OEBB.

Ashland and Medford school district officials report they've saved millions of dollars by staying self-insured, and they are able to offer their employees richer plans for lower costs than what OEBB offers. Ashland has actually decreased its costs.

Ashland's insurance premiums plummeted by 12 percent between 2008-09 and 2009-10, while OEBB plans went up more than 10 percent during the same period, says Ashland schools Superintendent Juli Di Chiro.

Ashland district's plan is most comparable to the offerings in OEBB's ODS Health Plan 5. The premium for that ODS plan went up 17.61 percent this year.

On average, Ashland spends $749 per employee each month for health insurance, Di Chiro says. Compare that to OEBB's composite rate — an average cost based on participation in a variety of the nine plans — at $935.

"That's less than what we paid five years ago when we first became self-insured," she says. "That's pretty unheard of in the insurance world."

Plus, Ashland school employees pay no deductible, while school employees in ODS Health Plan 5 have a $300 deductible per individual.

Di Chiro says the advantage of self-insuring is that school officials can immediately pinpoint how employees are using their plan, can find ways to curb wasteful visits and procedures, such as going to the emergency room when urgent care would do, and can target preventive care in a customized way.

And, unlike insurance companies, self-insured districts have no interest in making a profit, she says.

Hall says OEBB also is offering more preventive care and hopes to reap savings in the future from those measures. This year, for instance, OEBB plans offer free health coaching and weight-management resources. A smoking-cessation program is also in the works, she says.

Like OEBB, the Medford district has not been immune to climbing premiums.

The district's overall insurance costs are expected to go up by 11 to 12 percent this year, but district officials say their self-insured plans cost less than they would under OEBB. They compare their three self-insured plans to ODS Plans 4, 5 and 7. Those ODS rates increased by 22.07 percent, 17.61 percent and 8.85 percent, respectively.

Based on that comparison, the Medford district saves nearly $6 million per year by remaining self-insured, says Todd Bloomquist, Medford schools human resources director.

"Our plan is richer the way it is, and there is less out-of-pocket than the OEBB plans," Bloomquist says.

Self-insured districts are required to submit to periodic reviews by OEBB to ensure their plans are indeed saving employees money. Medford is set to undergo its review this fall, while Ashland is scheduled for January.

Anna Richter Taylor, a spokesperson in Gov. Ted Kulongoski's office, says comparing a self-insured plan to OEBB plans is not a fair comparison because it's unknown what premiums would have been for the other some 200 school districts in the state.

"We need to be careful not to compare apples to oranges," she says.

Plus, not all school districts are large enough to self-insure, Hall adds. They need the insulation of an insurance pool because one large claim could deal a devastating financial blow to a small district, she says.

Craig Prewitt, a Phoenix-Talent School Board member, says the success of self-insured districts shows the Legislature should not have deprived school districts of self-determination, flexibility and creativity by forcing them into an insurance pool.

He says under the OEBB plan, Phoenix-Talent school employees, who used to be part of the OSBA pool, are paying higher deductibles, have fewer choices and are paying more out-of-pocket.

When the legislation was proposed, Kulongoski's staff estimated OEBB could save schools $270 million in the subsequent five years — money that theoretically could go into the classroom.

"OEBB was not the financial savior it was proposed to be," Prewitt says. "That promise was broken. Everything that could go wrong has gone wrong. It's frustrating to me. It eliminated our choice and forced us to pay more for health insurance. That doesn't make sense to me."

But Taylor says not mandating participation in OEBB would have undermined the whole intent of the insurance pool to join forces to increase negotiating power and decrease costs. With time and experience, OEBB hopes to see premiums level out.

"Bigger change sometimes takes incremental steps," Taylor says.

Reach reporter Paris Achen at 541-776-4459 or e-mail

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