Will districts make the shift?

The rate differences are not large and insurance coverage for families and spouses is still more affordable in districts not using the state’s program. Still, the gap is closing. Districts that don’t use TRS ActiveCare also contribute more for employee insurance per month on average than districts that do use it. If TRS premiums hold steady—and they will again for 2006–07—rising premiums and increasing district costs may force self-funded districts to look at TRS ActiveCare.

For the 2005–06 school year, 69 percent of districts with local plans had at least one coverage category that cost more than the equivalent TRS ActiveCare category. Nearly 50 percent of districts with local plans have an employee-only premium rate greater than $331 per month, which is the ActiveCare 2 rate for employee-only coverage.

Premium rates in 20 of the state’s larger school districts are higher in all coverage categories than ActiveCare 2 rates. Should some of them move to TRS, ActiveCare could soon see a major increase in the number of employees and dependents it covers.

Switching to control costs

Many districts switch to TRS in an effort to control insurance costs. The benefits committee in Granbury ISD watched TRS rates and analyzed district costs for its partially self-funded plan for several years before deciding to make a switch.

When Granbury joined TRS ActiveCare, increasing costs were the driving force. “There had been a steady increase in our rates because our claims experience was so bad for a couple of years in a row,” said Troy Green, executive director of Human Resources for Granbury. The district’s administrative costs were also on the rise. “We were fearful of this happening all along…we couldn’t compete anymore, looking at what we would have had to charge for premiums.”

“We had managed to keep our rates below the TRS rates the last few years with our self-funded plan,” said Sheri Sides, assistant superintendent for Human Resources for Allen ISD. “As the number of employees and number of claims grew, we knew we couldn’t compete. We’ve added upwards of 400 employees in the last two to three years.”

Sealy ISD, another district with a self-funded plan, was in the same boat. “Our claims were more than our premiums, basically. We were having a difficult time staying above water,” said Bridget Peschel, Sealy’s Risk Management coordinator. The rate at which the district was losing money concerned Sealy’s school board. It pushed to make the switch to TRS effective March 1. “We came in at an odd time but the board felt we were sinking,” Peschel said.

The TRS plan year runs from September 1 to August 31 and coincides with the fiscal year for the state. Districts can drop their existing health care coverage to join TRS at any time, understanding that the first plan year will be a short one. The main consequence of a mid-year switch is a potential increase in out-of-pocket costs for employees, who could pay more than one deductible. That’s likely to be the case for some Sealy employees as a result of the district’s mid-plan-year switch.

Keeping options open

San Angelo ISD is one district that has stuck with its self-funded plan through thick and thin. “We are very pleased with our self-funded plan and have a healthy fund balance,” said Pattie Jackson, director of Human Resources for the district. “For now, we will remain self-funded, and the contribution levels for the district and employees will remain the same. The district is not changing benefits for the coming year.”

That said, San Angelo doesn’t rule out a switch in the future, should it be in the best interest of the district and its employees. “We always have an eye on ActiveCare and other fully insured plans to see if there’s something better for us. We keep an open mind about it.” Currently, San Angelo’s premium rates for employee-only and employee-plus-family coverage are more than ActiveCare rates (by $4 and $57, respectively). In other categories, San Angelo’s employees pay less.

Working with an actuary gives the district extra confidence in the health of its plan. “Every year we reconsider benefits, deductibles, co-pay, the district contribution level and the contribution level for employees and dependents,” Jackson said. “We have an actuary from a nationally known firm review the plan. Collaborating with an actuary gives us a greater comfort level in terms of where our funding should be as well as benefit changes that might be recommended.”

San Angelo’s relative calm belies some difficult times with its plan. Before ActiveCare’s start in 2002, the district’s plan had lots of losses. “At one point, we even transferred $1.6 million from the general fund to bail out the health fund,” Jackson said.

The district acted quickly, making changes in contribution levels and decreasing the level of benefits offered. Soon the district was taking in what it needed to meet its claims and the plan was performing better.

The district also educated its employees on being wise health care consumers. It talked to employees about using generic rather than name-brand drugs, going to the emergency room only in emergencies, and working with doctors to explore all treatment options. Employees listened, and with the help of its third-party administrator and service providers, the district was able to give its insurance program a clean bill of health. “We’ve been very fortunate that our plan has remained healthy,” Jackson said.

Weighing costs and benefits

The districts we talked to appreciated the flexibility and benefits they had with a self-funded plan. They also realize that the stability that TRS ActiveCare has shown over time makes it the best option, in many cases.

Granbury’s insurance committee watched over its insurance fund carefully. The district had a generous plan and liked being able to be involved in plan design, set its own rates, and look at extenuating circumstances in making coverage decisions. Districts that move to TRS give up that flexibility.

When TRS announced that its rates would not change earlier this year, the committee felt it had the information it needed. “We thought, okay, [ActiveCare] is very stable and it’s the way for us to go. Cost-wise, this is the best thing for employees, and it looks like its going to be that way for a long time,” Green said.

Allen ISD starts its first plan year with TRS on September 1. Sides appreciates knowing that the number of employees TRS covers is so large—more than 276,000 people—because spreading the cost over such a large group should help all ActiveCare participants contain costs. She’s also happy to be out of the insurance business on a daily basis. “Managing a self-funded plan is a huge job,” she said. Last but not least, she is happy that Blue Cross Blue Shield will administer the district’s plan since the company was the district’s third-party administrator under its self-funded plan.

Sealy ISD considered making the switch to ActiveCare last year. The district held off out of concern that everyone eligible for district insurance that had insurance through a spouse might jump on board and affect the district’s cost. That fear was unfounded. After the switch, the district still insures about half of its employees.

Sealy employees are paying a little less for insurance coverage than they were under the district plan, but may pay a little more for lab fees or prescription deductibles. ActiveCare is new to the district but working well for them, and Peschel anticipates that will continue.

San Angelo has confidence in staying the course as a self-funded district, for the time being. “By having our own plan, setting benefits and determining the funding, it gives the district the opportunity to control it. We’re not controlled by someone else. That in turn helps us to better meet the needs of employees, families, and our fiduciary duties in the district,” Jackson said.

The most critical piece of lost flexibility from the standpoint of districts that are considering a switch is this: According to the law, districts that join ActiveCare can’t leave at a later date. The inability to opt out of ActiveCare was a genuine concern for the administrators we spoke to.

“Once you’re in, you do not have the option of leaving, though I don’t think anyone has had occasion to test it because the majority of people are satisfied with [ActiveCare],” Green commented.

“They could raise the premiums on you and you’re stuck,” Peschel observed. Several years of stable rates have quelled those concerns for Sealy’s district leaders and many others.

Will TRS rates remain steady?

While it is true that once a district enters the TRS plan it can’t leave, the restrictive nature of the law contributes to the stability of the plan. TRS indicated that “enrollment stability has contributed to the plan’s ability to keep rate changes to a minimum.” The stability, and any future growth in the plan’s enrollment, will help control costs and minimize the overall impact of large claims by a few individuals.

TRS says it ensures rate stability by “close monitoring of the program for cost-effectiveness, customer satisfaction, and vendor compliance with contractual goals.” The agency also works with actuarial and health care consulting firms to track and monitor trends in the health care industry.

One thing is clear: the market will force districts that remain outside of the ActiveCare insurance plan to monitor premium levels and the quality of benefits offered by TRS. If TRS is able to maintain its stable rates and benefits, more districts will join the TRS plan, even if they lose some flexibility along the way.

The track record for ActiveCare from 2002 until now is a good one. If more districts, including those with large workforces, move to the TRS plan, it appears that TRS will be able to offer competitive health care benefits with affordable premium costs for a long time to come.