University of Arkansas Office for Education Policy

Changes May Be Coming to Teacher Insurance

In The View from the OEP on July 2, 2014 at 12:18 pm

insurance-premium11Early this morning, the three-day Arkansas Special Legislative Session wrapped up, with both the House and Senate approving legislation to boost funding for the public school employees health insurance plan, preventing a 35% premium increase for thousands of employees. Next, the bill will go to Governor Beebe, who has said he plans to sign it on Thursday.

The cost of teacher insurance premiums has been a long-standing issue in Arkansas. For the second year in a row, the health insurance program for public school employees has faced a deficit which, without Legislative intervention, would have caused double-digit premium increases. According to the Associated Press, the program suffers from low participation, expensive benefits, and a high number of claims.

Background on October 2013 Session

In order to reduce the cost of premiums, Governor Beebe called two special sessions in the past eight months. In October’s Special Session, the Democrat-Gazette reported that the Legislature authorized the use of $43 million in state surplus funds to help cut the proposed premium increases of about 50% to about 10% this year, and enacted measures to shift $36 million per year in state funds to the plan in the fiscal year that recently began. A task force was also created to recommend changes related to teacher insurance, headed by Sen. Jim Hendren, R-Sulphur Springs. (Read our blog post here examining October’s special session.)

Changes for Part-Time School Employees and Some Spouses

Under the new plan, about 4,000 part-time public school employees and some spouses will be removed from the insurance program in order to cut costs. Proponents state that most of these part-time employees will qualify for subsidized coverage that became available January 1st under the state’s private-option program. Arkansas uses federal Medicaid dollars to purchase private health insurance for low-income Arkansans, with the funding coming from the Patient Protection and Affordable Care Act. These part-time employees are eligible for the state Medicaid expansion program as long as their incomes do not exceed 138 percent of the poverty level — $16,105 for an individual or $32,913 for a family of four. According to the Associated Press, some chose to vote against the bill because they believe that the “private option” Medicaid expansion could be eliminated by the Legislature next year. “What’s going to happen to them then?” said Rep. David Fielding, D-Magnolia, who voted against the bills. “There’s just too much uncertainty about what’s going to happen to those part time workers.”

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Sen. Jim Hendren, R-Sulphur Springs, Chairman of State & Public School Life & Health Insurance Task Force

In the House debate over this measure, Rep. John Payton, R-Wilburn, asked if pushing part-time employees off the public school employees health insurance would backfire because the most “health-needy” employees would have an incentive to try to become full time while the least expensive part-time employees, who pay in but don’t use the program much, would be gone. Proponents stated that by removing part-time employees,  school districts would save about $7 million annually because they would no longer have to contribute to the cost of part-time employees’ insurance. The districts are now required to contribute at least $150 per month for each employee enrolled. Chairman Hendren stated, “None of us came down here in the last General Assembly with the idea that we are going to start excluding people from insurance. But the fact is a decision has to be made. Do we want to have affordable rates or do we want to have a high eligibility?”

House Bill 1004 and Senate Bill 3 (which are identical) were also approved, which will remove public school employees’ spouses off of school insurance plans if they can get coverage through their own employers. The bill also limits coverage for weight loss surgeries. In doing so, the bill would eventually transfer about $4.6 million a year from school districts to the public school employees health insurance plan from school districts’ payroll tax savings.

Projected Changes in Premium Costs

If this plan is adopted, insurance premiums will still increase next year, but only by about 3% (this projection is from the state’s Employee Benefits Division). According to Arkansas News, Chairman Hendren stated that this estimate may vary based on the individual and which plan he/she has: some school employees may see an increase of more than 3% and some may see their premiums go down. For example, some bronze plan employees will see an increase in premiums from about $11 per month to $60-65. On the other hand, over 50% of employees are on a gold plan and their premiums are going to decrease by a couple hundred dollars per month.

A Short-Term Fix

Sen. Jim Hendren, R-GravetteConclusion

AAEA_LogoMembers of the Legislature have stated that this is a short-term fix or a “Band-Aid” applied to an issue that will have to be re-addressed in next January’s session.  Shortly after the votes, Senate President Michael Lamoreux announced, “I’m satisfied with what we did here, but I don’t want to say that means we’ve permanently solved the problems, because that’s not what we did.” Richard Abernathy, Executive Director of the Arkansas Association of Educational Administrators, has voiced his agreement. The AAEA does not plan to oppose the proposals reached in the Special Session, but Abernathy indicates that additional fixes to the insurance program will be needed in the future.

Possible Future Solutions

Chairman Hendren has warned that the long-term solution to Arkansas teacher insurance woes is going to be controversial. Some long-term changes that have been proposed include: 1) merging the teacher insurance program with one offered to state employees and 2) having school districts contract with health insurers on their own rather than depend on a state-administered system.

In conclusion, Arkansas’ teacher insurance premium costs have been an extended and not-yet-resolved issue. We at the OEP will keep you up-to-date on any new developments through blog posts and social media — stay tuned!

 

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