The
Facts About OSBA's
Health Insurance Trust
(30k  )
For 40 years, the Oregon School Boards Association Health Insurance Trust has offered school districts, education service districts and community colleges comprehensive, high-quality and cost-effective health insurance for their employees - regardless of district size or geographic location. Today more than 92,000 school employees and their families are covered by OSBA trust plans.
OSBA members are free to choose among the trust's plans or insure with local carriers or self-insure if they can save even more. Of Oregon's 235 school districts, ESDs and community colleges, 202 insure some or all of their employees through OSBA trust plans.
OSBA opposes a proposal to create a state-controlled health insurance pool
Proposals to create a state-controlled health insurance pool raises serious questions for school boards, school employees and their families.
- Can a mandated health insurance pool save school districts more than the savings already available through the OSBA Trust statewide pool?
- Would forcing school districts that currently have lower-cost programs into a state-controlled pool make insurance more expensive for them?
- What happens to local carriers if the state creates a mandatory health insurance pool? Does it eliminate competition and health care plan choices?
These questions should be studied and answered before action on any proposal of such magnitude is seriously considered by the 2007 Legislature.
The OSBA Health Insurance Trust has gained the business of 85 percent of the association's members by providing a proven, valuable product at a competitive price. Why does OSBA oppose a mandated health insurance pool?
The proposal relies on incomplete information that does not address the real drivers of higher health care costs:
- Aging employees
- Skyrocketing prescription drug costs
- Use of expensive "high tech" medical procedures
- An Oregon law requiring school districts to keep retirees in the same plan as current employees
Instead, the proposal tries to make a case based solely on monthly health care premium payments.
If the new state program was modeled after the Public Employees Benefits Board (PEBB) - the state workers' insurance provider - our research shows that premium rates for the mandatory school employee health insurance pool would be higher than what most OSBA Health Insurance Trust members pay now.
We compared 2007 PPO (Preferred Provider Organization) rates for medical, dental and vision coverage in the OSBA pool to PEBB. Based on the actual mix of single, two-party and family coverage in medical, dental or vision insurance, the 202 members of the OSBA pool and their employees would pay $99 million per year MORE!
The OSBA Health Insurance Trust premium rate increase for 2006-07 was 1.3 percent. PEBB's premium rate increase for 2007 was 8 percent.
More than 92 percent of OSBA trust members "cap" the amount they pay for insurance premiums, which means employees in many cases are paying part of the cost of their insurance. PEBB insurance premiums for state employees are fully paid by the employer.
Wouldn't a bigger pool mean lower premium rates?
It seems logical that a larger pool would bring down the total cost of the program. However, according to the National Association of State Personnel Executives (September 2006), larger pools typically do not save anything more since the economy of scale is achieved with around 20,000 participants.
The OSBA Health Insurance Trust is the largest account at Regence BlueCross BlueShield of Oregon.
The OSBA trust provides health insurance plans for 37,100 school employees - including dependents, that's more than 92,000 people covered by trust plans. An even larger "pooling" of employees under a state-government-run monopoly is not likely to produce further economy-of-scale benefits.
The most important factors for cost effectiveness for large pools are:
- The group's "experience rating," which includes:
- How much the group uses health services. (Factors affecting experience rating include age of participants, illness and injury occurrences.)
- How the overall plan is managed.
- The plan's eligibility rules. (Who is allowed into the plan.)
- Plan design - Benefits; employee deductibles, co-pays, etc.; and the plan's drug benefits.
How does the OSBA Health Insurance Trust keep costs down?
Competition in the insurance marketplace keeps OSBA's rates low and competitors' rates in line. Since it began in 1966, the OSBA trust has competed on the open market.
The trust has earned the business of 85 percent of the association's members by providing a high-quality product at a competitive price. Every year the trustees must structure OSBA Health Insurance Trust offerings to compete with other carriers. If the trust's products are not the "best buy," school districts, ESDs and community colleges are free to go elsewhere.
A state-controlled monopoly would eliminate the ability of local carriers to offer cost-effective plans to local school boards, ESDs and community colleges, which would deprive them of business. A mandated pool would be at the mercy of a very limited number of large insurance companies when it comes to rates and plan options.
What's driving up the cost of health insurance plans?
All health insurance premiums - even those in large, well-run pools such as the OSBA Health Insurance Trust - are being driven up by the following:
- Aging employees using more health care
- Skyrocketing costs of prescription drugs
- Ever-increasing use of "high tech" medical procedures
- An Oregon law that requires school districts to keep retirees in the same plan as current employees. Based on 2005-06 OSBA trust claims, the cost per retiree family was 39 percent higher than the cost per active employee family, although retirees pay the same premium amount.
None of these cost drivers would be alleviated by the proposed school employee health insurance pool.
What are OSBA trust administrative costs?
In 2006, the trust's administrative costs were 7.6 percent. Administrative costs were 7.8 percent for 2004-05. (Administrative costs include an OSBA endorsement fee of 0.8 percent.)
What is the endorsement fee OSBA receives from the insurance program?
Endorsement fees for non-profit and for-profit associations are common and help such organizations provide programs and services. Twenty-nine of the 46 state school board associations have some type of endorsed insurance program.
In 2003, the OSBA Health Insurance Trustees lowered the endorsement fee that OSBA receives from the insurance program from 1.025 percent to 0.8 percent of premiums paid to the trust. The 0.8 percent will provide OSBA $2.5 million in 2006-07, which is about 51 percent of the association's revenue. OSBA membership dues provide 14 percent of the association's annual revenue.
How is the endorsement fee used by OSBA?
The money is returned to members. The endorsement fee allows OSBA, a non-profit organization, to subsidize the following services offered to member school district, ESD and community college boards: leadership training, policy services, employee contract negotiations assistance, human resource development, communications services, budget and public contracting assistance and executive search assistance. OSBA also offers professional development workshops for board members and school administrators at minimal cost.
How does the trust operate?
The OSBA Health Insurance Trust is governed by a five-member board appointed by the OSBA board of directors. The trustees operate the trust independently from OSBA and have sole control over the endorsement fee paid to OSBA. The trustees maintain policy control and authority over plan design and participation rules.
The members include a school district superintendent; a school district, ESD or community college business manager; and three locally elected school district, ESD or community college board members. (Trustee member organizations must be members of OSBA.)
The trustees have voted to "buy down" premium rate increases from 2 to 5 percent annually. In 2002 the trustees provided the largest premium relief in the history of the OSBA trust when it committed $10 million to a refund of premium costs paid directly to participating school districts, ESDs and community colleges.
In 2003, the trustees restructured offerings to eliminate high-cost options and create more effective and more economical options. In 2007, the trustees realized the lowest increase in premium rates since 1999. The 2007 overall rate increase for trust plans was 1.3 percent, compared to an 8 percent increase for PEBB, the state workers' health insurance provider.
OSBA
Health Insurance Trust Committee
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