What impact will dissolving the Health Insurance Trust have on districts for the 2007-2008 insurance year?

This transition will appear seamless to OSBA members. OSBA will continue to sponsor health insurance plans through Regence Blue Cross/Blue Shield (Regence) just as it has for over 40 years. The actual renewal decision (for 2007-2008 premium rates) will be made by the OSBA Board on May 20, 2007.

Why not just keep the Health Insurance Trust intact until 2010?

OSBA – not the Trust – contracts with Regence Blue Cross/Blue Shield of Oregon. We have estimated that in the first year that OEBB offers plans, 81 percent of covered employees in the OSBA pool will be required to join OEBB and by 2010, 97 percent will be required to join. With that short a time frame, a health insurance trust for management purposes is not needed.

As OSBA assumes the management of the insurance program, OSBA staff and Mercer consultants along with a subcommittee of OSBA board members (which includes the former chair of the Health Insurance Trust) will manage the insurance programs offered through Regence.

Timing is also a critical factor in the OSBA board's decision. According to the trust agreement, the Trust can only be terminated at the end of an established insurance year, e.g., 9-30-07 or 9-30-08. The OSBA board must be able to take immediate steps to address the long-term needs of the association and its member districts.

What happens to the Trust's assets (or reserves) after all the claims and costs have been settled up when the trust ends?

When the Trust was created in 1965, the OSBA board clearly outlined what would happen to Trust assets, in the interest of preserving OSBA services for the future, should the Trust be terminated. Section 9(c) of the trust agreement states:

"Upon termination of the Trust, any excess funds held in the Trust after payment of all just claims and expenses shall be paid to the Association to be added to its general fund and used by it to further its governmental purposes." 

If school districts have been paying into the Trust over several years, why can't they withdraw their interest on a prorated basis when the Trust ends? Isn't it "their" money?

School districts (and their employees) have not paid premium dollars to the Trust. They've been buying what is commonly referred to as "fully insured" coverage not unlike any insurance program such as home or car insurance. OSBA members participate in the Trust by paying premiums to the insurer (Regence). Regence assumes the risk and enrolls OSBA member districts in the group health insurance programs offered by Regence and sponsored by OSBA. Consider a car insurance analogy – if you don't file any claims (or get speeding tickets) this year, you don't get a premium refund. 

OSBA has negotiated contracts with Regence so that it retains only part of its normal reserve and the Trust manages (and invests) a smaller portion. It is these trust-managed funds that become any "reserve" funds that the Trust can then use to buy down rates, establish new programs (such as Advicare), offset large claim losses to moderate future rate increases, or distribute to participating member districts.

When the Trust ends, these funds, after paying any claims and expenses, go to OSBA.

If OSBA keeps the surplus trust assets, how will they be used, and who decides?

The OSBA Board of Directors makes these decisions to assist members in performing their governmental functions in a cost effective way.

How big is the Trust reserve that will revert to OSBA?

When the Trust ends, assets are estimated at $45-to-$50 million – but this depends on claims and expenses needed to settle up after the plan year ends on Oct. 1, 2007. Currently, trust reserves are around $64 million. Because of our members' high claims costs this year, claims and expenses will be about $14 to $17 million beyond what we expected. This won't be known until about 90 days after the insurance year ends.

Graph of Premium Reserves 1984 through 2005. 

Why not use remaining reserves to "buy down" next year's insurance rate hike?

It would not be in the best interests of school districts to buy down large rate increases in an attempt to guard against spiking insurance costs. Because of double-digit rate increases continuing nationwide and the Trust being put out of business by the creation of OEBB, OSBA is no longer positioned to continue its historic long-term rate stability strategy. 

Districts cannot avoid the eventual increase in premiums. They will only postpone the inevitable and perhaps make it worse by having a huge increase in a single year and thereby possibly requiring dramatic resource shifts. 

In the long term, no single strategy will stop skyrocketing health-care costs. Among the elements to be balanced (nationally and locally): addressing an aging population, increased use of prescription drugs, how we pay for expensive technology, and designing plans where both employer and employee assume their "fair share" of cost increases.

Graph of Premium Rate Increases 1984 through 2005.

If the Trust has produced about 51 percent of OSBA's budget, what will become of OSBA and its services?

OSBA services and programs will continue to assist member boards and districts in performing their governmental functions. OSBA will, however, seek new revenue sources and products for its members. Wise investment of surplus Trust assets will allow OSBA to use any earned interest as a revenue source as OSBA broadens its revenue base. You can expect OSBA services to continue without interruption as the association provides services our members value most.

Will OSBA monitor the new OEBB to see that it is a better deal?

OSBA will be working closely with the new OEBB to ensure a smooth transition of insurance plans. OSBA's human resources staff has analyzed some of the short- and long-term impacts of SB 426 and actions needed by districts. Please watch our OEBB Information Center for details of the SB 426 roll-out. 

Will the OSBA establish a health insurance trust again if the state program doesn't function efficiently?

That will be up to the OSBA board, but OSBA will be making its best efforts to assist the OEBB to create a successful program for school districts and ESDs. One of the advantages in preserving a portion of the Trust assets is that it could provide "seed" money for new products, projects, or services to assist in the long-term management of health-care costs. While we don't know exactly what the future holds, this asset positions OSBA to provide whatever assistance its members need.

Are the Trust's assets earmarked just for insurance purposes, since they were generated by the Health Insurance Trust?

The Resolution (17k ) passed by the OSBA Board on May 5, 2007, says that the remaining funds from the trust may be used for "purposes identified by the OSBA to assist districts in the long-term management of health care costs and/or to assist OSBA members in performing their governmental functions in a cost effective way."

The action of the board is consistent with the Insurance Trust Agreement (580k ) itself. One of the purposes of the trust is to "promote the common interests of its members and to institute programs to assist those members in performing their governmental functions in a cost effective way." Craig Prewitt, President-Elect of the OSBA and former chair of the trust, perhaps said it best: "By preserving the assets of our trust, we meet three major needs: Continue health insurance services for as long as we can, maintain core OSBA services that keep boards running smoothly – and dedicate a major financial asset to meet future needs."

What happens to community college and charter school members of the OSBA insurance program through Regence?

OSBA will continue to sponsor health insurance plans through Regence for community colleges, charter school employees and those remaining school districts and ESDs as OEBB rolls out. OSBA, through its new Insurance Oversight Committee, is also exploring the development of a new group health insurance program for community college and charter school employees and other employee groups not required to enter the OEBB.

Will anything change for retirees?

By law (ORS 243.303), public employee retirees of local government are covered just as if they were active employees – in the same plans, with the same costs. This means they have the advantage of paying the same group rate, rather than being put into a different pool just for retirees, who traditionally use more health care services. The new Oregon Educators Benefit Board will be subject to this law.

Note: This is not the official OEBB site provided through the State of Oregon. Our site provides updates on the OEBB to keep our members informed about this new program. The official OEBB Web site is now online.