The factors pushing up health care costs are as complex as cutting-edge medical technology and government regulations, and as simple as that old joke, “If I’d known I was going to live this long, I’d have taken better care of myself.” 

Whatever the reasons, many of the factors driving costs skyward are out of our immediate control. As OSBA Executive Director Chris Dudley puts it, “The challenge is, how can we get control of an uncontrollable situation?”

Choices, caps, cost-sharing and communication (the Four C’s) are major remedies to ‘control the uncontrollable’ – especially when it appears we’re entering the fifth consecutive year of double-digit premium increases.

Below are a few success stories showing how several Oregon districts use three approaches to insurance: OSBA’s Trust, self-insurance and direct-write. We note monthly premium contributions compared to the state average of $683. This average was calculated from the 133 school districts and ESDs that responded to OSBA’s annual salary and benefits survey (as of Feb. 28, 2004).

Using OSBA Trust plans

Small districts, big insurance issues

Most of Oregon’s school districts serve 3,000-4,000 students in small communities with a limited number of health-care providers. OSBA’s Health Insurance Trust offers employees in those areas a variety of insurance choices that prove to be the “best buy” for most districts.

“We’re trying to offer reasonable alternatives for insurance so that every district – no matter the size – can access affordable health insurance for employees,” says Chris Dudley. “One plan fits all” doesn’t work for Oregon schools, but about 40 percent of the number of district employees covered in this state use OSBA plans, Dudley says. In all, Trust plans cover more than 91,000 school employees and family members.

Here are how three Oregon districts use Trust offerings to keep costs down:

Seaside School District 

Duane Johnson has spent lots of time in negotiations during his 20 years of service on the Seaside School Board. Those negotiations have driven home one universal fact:

“Employees hate losing benefits,” he says. “In the past, our employees nearly always chose benefits over salary increases. But this year, the board had to get a handle on insurance costs.” By offering employees a choice between two OSBA-sponsored insurance plans, the board found the “handle” it needed.

Both Johnson and Seaside Superintendent Doug Dougherty agree that communication was key in the district’s negotiations.

“Our first hurdle was to help the bargaining team understand that costs were going up close to 20 percent each year and the only way we could continue was to implement a 5 percent cost-sharing or an insurance plan with a higher deductible,” Dougherty says. (Seaside employees now can chose either a 95-5 split with OSBA Plan A100 or the 100 percent Plan B300.)

Opening up negotiations to the public for the first time enabled employees to hear both sides of the issues as they were discussed at the bargaining table, Dougherty says. Open meetings, which included the press, allowed more people to become involved and understand the implications of skyrocketing health-care costs.

“When we put together the total compensation package, it included insurance and a salary increase,” Dougherty says. With employees contributing to the cost of their insurance for the first time, the Seaside district could offer a 1.5 percent salary increase in the first year. The second year salary increase will be equal to the CPI for next year, according to Dougherty.

“My advice to other board members is to have an open meeting when benefits issues are discussed,” Johnson says. “It really makes a difference when the press is there, reporting the issues to the community.”

Seaside’s maximum monthly premium contribution: $714
State Average: $683 (Based on 133 responses to OSBA salary survey.)

South Umpqua School District

Angie Peterman has a broad perspective on health-care costs in the South Umpqua School District and other districts around the state.

As her district’s business manager, Peterman sees first-hand the critical importance of a cap on the district’s liability for insurance costs. As the newest member of OSBA’s Health Insurance Trust Committee, she also is learning the importance of educating employees about wise insurance usage.

The South Umpqua district converted to an OSBA Trust plan some 15 years ago and negotiated a 5 percent cap on insurance “before we hit double-digit increases,” Peterman says. That cap is crucial in South Umpqua and other Oregon districts, where employer caps are the primary cost-control option available in response to premium increases.

When employees have to pay excess insurance costs out of their own pockets, they began to look carefully at options, Peterman says. They’ve weighed the value of orthodontia, vision coverage, long-term disability and low deductibles, for example, to determine if it is prudent to keep those benefits.

“Before the cap, employees were suspicious whenever the district brought up the subject of insurance,” she says. “They didn’t have much interest or desire to discuss the issue. Now we’ve seen a real transition over time, a building of trust. Local union representatives are personally vested in the issue and interested in talking over the options.”

Cost-controlling discussions are ongoing “as we try to help employees become better consumers,” Peterman says. Regence representatives provide information about making better medical choices to employees through group meetings, mailings and on a Web site. When changes in coverage and different choices are being considered, all employees have input before decisions are made.

“We also implemented an IRS Section 125 plan so employees could shelter their contributions to insurance under pre-tax dollars,” Peterman says.

The cost of South Umpqua’s Trust-sponsored insurance plan “is lower than any other plan we’ve found,” Peterman says. “In Douglas County, with one hospital, we have limited options of providers, and that can run other insurance companies off. The Trust has been able to maintain affordable coverage in our area.”

South Umpqua’s maximum monthly premium contribution: $581
State Average: $683 (Based on 133 responses to OSBA salary survey.)

Baker: Trust Agreements bring groups together

The Baker School Board opened the way for frank communication about health benefit costs in recent negotiations by creating written “trust agreements” with employee groups.

Budget cuts, salary freezes and insurance caps were among “lots of really ugly decisions we had to make over the last four years,” says Eloise Dielman, who served on the school board for four years before retiring in July. Dielman is also a retired teacher.

Last year, a group of 40-50 union leaders, board members, district administrators and staff began meeting to outline “what is most important in negotiations to develop trust between the different groups in our district,” Dielman says.

The group outlined ground rules, then broke into small groups to develop lists of important issues. Those priorities include being open, honest and ethical in all decisions, showing respect and being willing to comprise.

The trust agreements were in place before bargaining began last spring for the district’s two-year contract effective July 1, 2004. [Baker Trust Agreement (59k )].

The contract included a $650 insurance cap and salary freezes for all staff. Because the trust agreements were developed jointly, they helped district personnel put past issues behind them, according to Superintendent Don Ulrey. “This, combined with using OSBA’s Insurance Trust plans, helped us offer good benefits at a very fair cost,” he says. “We’ve worked hard at building relationships, which makes it much easier for everyone to share the load.” 

By talking through all the budget possibilities, no one felt that they were being taken advantage of, Dielman says. “And, whenever we got to a sticking point, the trust agreement kept us focused.” 

Baker’s maximum monthly premium contribution: $650
State Average: $683 (Based on 133 responses to OSBA salary survey.)

Self-insurance approach

Self-insurance & a cap are incentives for Medford School District employees

The high administrative cost of a former plan was a prime reason Medford School District decided to change to self-insurance for its employee health plan.

“We thought we could do better,” says Galen Anderson, director of business and facilities for the district.

They were right. The switch to self-insurance has saved the district an estimated half a million dollars in the two years since the change was made, Anderson reports.

Medford district employees have the same BlueCross BlueShield coverage they had previously, but now Associated Administrators Incorporated (AAI) administers the plan, according to Anderson, “When a district is self-insured, it’s a real incentive to keep costs down,” Anderson says. “We’re paying the bills ourselves, not just paying into a program, so we can see the results of our efforts to control costs.” The district provides employees with regular information about using health care wisely. “We’ve learned you don’t need to run to the doctor every time you have a sniffle, for example,” Anderson says. “After two years, we are seeing the results of our hard work in educating employees about health care. Our insurance usage is way down from last year.”

“In order to go self-insured, you must have at least 1,000 employees,” explains board member Larry Nicholson. “If you have fewer employees than that, you’ll need to team up with another district to self-insure.”

Medford also put a cap on insurance costs two years ago. If the district’s insurance costs increased more than 7 percent the first year (or 8 percent the second year, or 9 percent the third year), an automatic cap goes into effect, meaning all employees pay $75 a month to offset the increase. (Because this is a before-tax program, the net cost to employees is $62.)

This year, when an 8 percent increase could have kicked in the cap, costs went up only .6 percent. “That means the cap goes away effective with an employee’s new insurance contract year,” Anderson explains. The cap is another incentive to employees to keep costs down.

Medford maintains an excess insurance policy, separate from the regular employee health insurance plan, to cover catastrophic illnesses. If a person’s medical costs exceed $100,000, this policy kicks in. “In two years, we’ve had about a dozen situations where we needed excess insurance,” Anderson says. “I’d encourage anyone considering self-insurance to carry excess insurance.” 

“Employees are well satisfied with their insurance in Medford,” Anderson says. “In fact, ‘health insurance’ is a nice word down here.”

If Medford stayed with its direct-write plan, maximum district premium contribution would average $800 per employee. By switching to self-insurance, the district kept the same benefit package at about $730 per employee. 
State Average: $683 (Based on 133 responses to OSBA salary survey.)

Direct-write plans

Beaverton SD employs specialist to ‘help employees help themselves’

Beaverton School District has a “strategic weapon” aimed at the often confusing, always changing target that is health insurance.

That weapon is Debbie Johnson. She’s Beaverton’s benefit management specialist.

Johnson, who has worked for the district since 1992, assists employees with managing their health benefits more effectively. She’s a registered nurse with a case management background, and she says her goal is “to help employees help themselves.”

With more than 3,600 employees, Beaverton’s employee base is large enough for the district to create its own insurance plans with BlueCross and Kaiser Permanente. (Plans include BlueCross PPO Options 1 and 2, BlueCross BlueChoice, and Kaiser.) Plan rates are determined by factors including usage and comparisons with other large entities.

Educating employees about the importance of keeping insurance costs down is just one part of Johnson’s job. She also helps employees choose the plan that works best for them, advocates for them when insurance issues arise, and offers one-on-one assistance and counseling. Offering district-wide clinics for mammograms and flu shots? That’s part of a day’s work for her, too.

“Employees may need different plans at different stages of their careers,” she says. She can walk them through case scenarios from maternity care to retirement needs.

Johnson is a member of the Beaverton district’s insurance council, which also includes teacher and classified representatives, administrators, and human resources representatives. Like insurance committees in about a third of Oregon’s school districts, Beaverton’s council keeps watch over everything from employee prescription drug usage to the frequency of trips to the emergency room. The council keeps track of cost lines and trends, and monitors the insurance cap and possible changes in plan design.

“We get a print out from BlueCross and Kaiser to see what our employees are using, monitor the data, then work with employees to teach them how to keep costs down,” says Beaverton’s business manager Linda Borquist. “You have to educate your employees and give them an incentive to watch costs.” The district’s cap on insurance benefits, in place for the past eight years, is a definite incentive, she adds.

Education about insurance costs is an area Johnson focuses on intently. In counseling sessions, informational meetings and quarterly newsletters, she suggests how employees can keep watch over rising costs.

“I tell employees to look carefully at their medical bills, question their doctors about procedures, and continue to question costs. Employees often tell me that, when they question a bill, someone at the doctor’s office will say, ‘Why are you complaining about this? Your insurance will pay for it.’”

Johnson reminds everyone to “have a primary care doctor whether your plan mandates it or not. It can save money.” 
Board member Ann Jacks believes the district’s benefit management specialist is key to keeping insurance costs down. “Employees can contact her directly to talk things over and get ideas for cost-cutting measures they might not otherwise have thought of,” she says. The specialist’s services are always confidential and voluntary.

“Insurance companies tell us that there’s something different about Beaverton School District,” Johnson says. “Employees are always questioning doctors, medical costs, and the need for services.”

By creating a district full of ‘insurance watchdogs,’ Beaverton is doing what it takes to challenge rising costs.

Beaverton’s maximum monthly premium contribution: $720 (starting 7/01/04; currently $650)
State Average: $683 (based on 133 responses to OSBA salary survey.)