How Waterford’s School District Saved $550K in Healthcare

Last week, Superintendent Jerome Belair explained to the Board of Finance why this fiscal year the Board of Education will spend $550,000 less than what it budged for health insurance, a savings he hopes will mean lower health insurance costs in the future.

“I think it will put us in a better place as we start to build our budget for (the 2013-2014 fiscal year),” Belair said.

Belair and School Business Manager Ron Melnik went through the savings with the Board of Finance, which included better education of district employees and some aggressive negotiating by the administration. The extra money will be returned to the town’s general fund, and Belair is hoping it will mean less of an increase in the 2013-14 school budget.

Belair said the savings listed were incorporated after the Board of Education had passed its budget in March, some even after the fiscal year started in July, and could not be reflected in the district’s $44.2 million total (although he said previous savings were). Health insurance has increased more than any other line item in the district’s budget the last two years, with a 30 percent increase in the 2011-12 fiscal year alone, so getting these kinds of savings are significant, Belair said.

The Specifics

Belair said the Board of Education will spend $550,000 less than what it budgeted for health insurance. The reasons are because couples are not doubling-up on insurance thanks to some education, new contracts that increase co-pays and cost-sharing to employees and the new option of Health Savings Accounts (HSA) to employees, which save both the employee and the town money.

The town eliminated three paraprofessional positions and added one special education position since the budget was passed by the Board of Education in March. That means the district is giving health insurance to two less people, which is a savings, Belair said.

The district also had several informational meetings with staff on health insurance, he said. During those informational meetings, people realized both they had insurance and their spouse had insurance, Belair said.

With a couple’s insurance plan, they can get the same coverage for far less cost to the district, Belair said. Twelve people came up to the administration and told them this, and that decreased enrollment by 12 without those dozen losing any coverage, he said.

The other big savings came from new contracts negotiated with the teachers union, the custodians union and the secretaries union. In all three, employees had to pay more for their health insurance and had to pay more for co-pays, which decreased the district’s cost, Belair said.

The custodians and the secretaries contracts, which cover about 50 employees, were approved by the Board of Education in August – after the fiscal year had started – and could not be reflected in the budget. Those contracts both drastically increased co-pays to employees immediately, from $5 to $25 for doctor visits and $25 to $75 for emergency room vists.

The teachers contract was approved before the budget was approved in March, so those savings could be reflected in the 2012-13 budget, Belair said. However what could not be reflected was how many employees would switch into the new health savings account (HSA) insurance plans, which are cheaper for both the employee and the district, he said. HSA plans were also offered in the custodian and secretary contracts as well, he said.

Overall, 54 employees took the new HSA insurance plans, and Belair believes that number will only increase as word spreads of the benefits.

How Do HSA’s Work?

Under an HSA plan, the health insurance plan does not kick in until the employee spends $3,000, Belair said. The first $1,500 of that is paid for by the town, and the remaining $1,500 is paid by the individual, and then health insurance covers everything above $3,000, he said.

The idea is to make people cognitive of how they use health insurance, and give incentives for using medical care correctly, Belair said. For example, with that incentive, people would be more inclined to do a doctor’s visit compared to an emergency room visit, because it is much cheaper and they will save money, he said.

With that program, all preventive care is at no cost to the employee and does not come out of the $3,000 deductible, he said. If the person does not spend the entire $1,500 paid out by the district, it goes into a savings account that the employee can get when they leave the district, Belair said.