As School Districts Confront a New Perspective on Healthcare, Detailed Data is Key to Understanding and Managing Costs
With school districts across the state trying to do more with less, the rising cost of healthcare looms as a threat that can wreak havoc on a district’s budget.
There’s no question that when it comes to controlling healthcare costs, what you don’t know can hurt you.
About one year ago, PA 106, was signed into law changing the face of how benefit programs are purchased by Michigan Schools. The law also intended that school districts would have the data necessary to get competitive pricing and be able to begin managing the second largest expenditure in your budget. According to current rate filings, all districts with more than 100 insured employees will be paying a rate different than every other district due to their claims experience. They will no longer be wholly community rated, but at some level, based on their size, experience (claims) rated.
In order to understand the potential impact of PA 106, and what it can mean for your district, it is important to start by reviewing the health care landscape for Michigan Public School Districts prior to passage of the act:
- The delivery of health care benefits to Michigan Public School Districts has been dominated by one health care administrator,
- This administrator has built a “community rating” pool under which all similarly situated districts are provided a common rating, not necessary related to the actual expenses incurred by district employees,
- Health claim experience to compare a specific district’s actual expenses to their premium ratings has been limited by the administrator.
As a result, it has been difficult for competing insurance carriers to offer attractive alternatives to public school districts, perpetuating the dominance of the single administrator and pressure on individual districts to maintain the status quo.
Under PA 106, the situation overviewed above changes in the following ways:
- Public school districts are required to conduct competitive bidding for their employee benefit programs on a periodic basis, whether changes to the programs are being implemented or not,
- Insurance carriers and administrators for each public school district are required to provide the district with the health claim data necessary to help obtain fair, competitive proposals, and
- The results should be an opportunity for many districts to reduce their health care premium costs.
The real opportunity for Michigan Public School Districts under PA 106 presents itself in the requirement that insurance carriers and administrators release individual school district claim data upon request.
With this data, competing insurance carriers and administrators can offer districts pricing based upon their historical costs, which in many instances, may be below those which they currently pay under community rated pools. Further, availability of detailed claim information can help districts to more accurately project future health care costs, which is important in the budgeting process. Finally, the availability of usable claim data can help the district to design benefit programs and employee education initiatives that address the claim profile and specific needs of the individual district, rather than “one size fits all” solutions. In effect, information offers the opportunity for intelligent management and control of a major cost component in the school district budget.
What can districts expect in the future? Preliminary information indicates that although districts may be using the same company to administer their plans, district premiums will no longer be based upon rating factors from a geographic area, but rather, based upon district specific claims data. As a matter of fact, the majority of districts with more than 499 employees will be 100% experience rated.
With public schools generally becoming experience rated the need to receive and understand claims experience will be greatly heightened. Districts that receive and act on their data will be able to make the greatest impact on cost and be better positioned to maintain benefit levels longer than those who don’t know or act.
Ultimately, the winners will be the districts that make incremental changes in claims experience. The key will be communication and education; plan design changes; a focus on wellness; and plan options and choices.
To summarize, obtaining claim utilization data can help individual Michigan Public School Districts by enabling them to:
- Obtain fair, competitive proposals for health care coverage,
- Design health care benefit programs and implement benefit changes that address the claim situation of the individual district,
- Project long term cost patterns based upon the specifics of the group,
- Implement wellness and other cost-controlled programs in an appropriate way,
- Educate district employees on the reality of health care expenses and cost reduction opportunities.
The hard reality of our Michigan economy dictates that health care cost control is an immediate necessity. Having and being able to use your health care claim data will put you in the most powerful position to anticipate future costs and determine how to best manage them.
Learn more at the MSBO Financial Strategies Conference, January 21-22, 2009 at the Kellogg Center in East Lansing.