Payment of a $353,000 assessment to maintain health coverage for Salem R-80 employees was approved by the school board Thursday night.
Insurance coverage from United Health Care is purchased through the South Central Education Consortium, a self-funded pool of Missouri school districts. Due to a high ratio of claims, the consortium is struggling financially and is sending assessment bills to its members to stay afloat.
Premiums go into a bank account that United Health Care draws from to pay health care providers on a weekly basis. The SCEC is required to maintain a minimum balance of $778,000.
Superintendent John McColloch said the consortium has not been at that minimum balance “for quite some time.” He added, “UHC gave us notice a couple weeks ago that if we did not start funding that balance at the required level, that they would stop paying providers, in essence cutting off our insurance.”
That’s not an option with 260 employees, dependents and retirees on the R-80 plan, he said.
Under its current health plan, R-80 pays $456 a month for coverage for each employee. Employees can add dependent coverage for an additional charge.
Partly due to a high loss ratio of 129 percent for the district in 2018, the health insurance premium went up $50 per employee per month in 2019-20. The district also had to pay a $155,049 assessment last spring to help build up the consortium’s reserves.
“We are an unhealthy district in a really unhealthy consortium,” McColloch told the board.
The SCEC board voted recently to assess districts more than $1,600 per employee per month to build up its required minimum balance and cover any delayed provider billing if the consortium folds. Districts with higher loss ratios pay more.
“It’s different because you’ve got some districts in the consortium that are running pretty good, they’re running pretty healthy,” McColloch said. “You have some that are running horrendous. We’re kind of in the middle.”
A loss ratio over 100 percent occurs when claims outstrip premiums paid. R-80’s four-year average was 114 percent going into 2019-20. “This year we’re running at like 123 percent, so that’s really going to hamstring our options moving forward,” he told the board.
Some districts in the consortium are around 60 percent and are sought after by insurance companies, offering to save them money. Others are around 250 percent and saw their standalone rate with UHC almost triple this year.
The SCEC board was to meet Friday to discuss different options — remaining self -funded with possible rate increases, remaining self-funded with possible future assessments or going fully insured, with all the liability on UHC.
“However that would mean a pretty sizable rate increase for us of almost 20 percent ,” McColloch said. “Or the consortium could dissolve Jan. 1 and we’d be standalone with UHC, our only option to be fully funded.
McColloch said he’d like to see the consortium stay self-insured until June 30 with the district paying any further assessments, instead of increasing premiums to avoid impacting dependents and retirees.
“What I think is going to happen is we’ll finish this thing out, and we’ll be with somebody different starting July 1 and do a regular open enrollment like we always do,” he said. “But be prepared to expect some type of rate increase just because of the way we’re running.”
There’s not enough time to get through underwriting, quotes and an open enrollment before Jan. 1, he said. McColloch is currently working with four or five groups to get quotes.
Board member Larry Maxwell asked if the district would eventually have to place a cap on the amount it pays for each employee’s health insurance.
“That’s a very difficult thing to do but it could be a discussion at some point,” McColloch replied. “A lot of districts do that. I hope we don’t get to that point.”
The $353,000 assessment will be paid out of district reserves, dropping them below the point of equaling 20 percent of annual operating budget. McColloch said some revenue could be diverted to build up those reserves instead of going into capital projects.
“But of course, the bad side of that is it’s going to hamstring us on our capital projects and our facility plans and some of the things we’re able to do,” he said. “But insurance is one of things you have to have. It’s a benefit for our employees and something we have to take care of.”