June 10, 2005
Shephard: Madison Schools WPS Insurance Proves Costly
Jason Shephard emailed a copy of his article on Madison Schools' Healthcare costs. This article first appeared in the June 10, 2005 issue of Isthmus. The Isthmus version includes several rather useful charts & graphs that illustrate how the Madison School District's health care costs compare with the City and County. Pick it up.
K.J. Jakobson voted “yes, yes, yes” on the recent Madison school referendums but promised herself after the vote to look into whether the district is paying too much for its employees’ health insurance. What she’s found has led her to agree with district critics.
“Here’s an issue that could potentially, at least for this year, solve the entire budget problem,” says Jakobson, a former business administrator who this week sent the school board a memo on the issue. “Personally, I feel the district is being negligent in not providing alternatives.”
For years, questions have been raised about the Madison district’s health insurance costs, and especially its relationship with Wisconsin Physicians Service, the provider specified in the teachers’ contract. WPS has regularly been lauded by John Matthews, executive director of Madison Teachers Inc. and a paid member of WPS’s board of directors.
On Tuesday, the district and MTI announced a new two-year contract with $14.7 million in new spending for teacher raises. The roughly 4% salary and benefits hike in each of the next two years will go largely toward rising health-care costs. The wage scale will increase just 0.75% in the first year and 0.9% in the second, although the average teacher will see a pay hike of about 2.1% in each year due to automatic step increases.
The deal also calls for the district and MTI to create a task force to analyze health-care costs, in part because of rising premiums through WPS. If the task force recommends a switch in coverage, officials say any savings will go toward teacher pay rather than prevent layoffs.
Current WPS rates are 71% higher than those for Dane County government employees, who 11⁄2 years ago agreed to insurance-coverage changes to avoid layoffs. The county now pays $796 for monthly family coverage under its most expensive plan. The city of Madison, in comparison, pays $929 for its most expensive HMO plan.
Bob Nadler, the district’s director of human resources, says his office has solicited proposals from HMOs whose premiums are “near” the rates of the county and city. But because the union has refused to negotiate the item, exact cost savings are unknown. A 1997 estimate placed potential savings at $3.6 million. And in 2000, the Wisconsin Policy Research Institute concluded that the district would save almost $2.5 million annually if it enrolled in the state health insurance pool. “We’re talking estimates of anywhere between $2 million and $10 million,” says Jakobson. “Even $1 million in savings would prevent all teacher layoffs this year.”
“I think MTI members have said, this is quality issue for us,” Matthews says. “I have sacrificed wages to keep my health insurance the way I want it.” And indeed, rising health-care costs have largely gobbled up the “total package” raises given to teachers over the past decade.
“Basically, since the revenue caps, the district has said, ‘Here’s the amount of money we have for wages and benefits. If you continue with WPS, you have this kind of salary increase,’” says school board President Carol Carstensen. “Ultimately, this is a decision for the bargaining unit to decide between wages and benefits.”
Matthews won’t give up WPS without a fight, and some have suggested his dogged support stems from his role as a member of WPS’ board and executive committee. In 1994, the state Office of the Commissioner of Insurance cleared Matthews of interest-of-interest allegations. But concerns continued to be raised, with the commissioner of insurance in 1997 telling the Wisconsin State Journal, “If I were a member of the union or a member of the School Board, I would be asking, ‘Why aren’t we bidding this out?’”
The ties between Matthews and WPS date back more than 20 years. Matthews says he serves because of his expertise: “I’m the conscience of the public sector unions on the WPS board.” He adds that he discloses on WPS conflict-of-
A detailed survey of MTI members conducted this spring, says Matthews, showed that “keeping WPS was the number-one priority” of teachers. “As far as the members are concerned, this is more important than wages.”
But the clear trend in the past decade is teachers selecting Group Health Cooperative, the HMO plan the district started offered in the 1970s to comply with federal law. GHC costs $807 a month for family coverage.
In the past, Matthews says he’s discouraged teachers from taking GHC because of lower-quality service. Now, many younger teachers are willing to select an HMO plan that’s more restrictive but less costly. In 1997, only 20% of Madison teachers were enrolled in GHC; today that figure is 47%.
Still, others say HMO coverage is just as good in part because Dane County is unique in its variety and depth of coverage in the 5 most-popular HMO plans. “There was a time when HMOs may not have been high quality,” says Carstensen, who herself receives HMO health care. “I think that in this community, the quality of care is extremely high in any of the HMOs.”
“All these young healthy people go to GHC. They don’t have costs. If you went and talked to 10 new teachers, they probably haven’t been to the doctor at all, for any reason,” Matthews says. “That’s not the case if you go talk to 10 teachers over the age of 50 who are the population in WPS.”
“Does it save the district money to go to a lower costing option? Probably not, because that money would go to salaries,” says Nadler. “This is a bargaining issue and the union won’t give this in exchange for nothing. Changing plans becomes a big negotiating item.”
School board member Ruth Robarts says $3 million is her conservative estimate of potential savings, which translates into 54 jobs. She suggests the district follow the lead of Dane County Executive Kathleen Falk, who used health-care savings to avoid layoffs during the last contract negotiations with county unions.
“We’ve got to work with the union and see about translating several millions of dollars in savings to keeping jobs and protecting programs,” Robarts says. “The only difference between us and the county is that we are weak in our bargaining and they are strong.
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