Parameters for Studying Health Insurance
Madison Metropolitan School District
To provide the Madison Metropolitan School District (MMSD) with critical information and options that will allow it to negotiate more effectively to provide more cost effective quality health insurance to district employees and their dependents.
II. Executive Summary
The MMSD has seen increases in the cost of providing health insurance that cannot be sustained in the future without threatening educational quality, reducing overall compensation, or requiring the district to exceed state-imposed revenue caps. The district needs to fully understand what has occurred during the past 15 years (1990-2005) and to explore options that would provide a balance between cost containment and the needs of district employees. The exploration of options needs to focus on the level of benefits offered, employee cost sharing, the use of managed care, competitive bidding, individuals covered, and proven strategies that have been used by private and public employers to improve overall cost effectiveness.
III. Historical Perspective
An evaluation of future options is not possible without a complete understanding of trends since 1990. Quantitative data needs to be obtained that tracks overall dollar costs and number of individuals covered annually for the following categories:
A. Active full time employees and their dependents covered under contract by Madison Teachers, Inc. (MTI)
B. Active full time employees and their dependents that are not represented by MTI
C. Retired employees and their dependents
D. Part time employees covered by health insurance
E. Disabled employees with district provided health insurance
Information obtained should also include a complete analysis of the coverage provided and any changes made during the past 15 years. Analysis of coverage should include cost sharing of premiums, employee cost sharing at the time care is received, and benefits that are covered and not covered. Data should also be broken out for services provided by the district’s insurance carriers, WPS and Group Health Cooperative. Finally, data should be generated that tracks overall health costs as a percentage of total district expenditures.
From this data those factors that appear most to be contributing to increases in cost should be identified.
IV. Proven Cost Containment Strategies
Containment of employee health costs is an issue that is facing virtually every public and private employer in the United States. Many strategies have been employed with mixed results. Data and information should be obtained from approaches that have proven successful. Using available sources, attention should be focused on:
A. Private employers in Wisconsin
B. State experience through the State Employee Health Insurance Program
C. Federal experience through the Federal Employee Health Insurance Program
D. Wisconsin school districts (i.e. Middleton-Cross Plains, as well as cooperatives)
F. Public employers throughout the US
G. Competitive bidding processes
From this information a complete listing of successful cost containment strategies should be obtained for analysis and for possible inclusion into the MMSD benefit program.
V. State Employee Health Plan
Options may exist for the MMSD to join the State of Wisconsin Employee Health Insurance Plan. The cost of utilizing this option should be calculated using options available from the state.
It has been proven that a major factor in overall health costs is the level of benefits provided under any employer health insurance plan. An analysis should be conducted focusing on the MMSD benefit structure and benefits that could be restructured or eliminated. The analysis should be guided by continuation of quality health care but with an emphasis on those factors that contribute to cost increases without measurable impacts on overall employee health. The analysis should also focus on strategies of employee cost sharing (at the time care is delivered) that might reduce unnecessary utilization.
National studies have shown that a disproportionate amount of costs for health care come from a small percentage of individuals that either have chronic health problems, a major illness or injury, or unexplainable high utilization. Analysis should include ways that these individuals can be more carefully monitored with the goal of meeting their needs and stimulating more efficient utilization of services.
VII. Premium Sharing
Sharing of overall premium cost between the employer and employee has been used increasingly by employers to provide balance in overall health costs. Data and information should be obtained on strategies that would move the MMSD in this direction in a manner that is fair both to the District’s employees and the taxpayers who ultimately must foot the bill. Data should be obtained that evaluates the cost savings that would provide some degree of equality between what taxpayers are receiving and what the District provides.
VIII. Covered Individuals
Meaningful evaluation of health costs is impossible without a complete understanding of who is covered and why under the overall MMSD health plan. Information should be obtained that evaluates this focusing on active employees, domestic partners, individuals on disability, and retirees.
A. Multiple Coverage Employees
Information should also be obtained focusing on cost implications where two or more individuals in the same household are district employees. Finally, information should be obtained on situations where dependents could receive their health insurance through other options provided by their own employers. In particular, attention should be focused on those employees of the district having spouses covered under other public health insurance programs.
B. Part-time Employees
The District employs a number of individuals that is less than full time. The degree to which they are eligible for health insurance should be evaluated. The evaluation should also focus on the degree to which they use this benefit, and the degree to which premiums are pro-rated. Options should be identified that appropriately balance their needs with containment of costs.
C. Retiree Coverage
A complete understanding should be obtained of retiree health costs for the District. Analysis should focus on criteria for receiving this benefit, how and where it is provided, and effective coordination for those employees who have become eligible for Medicare. Options should be identified that would achieve cost savings for this significant group.
D. Disability Coverage
Individuals who have become “disabled” frequently have access to District provided health insurance. Information should be obtained on the criteria for disability, the number of individuals covered, the degree to which “disabled” employees work elsewhere, and the approach for review and removal from disability status. Total dollars for these individuals should be examined from a standpoint of cost effective options.
E. Domestic Partner Coverage
Information should be obtained on the number of individuals covered under the District’s domestic partner benefits. Criteria should be analyzed to determine appropriateness of eligibility.
IX. Competitive Bidding
The MMSD has not utilized a true competitive bidding process for its entire health benefit package in recent years. Information should be obtained that analyzes potential cost savings that could result from the following options. The analysis should focus both on the existing benefit level and a level that incorporates benefit reductions/employee cost savings identified in the previous points.
A. Putting all MMSD employees under a single program competitively bid for a three- year period under a full “freedom of choice plan”
B. Putting all MMSD employees under a single program competitively bid for a three- year program under a managed care option
C. Competitively bidding a plan that continues to offer MMSD employees a choice of a managed care plan and a plan that includes freedom of choice as part of covered services
From this analysis, information should be obtained on the potential costs compared to what can be expected under the status quo.
Review of health insurance costs has never been an exact science with totally predictable results. What can be obtained is a listing of options that, if implemented, hold considerable promise to lower future increases that MMSD must ultimately absorb. From information obtained from the points enumerated above, a listing of options should be provided that would include a range of anticipated cost savings. The listing of options should include some that could be implemented individually and others that might be implemented as part of a package of changes. For all options, it should be emphasized that the District’s greatest asset is its employees and they deserve a health plan that provides quality care and reasonable access. The options must recognize that this goal needs to be balanced with responsibility to the taxpayer and recognition that maximum dollars should be available to educate the children of MMSD.