Staff of the Jefferson City Public Schools district will see reduced healthcare costs, and maybe some pay raises in the near future because of a recalibration of the district's health insurance program.
The district's Board of Education approved a recommendation at its last meeting to reduce premiums on all the district's health insurance options by 8 percent. Per the same recommendation from the district's Chief Financial Officer and Chief Operating Officer Jason Hoffman, the board also gave its approval to reduce the board contribution to the district's medical trust by 8 percent.
The board is in a position to lower its health insurance premiums because in an unexpected trend, the district's healthcare revenues have been exceeding costs.
As of the end of March, the balance of the district's medical trust was about $10.49 million. Hoffman told the News Tribune "we think we need $5 (million) to 6 million in that account" to operate the district's health insurance program. He also projected for the board the balance in the trust account by the end of the 2016-17 school year will be $11.17 million.
In other words, the district has collected about twice as much money as it needs to operate its health insurance program, and it wants now to start passing the excess revenue back to staff as reduced healthcare costs, and probably increases in salary schedules, too.
The money in the trust can only be used for health insurance expenses, Hoffman said.
"We kept expecting (healthcare) expenses to rise and exceed our revenue," but that trend never materialized, he explained.
He credited policy changes from the 2010-11 school year as the changes that drove the current positive revenue trend - a choice of three healthcare plans for employees, and a change of network.
On the other end of the balance, he said expenses have been driven down over time by measures like wellness incentives and deeper discounts on plans the district has negotiated.
He said the district has pretty much followed the best healthcare practices of what other large employers have been doing.
Nationally, he said healthcare expenses have been trending at an inflation rate greater than that of general inflation.
Given the current status of the fund though, and after looking at the district's own history to make predictions, Hoffman said the district feels comfortable making adjustments to the program to increase expenses and decrease revenue.
The district currently pays $500 toward every employee's monthly premium; this is what the "board contribution" is, though the funds come from the district's overall budget.
Under Hoffman's approved recommendation, payments will be accordingly reduced to $460 per employee per month in sync with the decreased premiums.
The district contributes 71.6 percent of the trust's balance; employees contribute 17.3 percent, retirees 10 percent and less than one percent comes from interest, he explained.
The district will also switch its pharmacy benefit manager to RxBenefits, which is a co-op with other employers - and not just schools. This move essentially guarantees the district more bargaining power to negotiate reduced prescription drug costs with its provider, Optum.
Hoffman projected those savings to be about 30 percent, or $400,000 in total. At least some staff will see reduced prescription drug costs, though not all, and some will save more, others less.
In addition to these savings, he also recommended to the board the steps of teachers' salary schedules be increased by $500, because a decrease in healthcare savings on staff also lowers their retirement benefits.
Hoffman explained retirees' benefits are based on their three highest years of pay, which typically are people's last three years of employment. The calculations involved include the amount the board pays for their healthcare, as well as their salaries, so a reduction in healthcare costs actually lowers the calculations of their benefits.
The increase in salary schedules are to compensate for that, he explained.
Hoffman said he asked the board for a consensus of approval at its last meeting for the recommendation to increase salary schedules, and he said the board agreed with the concept.
That means while not yet official, he expects the board will vote in favor of the measure next month.
His presentation to the board explained there will not be any changes in benefits of healthcare plans. Staff and retirees have three options of two preferred provider organization (PPO) plans or a health savings account.
The district is self-insured, meaning it hires a third-party administrator to review claims and pay bills, and hires a network provider to get access to a physician network and negotiate discounts.