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The Quandary of North Coast Schools Medical Insurance Group 

Increasing medical claims and low reserves are changing how NCSMIG fixes rates By Iridian Casarez

click to enlarge The North Coast Schools Medical Insurance Group board meeting on Feb. 19 discussing possible changes.

Photo by Iridian Casarez

The North Coast Schools Medical Insurance Group board meeting on Feb. 19 discussing possible changes.

Local school district employees from teachers and secretaries to bus drivers and janitors are raising concerns about their healthcare insurance, which might be undergoing some major changes.

The majority of Humboldt County's classified full-time school employees are covered under North Coast Schools Medical Insurance Group, a joint powers authority (JPA) that pools monthly premiums to pay medical, dental and vision bills.

Premium rate changes are part of the NCSMIG's process. The group's board, which is governed by 16 members made up of appointees from NCSMIG's member school districts, sets monthly premium rates for the following year around spring. The board sets the rates based on recommendations from experts and consultants who take into account the pool's current net balance, past medical claims and projected medical claims for the rest of the year.

This year's initial review opened up many concerns.

During the NCSMIG's initial rate change review in January, the board's consultants projected that the pool's "medical balance would end the year with a negative fund balance of $7,666,119," said Cindy Vickers, Northern Humboldt Unified High School District's director of fiscal services and president of the NCSMIG board. These projections stemmed from higher medical claims incurred from the current year, July to December of 2019, on top of a previous negative balance of $1.53 million. In simpler terms, if the pool continues to pay for medical claims at the same rate as those acquired from July to December, the medical fund balance will be short.

Vickers emphasized that these numbers were projections and said that she believes the pool will end the year "better than expected." During the latest board meeting on Feb. 19, an updated review projected the end of the year net position would be a deficit of just under $4 million.

The negative net position means the board will have to offset the balance while continuing to provide medical insurance to its participants, requiring either increasing rates by more than the usual 5 to 7 percent or restructuring premiums costs into tiered rates.

Lathe Gill, a California Teachers Association staffer based in Humboldt County, said in an email that premiums are already a "hardship" for some school employees.

"Many already have to give half of their annual wage for a good health plan before they ever go to the doctor or fill a prescription. Others choose a bare-bones plan where they can't afford to go to the doctor if they actually get sick," he wrote. "A few districts have tried hard to keep up with the cost of healthcare, to keep a high-quality workforce, but with possible rate increases this year of over $200 a month, workers are very worried."

Gill also said increasing health insurance premiums puts another burden on teachers, especially because school districts aren't getting enough new money to compensate for increased healthcare and pension costs, and most North Coast districts have hard benefit caps on how much they will pay for health insurance before passing costs to employees.

"The health plan is unsustainable," he said. "Providing healthcare for school employees (in Humboldt County) is a real bind. The costs will come out of pocket on top of high premiums."

One of the board's consultants, Geoffrey Kischuk of Total Compensation Systems Inc., an employee health benefit consulting firm, submitted a report to the board Feb. 13 reviewing the medical plan's premium rate structure. He recommended changing some practices to improve the predictability of claims and better manage the JPA's finances.

In his report, Kischuk writes that the JPA is facing some complications. He starts by stating that the JPA's "allowance for increasing reserves" has been used to pay claims. Simply put, it's paying claims with money that is supposed to be, in some way, in a savings account. He also notes that is because the board is experiencing lots of "anti-selection" — people choosing lower coverage plans.

Anti-selection is when people are able to select their healthcare plan based on their medical and financial needs, and opt for a lower coverage plan.

"When it comes to medical insurance, claims vary by individuals and what their needs are," Kischuk said to the Journal. "The majority of claims are chronic and foreseeable instead of accidents and acute illnesses, so people know what their health insurance needs are. And when it comes time for them to pick a health coverage plan, they chose the plan that's most beneficial to them."

Kischuk gave an example: Let's say there are two coverage plans, one that's $1,000 a year and offers more coverage and another that's $500 a year and offers less coverage; someone who knows they don't need the $1,000 plan will opt for the lower cost plan. However, even though there's a lower premium, the medical claims cost stay steady. Less money is going into the pool to pay for medical claims that keep coming.

"It's not a matter of claims going up but the claims staying the same," Kiscuk said.

In his report, Kischuk suggests that the JPA tier coverage rates — including different options like one rate for a single employee, another for an employee with one dependent, a family rate and so on — to both build reserves and make up for the deterioration of funds, while also curbing the amount of anti-selection. Tiered rates, he said, would make it so the JPA doesn't increase the premiums more than necessary.

If the JPA doesn't choose to tier its rates, it will need to increase them by 11 to 13 percent. Kischuk said if the board decides to increase rates by that much, the increase would be supported "almost entirely by employees," meaning even more anti-selection losses or member districts withdrawing from the JPA to find other medical insurance programs.

An 11 to 13 percent increase has a bigger effect on employees who are paid a lower salary.

According to Vickers, the NCSMIG by-laws require any member district considering withdrawing from the JPA to send a letter of intent by Jan. 1. If a district does find an alternative JPA, it must send in a confirmation letter by March 1.

Gill said that College of the Redwoods and Eureka City Schools have already left the JPA and five JPA member school districts, including Arcata School District, McKinleyville Union School District, Northern Humboldt Union High School District, Klamath-Trinity Joint Unified School District and Pacific Union School District, submitted their letters in January. (Taylin Titus, director of JPA services, clarified at the Feb. 19 meeting that none of these districts has submitted withdrawals.)

When the Journal contacted ECS Superintendent Fred Van Vleck's office about why the district left the JPA, Van Vleck's assistant Micalyn Harris replied in an email, "We have no comments at this time."

Northern Humboldt Union High School District Superintendent Roger Macdonald said that his district sent its letter to view all of the options, adding that it has put together a committee to try to find healthcare insurance alternatives.

"I am looking at it logically, not as an emotional response," Macdonald said. "We owe it to our employees to look at all of our options and find the best healthcare insurance that gives the best coverage at reasonable prices."

Macdonald also said he doubts the district's committee will find a better coverage plan by the March 1 deadline and added that the JPA is working to find good health insurance for its subscribers.

Gill said that these changes will potentially impact hospitals as well. A hospital's viability is based on what percentage of patients have comprehensive coverage. Comprehensive coverage helps hospitals stay solvent, they don't make the same type of revenues with people who come in with limited insurance coverage. When a patient has comprehensive coverage, the hospital doesn't have to wait for payments as long as it would with a patient with limited coverage.

Kischuk also emphasized the importance of the local health market.

"The local healthcare market in Humboldt County is unique. The best situation for employers and employees is to have a plan that's designed and operated based on the healthcare market, and maintaining the program would be the best thing for everyone," he said.

The NCSMIG board scheduled the rate setting decision for its March board meeting but, with only four weeks to go, during the last NCSMIG board meeting it was clear members were still undecided.

Jeff Brock, NCSMIG board member and chief business officer for McKinleyville Union School District, pointed out that the board has many options and recommendations but still hasn't seen any proposals of concrete examples to make "the best possible decision for the JPA." The board then decided it wanted to look at different examples of tiered rates to make a decision in March. If it cannot reach a decision the board will reschedule setting next year's rate for another meeting in April.

Adrian Dobson of the California School Employees Association addressed the board.

"Really think about what you're doing," he said, "this problem was made in this room and people at the bottom pay the most."

Iridian Casarez is a staff writer at the Journal. She prefers she/her. Reach her at 442-1400, extension 317, or iridian@northcoastjournal.com. Follow her on Twitter @IridianCasarez.

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