Starting in January, every K-12 school employee statewide who works at least 630 hours a year will be fully covered by a new health insurance program.
Everyone from teachers to secretaries and bus drivers will be covered fully by the School Employee Benefits program, as long as money is allocated to the program by lawmakers later this month.
The new system would cap family plan costs at three times the cost of an individual employee, and employees would only pay 15 percent of the cost of a standard health insurance plan.
With both the House and the Senate including money for the program in their biennial budget proposals, Yakima County school districts are anticipating funding will be approved.
In Yakima County, the new program would change health benefits for roughly 7,300 employees and their families, said David Iseminger, director of the employees and retirees benefits division at the state Health Care Authority.
But many districts remain uncertain about what this would mean for their budgets.
The program was initially projected to cost roughly $900 million to cover as many as 300,000 employees and family members at $1,174 per month. Districts began doing the math, and Educational Service District 105, a regional school district encompassing Yakima County, analyzed the projected funding required for local districts.
But those projections likely are out of date as state lawmakers continue to work on how to fund the plans.
Up in the air
The House has proposed a budget of $453 million broken down by $1,079 per person per month in 2020 and $1,106 in 2021 instead. The Senate has proposed a $507 million budget covering $994 in 2020 and $1,056 the following year.
“No district could even predict what this is going to cost,” said Tom Fleming, chief financial officer of ESD 105. “It’s almost wait and see time before we do an analysis again.”
The program is expected to hurt property-poor districts that rely on federal funding to cover employee salaries, he said, because the state won’t allocate health care funds for non-state funded employees. This could be of concern to districts including Wapato, Toppenish, Granger, Grandview and Sunnyside.
“They get way more federal funds because of their poverty rates,” he said.
What this means is that employees funded outside of state dollars won’t have allocated health insurance funding from the state, but will be required to pay the standardized cost of health insurance, likely leading to employee or program cuts, Fleming said.
T.J. Kelly, interim chief financial officer for the state Office of the Superintendent of Public Instruction, said this could be the case.
“The proposals from the state only cover SEBB costs for state allocated staff units. Any units hired with federal dollars or enrichment dollars will not be covered by the state, and will need a separate funding source,” he said, using the acronym for the School Employee Benefits board. “Districts that hire a lot of federal or local funded staff, and have low enrollment or property tax base, would be a greater risk of financial difficulty to meet their SEBB obligation.”
Sylvia Bazan, business manager for the Wapato School District, which has about 3,350 students, said that roughly $7.4 million of the district’s $48 million budget comes from federal and categorical funding. That money funds several programs, she said, including salaries.
The district currently pays $843 a month per employee for health care. Even if the lower House or Senate monthly rates — compared to HCA’s projection — are approved, that would still be at least an additional $151 the district would have to find to cover the missing funds for federally funded employees.
“They would have to find that funding either by making … cuts for staffing — so maybe not filling positions that are open — cuts to professional development, programs for students, supplies. Those kinds of things that they usually need to run their program,” Bazan said.
In the Yakima School District, the new program would do away with a long-running self-sufficient trust that many employees within the district use. One of the perks of the trust had been coordinators that work directly with district employees to help them navigate insurance needs.
“There are people who don’t know how to talk with insurance … if there is someone working with them, maybe they can help them come up with those right questions,” said Monette Dennis, head of payroll for the district. “Will SEB provide that? Will we still have that same kind of service? We might, but we just don’t know yet.”
“They’re trying to do something that’s going to help everybody, but I don’t know yet if that’s going to be best for our state and our district, or the end user,” she added. “Until they get it worked out, I don’t know that anybody could know that — what the end result could be.”
Iseminger, of the HCA, said some clarifications could help districts better understand the process, until details are ironed out.
• Lack of funding: Some have interpreted lawmakers’ budget proposals that are lower than the HCA’s projected health insurance cost as a sign that districts may pay more out of pocket. Iseminger said this isn’t the case.
“That doesn’t push obligations from the state to districts or employees. It’s just (impacting) how long the state will take to build up reserves,” she said. “You don’t need all of the money up front, which means you have a lower funding budget.”
The state will simply be paying the cost for a longer duration, he said.
• Out-of-pocket loss: Districts are accustomed to having to pay the difference between state funds allocated for employees and the cost of employee insurance, Inseminger said. Moving forward, this will largely disappear.
“For the state-funded basic education (employees), there won’t be a difference, because the funding rate is designed and based off of the state’s centralized purchasing,” he said. “Those are designed to match each other so that there’s not this gap, per se, that might be experienced in the current system.”
• Part-time employee costs: The program takes into consideration that some districts hire multiple part-time employees to make up one full-time staffer. That helps compensate for additional employee coverage under the new 630-hour threshold of the program.
“It’s a statewide average, which means it’s not necessarily going to be perfect for everyone … (but it) helps to account for that,” he said.
• Opt-out loss: While some have raised concerns districts are paying for employees who opt-out, Iseminger said that’s not exactly how the program is configured. Districts are paying an overall amount based on the staff they have, anticipating opt-outs.
• Employee-employer split: A collective bargaining agreement was made with a group of roughly eight unions statewide last summer to set the coverage ratio between employees and employers at 15 percent compared to 85 percent, respectively.
The amounts are based on an 88 actuary plan, he said. An actuary is the estimated amount a typical policyholder is expected to pay of their medical bills. The 88 actuary plan is a common plan, he said, which is why it was used as a benchmark.
The ratio of how much the district will cover is based on this cost. If an employee chooses more coverage, the district would not pay more for the plan.