Thursday, July 28, 2011

Board approves Health Insurance renewal lowering rates by 9 percent

Thursday night, the school board approved a two year proposal for health insurance rates for District employees from Blue Cross.   The new proposal contains several elements.  It reduces the number of our insurance carriers down to one -- the lowest bidder, of course.   There are several reasons for doing this.   We have been concerned that when we award bids to the two lowest bidders, there is less incentive for any of the bidders to bid as low as they can.  If all bidders can succeed by coming in second, all bidders may may try to come in second place.

Also when there are multiple carriers, each carrier worries that there will be an adverse selection process that sends higher risk employees over to one of the two carriers, and that risk causes actuaries to raise prices.  We have also phased out the District's highest cost insurance policy, leaving us with only two policies from the one carrier.  Phasing out that richer costlier policy has again improved the actuarial performance of the remaining policies.  We are left with two policies, one of which is a high deductible lower cost policy that is attractive to employees who cannot afford higher premiums.

The result of all of this is that our premium cost for next year will go down nine percent.    That will result in a significant savings to both employees and the district.   Depending on the particular coverage, premiums (district and employee combined) will be reduced anywhere from $50 to $167 per month.  The bid included a rate increase cap for the second year of not more than 5%, so that we are guaranteed rate reductions for the next two years.

These changes required collaboration between the District and representatives of its employees.  It required the agreement of our employee unions to reduce from two carriers to one and it required the agreement of our employee unions to reduce from three policy choices to two.   The rate declines we realized result in part from the changes we made in our approach to health insurance over the last several years combined with a favorable insurance market this year. 

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