By Bill Rusteberg
School districts are entitlement based bastions whose decision making processes heavily weight social considerations at the expense of prudent business practices.
Ask almost any Texas school district what their experience has been under self-funded health plans either now or in the past (prior to TRS ActiveCare 2001) and you will likely get a negative response.
“We ended up $12 million in the hole and had to dip into general funds!” says an official of a Houston area school district. “When we left self-funding we had to come up with millions of dollars to pay runoff claims” says another district official in the Coastal Bend area of Texas.
One of the reasons some districts have cited for joining the TRS ActiveCare program can be attributed to poor management of their respective self-funded health plans resulting in unexpected losses leading to adverse budgetary pressures. So they joined TRS ActiveCare, a self-funded pool, comforted by the perception “big is better.” However, after 20 years of TRS ActiveCare, member districts have less choice, less benefits, and higher costs.
This must prove that self-funding sucks. Or does it prove poor management sucks?
School districts are notorious for making poor management decisions when it comes to their health care plan. Third party intermediaries add to the mayhem and destruction through self-dealing recommendations that don’t benefit members who ultimately bear the cost of decisions made by others outside the community.
It takes a strong independent risk manager empowered to make fiduciary decisions instead of insurance committees comprised of consumers whose only interests are themselves and uneducated school board members who pander to voters (school employees), to successfully manage a self-funded health plan.
Take for example the La Feria and Rio Hondo Independent School Districts in South Texas who have successfully managed their group health plans since 1998. Their costs have remained essentially flat and their benefits have improved. These two small districts are within a 20 minute drive of the largest employer south of San Antonio (Brownsville ISD) and enjoy better benefits at half the cost. The nearby Raymondville Independent School District, another small district, is another example. The members of these three districts go to the same doctors and hospitals as do the Brownsville ISD membership, but with completely different financial results, including more take-home pay.
Ingredients to long term success include (1) Little or no school board interference in decision making, (2) Strong administration leadership, and (3) No employee insurance committee. Otherwise the chance of failure is high.
These three ingredients apply to La Feria, Rio Hondo and Raymondville school districts. As plan risk manager I have never attended any school board meeting at any of these districts since 1998 and would not be able to recognize nor do I know the names of individual board members. All three have strong administration leadership in place that listens to risk management advice before making plan management decisions.
School districts are service intensive by nature. Benefit decisions are often tainted by political pressures. Change almost always occurs with every school board election producing no plan stability for long term planning. This is why many carriers, third party administrators and other intermediaries shy away from bidding on school districts, leaving a predictable few to fill the void.
As the TRS ActiveCare plan in Texas erodes, more districts will be seeking alternatives. Self-funding, if properly managed, will be their best option.
RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.
FROM A RETIRED TEXAS SCHOOL SUPERINTENDENT
As you know a big part of the problem is the employment of benefits managers who don’t want independent consultants making improvements for fear that they will be viewed as incompetent by the Superintendent. So, the inefficient system propagates itself. Patrick Dantoni showed Lubbock where they could save nearly $1 million per year on their Rx plan. Their insurance consultant even recommended they do it. Their insurance committee said “No thanks.”
NOTE: Patrick’s company has saved millions in Rx spend for Texas A&M, Texas Association of Counties, and others.