The Greater Johnstown School District administration has decided to unilaterally drop the high-priced indemnity health insurance plan without the agreement of the district’s teachers union, setting up a potential arbitration showdown.
The move is expected to cut the district’s health insurance premiums by $584,000 for the 2009-10 school year, said Johnstown Interim Business Manager Ralph Acquaro.
Acquaro said that staring July 1, the district will switch all of the employees and retirees using the Blue Cross Blue Shield Indemnity plan onto a Blue Cross Blue Shield Preferred Provider Organization plan unless a “higher authority” orders the district not to make the switch. He said it’s the administration’s position that the PPO plan is comparable to the indemnity plan, although it costs substantially less, and it is therefore not a breach of contract to switch the plans.
“The union has rejected our proposal, which is their right, but the board believes we can’t spend $584,000 more of taxpayer money for a product that doesn’t provide $584,000 worth of [additional] benefits,” Acquaro said. “Should that decision get reversed and we have to provide the indemnity plan, the Board of Education would have made every single effort possible. In the spring of 2010, we don’t want to tell 10 teachers ‘you don’t have a job’ and reduce programming. And what are we buying, really — nothing.”
The district’s health insurance costs for 2009-10 jumped more than $729,000 from last year, with cost increases driven by a 20 percent cost spike in the indemnity plan, which is projected to cost $24,897 for coverage for a single family next year. That cost is about double the 2008 national average cost for a family health plan, according to the Kaiser Family Foundation annual survey of health benefits.
“It’s horrible, absolutely horrible. It’s terribly expensive,” Johnstown School Board President Robert Curtis said.
Acquaro said a family plan under the PPO plan will cost taxpayers and district employees $17,820 for the 2009-10 school year.
Even the PPO cost is 30 percent higher than the current year, thanks to an additional 10 percent hike agreed to by members of the Fulmont Health Trust Group at a meeting Wednesday. The Fulmont Health Trust Group is a collection of school districts — Johnstown, Gloversville, Amsterdam, Broadalbin-Perth, Mayfield and Wells — that purchase health insurance together and pay claims from a collected pool of money. Member districts say they set rates based on past and projected plan usage.
Gloversville Enlarged School District Business Manager Steven Schloicka said the increase in PPO costs will cost his district an additional $280,000 for health insurance next year that it hadn’t budgeted for. He said district officials hope to make up for the costs without additional layoffs.
Acquaro said the PPO plan may have been aggressively priced down by members of the trust to help attract teachers to use it and now has to catch up somewhat to sustain its costs He said the PPO plan offers about 10 percent less benefits than the indemnity plan and requires co-pays, whereas the indemnity plans have lifetime maximum deductibles of $2,000. He said the district won’t save the full $584,000 in 2009-10 because it has promised to pay the co-pay costs for retirees and active employees who have reached the lifetime deductibles for the indemnity plan.
“The district is going to make those folks whole, so there is no reduction in the benefit level guaranteed by contract … [but] I don’t think we’re going to be on the hook for $584,000,” he said.
Curtis said the Johnstown Board of Education did not formally vote on unilaterally dropping the indemnity plan but did direct Acquaro and Superintendent Katherine Sullivan to go forward with a plan to switch to the PPO plan.
“I’m sure the teachers union has already filed a grievance on this. We feel we are within our rights based on the contract language and they feel just the opposite, so we’ll let an arbitrator figure it out,” Curtis said. “We’re talking a substantial sum of money here. There are certain stipulations that we’ll have to meet to prove we are providing the same level of coverage with the PPO, but we feel comfortable we can meet those and still save hundreds of thousands of dollars for the district.”
Johnstown Teachers Association Co-President Kathryn Zajicek could not be reached for comment Wednesday.
Johnstown is one of three districts in Fulton County that saw unprecedented cost increases in health insurance for next year due to the 20 percent increase in the cost of the indemnity plans. Gloversville experienced an $858,769 cost increase, which it cut to $552,000 after cutting 34 teachers, 16 other staffers, six vacant teaching positions and one administrative vacancy. The cost increase has jumped back up to $832,000 after Wednesday’s decision to increase the cost of PPO plans. Broadalbin-Perth Central School District faced about an $800,000 increase earlier this year until knocking it down to $320,000 after eliminating 12 teachers and nine other staff and convincing some of its teachers to voluntarily switch to PPO plans. Broadalbin Business Manager Marco Zumbolo said the increase in PPO costs Wednesday will increase his district’s health care premiums by $30,000 to a total of $350,000.
Johnstown laid off no teachers in its 2009-10 budget because it was able to eliminate teaching positions through attrition with an early retirement incentive accepted by 13 teachers and by closing Jansen Avenue Elementary School.
“If we didn’t close a building this year, we would have had to recoup $700,000 just on health insurance. We can’t continue like this. We can’t keep closing a building every year,” Curtis said.
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