School, town cope with with the rising cost of health

By NATHAN LAMB | Milton Independent Staff Writer
mireporter@mac.com

The pre-Town Meeting hearing on the school budget was relatively free of controversy, but some eyebrows were raised by data that underscored the growing weight of health benefits.

Resident K.C. Norris was clearly surprised to see that two new lobby monitor positions were slated for nearly as much benefits ($14,791) as salary ($16,555), and questioned how that could be the case.

As it turned out, the numbers were likely too high; school business manager Don Johnson said afterward. It assumed a two-person health insurance cost of $12,100 per employee—which is no longer offered to support staff and wouldn't be available to 99 percent of applicants.

Even so, a single-person plan costs $5,712; making it easily the biggest piece of a $8,403 package for support staff that includes retirement ($612), dental ($490), life insurance ($48), along with social security ($1,266), worker's comp ($150), unemployment ($72), and flex benefits ($52).

With the law requiring health benefits for employees who work over 32 hours per week, Johnson said it's essentially a fixed cost of adding personnel. He added the payment-benefit ratio for the lobby monitors is by no means unique.

“(For) Almost all the support staff, their benefits cost almost half of what their salary is, sometimes more,” he said.

“They don't get paid very much but the benefits are good and that's how we can get them,” he added another point.

In all, $2,373,875—or just over 11 percent of the district's $21,409,326 budget-- was allocated to cover employee health expenses in the current fiscal year, and recent history suggests that figure will continue to climb.

Back in FY03, the district spent $1,210,825 on the health benefit, which was just under 7.7 percent of the district's $15,840,038 budget that year. Subsequently that line-item jumped by $313,973 (25 percent) in FY04, $266,803 (17 percent) in FY05, and $240,216 (13 percent) in FY06, before slowing with an increase of $64,054 (or $2,095,871) for FY07.

One variable behind that rise is the number of employees; the district has 328, compared to 314 in FY03. Of that number, some 218 took health benefits in FY03, with that number growing to 239 in the current year- roughly a six percent increase.

Even so, head count isn't the whole story, given that the school's premiums have seen annual increases between five and twelve percent over the past five years.

Those numbers were provided by Joe Zimmerman of Vermont Education Health Insurance (VEHI), a non-profit group that buys insurance in bulk and provides it for districts across the state.

He termed the local cost trends as in-line with state and national trends; saying VEHI recently announced a five percent rate increase for the coming year—and that was a low water mark in a five-year trend that's seen increases of 7.5, 8, 12, and 9.75 percent.

Zimmerman said those rates are based on usage, and are driven upwards by increases in user costs, medication, and underwriting high tech equipment. The expectation is for prices to keep going up for the foreseeable future, with a trickledown effect for the consumer, he added.

“In programs like ours, we simply attempt to raise the money we need and we base that on historical information,” he said. “If we're coming off a bad year we raise the rates to cover the expenses.”

On a local level, those rising expenses lead to a number of cost containment efforts. Some center on wellness programs that provide rebates for healthy lifestyles or hiring part-time personnel, but others venture into the arena of collective bargaining to shift the benefit cost off the employer.

One example is the schools no longer offering the family and two person plans to support staff after the year 2000. Another is adjusting the percentage of employee contribution for health benefits, which Johnson said has been increasing in recent years. Employees currently cover 11 percent of the benefit costs, and are in the second year of a contract that increases their contribution by one percent annually.

Any future changes would also have to be bargained collectively, and Superintendent of Schools Martin Waldron indicated that adjusting that figure too much could impact the district's competitiveness in securing and retaining employees. Even so, he acknowledged the expense has grown sharply over his 20-plus years in education.

“When I was first a principal, you could buy a family health plan for $130-$600, now they're almost $17,000,” he said. “I think at one time the cost was fairly modest and it was included in benefit packages and it wasn't a cost that people worried about as much as salaries…now that the cost has risen, it's become a greater concern for everybody.”

The issue also impacts the town-side, where just over eight percent ($467,200) of the $5,771,459 FY09 budget is earmarked to provide health benefits for the town's 46 full time employees.

In an e-mail comment, Town Manager Sandy Miller said most town employees will pay 10 percent of benefit premiums in the coming year. The exception is police officers, who have a cap of two percent base pay toward health insurance premiums.

In practice, Miller said that's substantially lower than other employees and something the town has looked to equalize in the next contract. He cited that as a sticking point in current negotiations, which have dragged on for about two years.

Beyond that, Miller said there's a state-level issue in play as well.

The state currently under-funds the Medicaid program by $90 million, and he said health care providers bridge that gap with surcharges on those who have insurance—including those covered by schools and towns. Miller, who is on the board of the Vermont League of Cities and Towns (VLCT), said it's something they'd like to see that change.

“”There is little we can do about this until the state properly funds its Medicaid bill,” he wrote. “One of the highest priorities of the VLCT's legislative program is to bring this issue to the attention of the administration and legislature and get them to address it—they know about it, but they don't want to deal with it.”

“It is essentially a cost shift from State income taxes to local property taxes,” he added.