"Good News isn't News": Addressing Health Care Costs

FoxPolitics via a Steve Loehrke email:

Fremont School District Board of Education and FoxPolitics reader, wrote to update me with positive (!!) financial news from a school district. Refreshing!

In early March, 2007, the Post-Crescent, striving to illustrate the Freedom of Information Act for readers, requested invoices for legal charges from Weyauwega Fremont (W-F), a 1000-student school district west of Appleton. Per one of the newspaper's articles at the time:

Using the state's Open Records law, the newspaper fought for 10 months to see detailed invoices for attorney services after the district released heavily redacted copies ....

(P-C, March 11, 2007. The articles are no longer linkable. You can pay the P-C for an archived copy, or access articles from 1999 and later, free with your library card via Newsbank on the Appleton Public Library website.)

Loehrke objected to carte blanche (unredacted) release of the information and the P/C suit ended up costing district taxpayers about $25,000.

Quoting again from the March 11, 2007 P/C article:

District officials maintain they have not broken the law nor spent money irresponsibly, that the media is hyping the issue, and a handful of antagonistic residents are digging for dirt where none exists.

"We have willingly and openly responded promptly to more than 30 open records requests in the last year," school board president Steve Loehrke wrote in an e-mail to The P-C this past week.

Much of the legal work paid for by W-F and questioned by the P-C, was in response to actions by district retirees unhappy with health insurance changes the board and administration were considering - changes which ultimately led to substantial savings for the District.

Loehrke is proud of his school district and concerned that good news isn't reported.

To update you, our school district changed to a self-funded insurance plan and got rid of the WEAC owned insurance carrier. This year the school district put $800,000 (8%) of our budget into the Fund Balance. Tax rate is lowest of all surrounding school districts. Test scores are up. Permanently fixed the OPEB [Other Post-Employment Benefits] problem. Balanced the next year's budget. Many things the newspaper could have and should have reported. Instead they wanted a whipping boy to help them sell papers. They never showed up at this year's annual meeting. News silence. Good news isn't news.

I talked with W-F District Administrator Jim Harlan to confirm Loehrke's claims, and if accurate, to get the low-down on how the district achieved all this good stuff.

It seems to me the primary story is one of doggedly doing everything they can to reduce costs - to reduce costs that don't impact learning in the classroom. Lo and behold, one way W-F reduced costs was by controlling - surprise, surprise - health insurance costs.

Like the typical school district, teachers had a contracted right to choose the district's health insurance carrier. So again, like most other districts in the state, WEAC members chose the Insurance Trust (WEA IT) run by their union. With no competitive bidding.

In negotiations, Harlan and his teachers agreed to form a committee that would simply look into a possible change. Ultimately all parties saw it as a win-win for the district to self-fund their insurance program. Premiums are lower and coverage is better than the WEA IT program - so good in fact, the district was able to add dollars to their reserve fund, as Loehrke mentions above. ($200,000 of the $800,000 mentioned by Loehrke came from positive performance of the self-funded health insurance program.)

Those dang OPEBs
"Other Post-Employment Benefits" are a huge budget item for most school districts - districts that years ago agreed to fund health insurance benefits for retirees from as early as age 55, to age 65 when employees are eligible for Medicare coverage. As you can imagine, this gets to be a pretty hefty bill, with family coverage per retiree at $14,000 annually and up. (Here's a great primer on the extent of the OPEB problem in Wisconsin. To get a good overview, read the Executive Summary at the beginning and the Recommendations section at the end.)

For newly hired employees, W-F is phasing in a defined contribution retirement plan meant to fund retiree health care coverage. The District now establishes (and funds half of) a 403(b) (like a 401(k), only used by public sector and nonprofit corp. employees) that ultimately is meant to pay for health insurance benefits on retirement. And it's portable - traveling with a teacher if he moves to another district - or another position.

Other school districts, and several local governments have huge health insurance and OPEB challenges. Kudos to W-F for addressing theirs.

Much more on Steve Loehrke here.

Posted by Jim Zellmer at November 17, 2008 6:55 AM
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