The Indian River County School District, having allowed its employee healthcare fund to plunge $7 million into the red, is seeking to hike the premiums teachers and other staff will pay in the year ahead by as much as a whopping 230 percent.
The School Board voted unanimously to increase the premiums of 229 non-union employees by up to $200 a month, effective this past Tuesday, and has given the same offer to the Indian River County Education Association, which represents about 1,100 teachers, and to the Communications Workers of America, which represents about 800 workers.
While the teachers union rejected the proposal and wants to negotiate further, the School District is acting as though it is a foregone conclusion that the union employees ultimately will fall in line.
“The longer (union) negotiations last, the more money per month each individual will have to pay,” said School Board member Charles Searcy.
The vote hiking rates was one of the final actions for outgoing School Board members Claudia Jimenez and Matthew McCain, whose eight-year tenure oversaw the depletion of funds in the district’s self-owned health insurance company, which now require replenishment.
Tiffany Justice and Laura Zorc will join the board in November.
“I know it’s going to be a big hit,” Jimenez said. “But if we want to continue to be self-funded, it has to be done.”
Board member Dale Simchick agreed, admitting “The (Indian River) county caught it earlier,” vaguely acknowledging the comparatively small premium increase county employees face.
Indian River County is also self-insured, but has done a better job of keeping costs down. The county needs about $2.1 million more in premium revenue in the current fiscal year while the School District needs $5.8 million more. The county plans to pay 76 percent of the premium increase, while the school district only plans to absorb 27 percent.
In past meetings, Assistant Superintendent of Human Resources and Risk Management Dr. William Fritz contended the district got into this mess through bad actuarial advice from Brown & Brown Insurance over the last several years. The company has recently been replaced with Aon Hewitt.
Fritz warned the board last March the healthcare fund was in the red. Aon firmed up the deficit amount in a May projection. The fund lacks the state-required reserve equal to 60-days expenditure, which is about $3 million. It also spent the fund into a $4 million deficit for medical fees, therefore the total deficit is $7 million.
Admitting they made a mistake, the board approved a plan in July to pay the $7 million deficit off in three years, but that still awaits the state Insurance Commission’s approval. Although the commission has approved three-year plans for replenishing “safe harbor” reserves, there is no precedent for approving a medical-fee deficit. In the interim, the district’s general fund has paid the $4 million deficit.
