The Indian River County School Board last week put off a vote on a staff recommendation to raise employee health insurance premiums 6.2 percent for the 2019-20 school year.
Instead, the board indicated it would approve the purchase of “Stop Loss” insurance during its May 28 meeting, which would protect the district’s self-funded health insurance program from going bankrupt if too many employees file large insurance claims next school year.
If approved this week as expected, the district would pay $746,068 to QBE Insurance Corporation to provide Stop Loss insurance, which would cover any health insurance claim that exceeds $225,000, said Mary Mercado, an employee benefits specialist for the district.
The insurance would go into effect July 1 and extend through June 30, 2020, at which time the board would need to decide whether to renew it.
The insurance protection is needed to help continue and stabilize the district’s self-funded health insurance program which has struggled in recent years, Mercado and other staff in the district’s employee benefits department told board members during a recent presentation.
Three years ago, the district’s employee health insurance fund had dipped to under $100,000 in reserves.
“What we would be saying, is that at some point we are no longer willing to carry that risk,” Mercado said. “We are going to pay an insurance company to cover our losses for us.”
There is some financial risk in purchasing the Stop Loss insurance, school officials acknowledge. The district paid $815,372 for the same type of protective insurance policy for the current school year, but only one claim exceeded this year’s $175,000 deductible.
That employee claim was about $300,000, so the district spent more on the backup insurance than it saved.
But based on projections by the district’s employee benefits department, claims are expected to rise during the next school year, Mercado said. Although staff could not predict how much claims will go up next year, the costs are usually cyclical, and the district is due for a more expensive than usual year.
“Claims trends are volatile,” Mercado said. “This is catastrophe insurance so that we know a claim is never going to wipe us out.”
In the meantime, the board still must decide whether to approve the staff-recommended 6.2 percent increase in employee insurance rates for the 2019-20 school year. The rate hike is necessary to cover a projected $1.2 million increase in employee healthcare costs, said Amy Eder, an employee benefits specialist.
The district’s insurance cost projections are based on state numbers that predict insurance costs will increase 6 percent annually, school officials said.
“The problem with that is we can’t afford to make up that cost every year,” said Board Chairman Laura Zorc. “Employees don’t receive annual 6 percent raises. We all know teachers are underpaid. Many teachers take jobs for the benefits. But if they can’t afford the benefits, what’s in it for them?”
Board Vice Chairman Tiffany Justice and Board Member Jacqueline Rosario also expressed concern about another increase, noting that the district raised employee insurance rates 30 percent in 2016.
That 30 percent increase was an emergency action, according to the district, which said at the time the dramatic increase in employee premiums was necessary because previous boards had used money from the district’s insurance fund reserve to cover increasing healthcare costs, rather than raise employee rates. That decision eventually left the district’s insurance fund with less than $100,000.
That problem prompted the state to become involved and required the district to develop a plan to increase the amount in its insurance fund, Eder said. According to Florida law, schools must maintain a 60-day “safe harbor,” or minimum balance equal to two months of employee insurance claims.
The district responded by raising employee rates 30 percent and transferring $1.56 million from the district’s general fund to the insurance fund.
Currently, there is $3.78 million in the insurance fund, Eder said. The projected minimum balance the district must maintain for the 2019-20 school year to remain in good standing with the state is $2.9 million.
Board members, who are expected to discuss the issue again in June, say they are considering several options, including raising employee insurance costs by 6.2 percent as recommended by staff, splitting the costs between the district and employees, or using insurance fund dollars to cover the $1.2 million increase.
