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Wisconsin School Districts are Switching Health Care Providers/Plans to Create Savings in 2011

Comments | Posted in News, mi reports | By MacIver Institute | Posted July 14, 2011 6:22 AM

By Christian D'Andrea MacIver Institute Education Policy Analyst

Part two in a series.

As we previously covered, school districts across the state are tightening their belts to find fiscal savings in 2011. With a lean budget approaching, many school boards have turned to the tools provided in Act 10 to make concessions that would prevent layoffs in institutions throughout Wisconsin. This included employee contributions to both health care and pension funds.

However, a significant number of these schools are finding extra savings by switching from longtime health insurers or to high deductible plans. In some districts, the benefit from simply shopping around for health care reaches into the hundreds of thousands of dollars.

There are 93 school districts in Wisconsin that have extended, renewed, or altered their local contracts since the beginning of 2011. According to reports, at least 13 of these schools had specific language built into their new contracts that ensure that they switch health care plans – either to new carriers or to lower-cost plans. This number may be higher than what has been reported so far, but it represents an eighth of all updated contracts in the state.

When tracked against the Wisconsin Association of School Boards’ listing of health insurance providers, it appears that many of the districts that are taking action to either change provider or plan currently contract with the same company – WEA Trust. Nine of the 12 identified districts (information for Menasha Joint School District was unavailable at the time of publication) were WEA Trust customers as recently at the 2009-10 school year. WPS, Security, and Medica were the other three providers in the group.

In this sample group, WEA Trust insured 75 percent of districts who reported having to switch health care provider as a stipulation in their latest contracts. In 2010, the company insured approximately 60 percent of all reported public school districts in Wisconsin. According to reports, these districts switching away from WEA Trust are doing so in ways that are producing major fiscal benefits for local school boards.

For example, the Baraboo School District saved approximately $660,000 by switching their coverage from WEA Trust to Dean Health Care. Hartford saved over $535,000 by changing carriers. The Kimberly School District saved even more, eliminating $821,000 in costs by dropping WEA Trust. In small districts like Hartford, these savings are impressively large. This echoes trends set in the past six years, as many local school boards have been able to produce savings by switching from longtime carriers.

Other districts, such as Edgerton and Green Lake, stand to save upwards of half a million dollars just by opening their bidding process to competing companies.

We examined these trends in January in the study “Health Care Trends in Wisconsin’s School Districts: A Look at the Expanding Market of Teacher Health Insurance.” The report showed that shopping around for health care presented significant savings for the state’s local schools. As a result, many districts were switching away from their traditional WEA Trust coverage for lower-cost alternatives. As we reported months ago, on average, Wisconsin's schools stood to save approximately $100 per staff member by shopping around for coverage just once every six years, according to statewide trends between 2004-2010. Statewide, that would produce $10 million annually if every school board changed their health care insurer at least once in a six year span.

This continuing reform reflects that shift. WEA Trust’s market share went from 78.87 percent of reported districts in 2004 to 59.95% in 2010. If all nine identified districts facing contract changes in 2011 switch as well, it would represent another three percent drop in enrollment for the insurer.

Of course, WEA Trust is the most likely company to be dropped because it remains the state’s largest insurer for school districts. January’s health care study showed that districts benefit from shopping around for insurance regardless of their provider. For example, Durand's schools stand to reduce their costs by over $500,000 just be switching from longtime provider WPS.

In short, school boards that stay loyal to health care providers may save some effort when it comes time to renew contracts, but they’re better served financially by continually opening the bid process to outside vendors. The examples shown in Baraboo and Kimberly reinforce this.

The bottom line is simple - when districts shop around for their health insurance, they get the best rates. The savings from smart consumerism can then be redistributed in the classroom, benefitting teachers and students alike. Whether teachers are insured by WEA Trust, Dean, Medica, or Security, they stand to save money by opening up their carriers to a regular bidding process in a competitive marketplace.