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Wisconsin Districts Save Millions by Switching Health Insurers

Comments | Posted in News, mi reports | By MacIver Institute | Posted August 15, 2011 9:31 AM

By Christian D'Andrea MacIver Institute Education Policy Analyst

It’s a narrative we’ve touched on before – switching health insurers can save Wisconsin’s school districts hundreds of thousands of dollars each year. This summer, two local school boards have proven this point in dramatic fashion.

Hudson and Kaukauna have both made headlines recently for saving over $1.5 million combined through bidding out their teacher health insurance programs. As a result, these districts are getting deals that will provide high-level health care while saving significant funding dollars.

Kaukauna’s switch from WEA Trust to WCA Group Health Trust will be part of an overhaul that is projected to turn a $400,000 deficit into a $1.5 million surplus. Their savings from the change are an estimated $400,000 – or about eight percent less than the district was paying under their previous plan. Part of these savings hinge on higher deductibles for eligible members.

Hudson also dropped WEA Trust and chose Health Partners as their new provider. This change, coupled with a switch to Delta Dental, is estimated to save $1.1-1.2 million each year. Prior to the enacting of Act 10, the district was not allowed to open their health care services up for competitive bidding unless such an agreement was collectively bargained with the union.

This switch is a swing from past trends in health insurance for Wisconsin’s public school teachers. As we covered this January, the state’s school boards are detrimentally loyal to their long-term insurers. As a result, many districts have remained static with one company, leading to higher costs for employee benefits and less money to be spent in the classroom. Though the data did not include figures on how many districts were barred from competitive bidding by contractual obligations, Hudson’s experience suggests that it may have played a role in this lack of transition in Wisconsin’s school districts.

Districts that did switch carriers tended to see lower premium costs, and many were switching away from WEA Trust. The company’s market share had dropped from approximately 80 percent to 60 percent between 2004 and 2010. The news of switches in Hudson and Kaukauna to other companies suggests that the non-profit branch of the state teachers’ union will have to find ways to retain current customers and lure new ones in the coming years.

Hudson and Kaukauna are two tangible examples of what local school boards can achieve in the face of budget reductions. These moves will save millions of dollars over time, and those savings can be invested back into the classroom to benefit schools and students in Wisconsin. As negotiations continue across the state, it can be expected that more and more districts will come to similar results.

It’s smart consumerism, but it’s also a move that will make the state’s public schools stronger. Hudson and Kaukauna are using the tools of Act 10 to get more bang for their buck, and while this won’t solve all their problems, it’s a step in the right direction for both cities.