Update on Teacher Health Insurance

Last month, I broke down here why school employee health insurance is more expensive than that for general state employees and why school employees may be facing a 50% increase in premiums starting in January.  Several weeks ago, Governor Beebe delayed school employee enrollment from October 1 until November 1 (enrollment ends November 20) to give legislators more time to explore options to lessen the increase. Governor Beebe has stated that he will not call a special session to address the problem until it’s clear that a consensus has been reached by the legislature.

On Friday, legislators circulated a memo, detailed here by Talk Business Arkansas, that outlines some short-term and long-term solutions to the problem. The school employee pool is facing an approximate $54 million shortfall for 2014. Legislators have proposed using either $36 million from the state surplus, resulting n a 16% premium increase for 2014, or $43 million from the surplus, which would result in a 10% premium increase. Neither are ideal, but both are better than a 50% increase. However, the state can’t rely on a surplus every year to cover this gap, so new funding mechanisms must be introduced, or the current mechanism must be restructured to spread the costs more evenly among the players (i.e., the state, the school districts, and the employees).

Reallocating current funding from certain categorical or matrix funding line items to increase school district contributions, thus reducing employee premiums, is the easiest solution and has been floated by some legislators. I don’t expect superintendents to happily jump on board with any proposal that simply reallocates existing district funds, as most will say that if they could contribute more to employee insurance, then they would already be doing so (about half of the state’s school districts already contribute more than the statutory minimum). The state can’t just continually pick up the tab, however. Teachers aren’t state employees. Their salaries are derived (mostly) from state funds, but they’re not part of the state’s employee classification system, and how they are hired and what they are paid (aside from a few statutory minimums) are not controlled by the state at all. School districts are individual employers and must bear some of the costs.

Governor Beebe met with legislators yesterday afternoon to discuss options, and from what I hear, they’re making progress. I believe a special session is certainly on the horizon. Compromise is key here. I look forward to seeing what the legislature comes up with over the next few weeks and months.

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