As costs mount, Johnson City Schools mulls switch to state health insurance

Between the 2017-18 and 2020-21 fiscal years, Johnson City Schools expects to lose $7 million on its health insurance plan.As the cost of the system's existing self-insured plan increases, staff will decide this week whether to switch to the Tennessee State Insurance Plan.In order to make the transition, employees must cast a simple majority vote (50% plus one) in favor of the switch. The voting will occur Monday through Wednesday this week. To have the state plan in place by the beginning of 2021-22 fiscal year, voting must occur before May 1.If employees vote to replace their plan, they would join many other districts in the area on state health insurance.For many years, school system employees have been on a self-funded health insurance plan, which has allowed the system to provide additional health benefits to employees such as a health assessment program, a diabetes program and an employee health clinic.A self-funded program means the school system and employees, through the regular payment of premiums, contribute to a local insurance fund that pays all claims for any enrolled members. Blue Cross Blue Shield of Tennessee manages the plan.In an email to staff last Thursday, Human Resources Director Lee Patterson explained that the system has had to increase premiums for employees in recent years because of the ever-increasing costs of programs and the escalating costs of employee medical claims.Finance Director Leia Valley said people on the self-insured plan have encountered more chronic conditions, which has increased the cost of claims, and there has been a large jump in the system's pharmacy costs.At the beginning of the 2020-21 school year, the system raised premiums by 10% and increased maximum out-of-pocket payouts.While the system has increased premiums annually over the last few years, Patterson said, the additional money generated has not been enough to keep up with a more than 40% increase in costs since 2017."To be very frank, the balance of our Johnson City Schools Insurance Fund has been depleted," Patterson wrote.As of March, the Johnson City Board of Education has had to transfer roughly $2 million from its general purpose fund balance to make up the shortage in the insurance fund.Losses started in the 2017-18 fiscal year with the fund balance dropping from roughly $5.8 million to $4.6 million. By the end of the 2019-20 fiscal year, the fund balance was $329,867.Looking at what the insurance fund would require in the 2021-22 school year to remain solvent, system leaders determined they would need to increase premiums by 54-64%."This would mean for the first time in the history (sic) that our Johnson City Schools Insurance Plan would be a higher cost than that of the Tennessee State Insurance Plan," Patterson wrote. "We knew that this high increase would not be acceptable or beneficial for our school system employees."That prompted system leaders to consider cost-saving programs and look at the state's plan as an alternative.Patterson said the system's management and professional collaborative conferencing teams, which includes administrators and teachers, ultimately determined that moving employees to the state plan was the best option.Among other reasons, it has had minimal cost increases over the last several years, has less risk of depleting its fund balance and it will offer continued coverage for retirees.Moving to the state plan will, however, mean that employees will see a 24-34% increase in their premiums and lose programs that existed under the self-funded plan, namely the health assessment program, diabetes program and the health clinic."While we know that change is never easy, and it can be somewhat overwhelming, we feel this is our best option for all of our certified and classified employees and families," Patterson wrote. "This is the best way to minimize current increases while also stabilizing minimal increases in the future."