Research Memo. 04 RM 027 Date: August 17, 2004 Author: Don Richards, Senior Research Analyst

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1 Research Memo 04 RM 027 Date: August 17, 2004 Author: Don Richards, Senior Research Analyst Re: Descriptive s on K-12 School District Health Insurance Plans PURPOSE Summarize the range of health insurance premiums for various K-12 school district policies, including an assessment of the employer's contribution. Identify and briefly discuss the monetary factor(s) integrated within the education block grant funding model for health insurance. Present analogous information regarding the state Group Health Insurance program. RESULTS IN BRIEF This memorandum is not intended to compare various health insurance plan premiums. Rather, the memo provides a brief summary of all K-12 plans, the relevant components in the K-12 school funding model, and the state health insurance program, leaving any comparisons, or judgments, to the reader. A whole host of potential issues might appropriately be considered when comparing health insurance plans, e.g. physician choice, maximum payment levels, proportion of expenses to be paid by insurance, etc. However, several of these factors extend beyond the relatively limited scope of this introductory summary. The summary information found within the following text is supplemented with attached documents, including additional LSO summaries and source survey information excerpted from the Wyoming Education Association School Districts Salaries and Benefits Book. LSO staff has not independently validated the information contained within this source document. K-12 HEALTH INSURANCE PLANS More than a dozen different insurance carriers provide health insurance to the 48 school districts. Even districts that use the same insurance provider do not necessarily have the same health insurance plan in terms of deductibles, premiums, lifetime maximum payments, etc. All districts offer health insurance to their employees, and all districts subsidize a portion of the premium costs for both individuals and families. The Wyoming Education Association (WEA) prepares an annual survey of benefits and compensation. The summary covers individual, family, two party, and adult plus children insurance plans. For the purposes of this memo, only individual and family coverage are considered. The WEA summary also separates the results by "certified" employee and "education support professionals." LSO reviewed both occupational classifications and found no differences between the two groups for the health plans considered. Table 1 and Table 2 summarize the fundamental descriptive statistics of the 48 district's health insurance deductible levels and premiums for individuals and families, respectively. Numerous other policy characteristics, beyond the scope of this introductory summary, may be relevant. For example, some district's premium rates incorporate health, dental, and vision insurance. Other districts may provide dental or vision insurance only with a separate premium. Still other districts may not offer dental or vision insurance plans at all. (See Attachment A for the full LSO summary of the WEA report.)

2 PAGE 2 OF 5 Table 1. School District Health Insurance Summary s Policies (SY03-04). Minimum NA ($0) $236 $137 50% $0 Maximum $2,500 $500 $ % $147 Mean $556 $329 $297 90% $32 Median $500 $323 $302 99% $4 1) Converse School District #1 (Douglas) reported three different insurance plans, i.e., different deductible/premium levels. For purposes of this summary the lowest deductible level is. 2) Laramie School District #2 (Pine Bluffs) health insurance plan is not structured with a deductible. As a result, the minimum amount reflects, "NA ($0)". Table 2. School District Health Insurance Summary s Policies (SY03-04). Minimum NA ($0) $602 $253 33% $0 Maximum $5,000 $1,077 $1, % $562 Mean $1,088 $830 $640 76% $191 Median $900 $829 $679 81% $179 1) Converse School District #1 (Douglas) reported three different insurance plans, i.e., different deductible/premium levels. For purposes of this summary the lowest deductible level is. 2) Laramie School District #2 (Pine Bluffs) health insurance plan is not structured with a deductible. As a result, the minimum amount reflects, "NA ($0)". K-12 DENTAL INSURANCE PLANS According to the WEA compensation and benefits survey, 41 of the 48 school districts offer dental insurance for their employees. (Relevant excerpts of the WEA report are available as Attachment B.) Of the 41 district dental plans, 15 are wrapped in with the district health insurance as a package. In other words, the dental premium is combined with the medical premium. Finally, one district's (Laramie #1, Cheyenne) dental insurance is made available through the employees' union, with no contribution by the district. Tables 3 and 4 summarize the basic descriptive statistics with respect to dental insurance deductibles and premium payments for individuals and families, respectively. Only standalone dental plans (those with separate premiums) are addressed in the premium summary statistics, since it is not possible for LSO to disaggregate the premiums from the medical insurance coverage.

3 PAGE 3 OF 5 Table 3. School District Dental Insurance Summary s Policies (SY03-04). Minimum NA $0 additional into Maximum $100 $38 $38 100% $25 Mean $47 $23 $19 81% $4 Median $50 $22 $20 100% $0 1) Converse School District #1 (Douglas) reported two different dental insurance plans, i.e., different deductible/premium levels. For purposes of this summary the lowest deductible level is. Table 4. School District Dental Insurance Summary s Policies (SY03-04). Minimum NA $0 additional into Maximum $300 $101 $ % $84 Mean $111 $68 $50 72% $19 Median $100 $69 $49 86% $8 1) Converse School District #1 (Douglas) reported two different dental insurance plans, i.e., different deductible/premium levels. For purposes of this summary the lowest deductible level is. K-12 VISION INSURANCE PLANS Twenty-nine of the 48 school districts provide optical, or vision, insurance, according the WEA report. Of the 29 plans, 13 are wrapped in with the medical health insurance premium and 16 require separate premiums. Compared to the health and dental insurance plans, the average employer's contribution toward the vision insurance premium is substantially lower. Nonetheless, there are districts that pay 100 percent of both the single and family optical insurance premium. Table 5. School District Optical Insurance Summary s Policies (SY03-04). Minimum NA $0 additional into Maximum $100 $16 $13 100% $16 Mean $48 $10 $4 48% $6 Median $50 $11 $3 42% $4

4 PAGE 4 OF 5 Table 6. School District Optical Insurance Summary s Policies (SY03-04). Minimum NA $0 additional into Maximum $100 $46 $26 100% $44 Mean $100 $26 $9 43% $17 Median $100 $27 $7 27% $18 PERTINENT COMPONENTS OF THE K-12 BLOCK GRANT FUNDING MODEL The K-12 school district block grant funding model is used to determine funding levels for each school district. But, school districts are not required to expend the resources in a manner consistent with the ingredients of the funding model. That said, most of the district employee health insurance costs are in an annual, per staff amount for prototypical schools. These prototypical schools can be viewed as one of the "building blocks" of the education block grant model. In school year (SY)03-04, the prototypical model included an annual amount of $4, per staff, or $ per prototypical school staff, per month (assuming twelve months of coverage). In the current school year (SY04-05), the health insurance amount is $5, per year, per prototypical school staff, or $ per month, per staff. This difference is due to the external cost adjustment, which may be applied by the Legislature annually after a consideration of the effects of inflation. This formula funding amount does not apply to special education or transportation staff, since they are fully reimbursed under the block grant model at whatever the cost is to the districts. In addition to changes due to the external cost adjustment, the base formula value for insurance is also adjusted based upon regional cost differences. As a result, the actual expected health insurance contributions per prototypical staff range from $4, annually ($ monthly) to $6, annually ($ monthly) for the current school year. (For a full review of the anticipated model-derived health insurance component and a seven-year history of the base health insurance provision within the education block grant model, see Attachment C.) STATE GROUP HEALTH INSURANCE The State of Wyoming Group Health Insurance plan is available to all state employees (in all three branches of state government), including employees of the University of Wyoming and the state's seven community colleges. The insurance plan is an optional, not a mandatory, benefit. The insurance coverage can initially be divided into three categories: individual, family, and individual plus children. Table 5 summarizes the premium statistics along with the state's contribution, by level of deductible. As indicated, the state's health insurance is inclusive of a "preventative dental" program. More comprehensive dental insurance, as is often the case in many K-12 insurance policies, requires an additional premium. The state does not have a vision insurance plan for its employees. The state health insurance program is a selffunded pool, with administration provided by Great West. The employer's contribution is a maximum of $ for individual coverage and $ for family coverage, regardless of the cost (or deductible) of the plan selected. The state's contribution first covers life insurance, then health insurance, then dental insurance, assuming funds are available from the set amount of employer's contribution after the selection of each plan. More detailed information is included in Table 7.

5 PAGE 5 OF 5 Table 7. State of Wyoming Group Health Insurance Summary (July 2004). Health Insurance, with Preventative Dental Optional Dental Deductible Total Premium State Contribution Employee Contribution Employer Percentage Deductible Premium $350 $ $ $ % $750 $ $ $ % $50 $8.89 $2,500 $ $ $0 100% $350 $ $ $ % $750 $ $ $ % $100 $20.82 Source: LSO summary of Department of Administration and Information provided data. ADDITIONAL ISSUES Members of the Joint Interim Committee on Corporations, Elections, and Political Subdivisions have also inquired about the following issues: 1. Distribution of health insurance use for the two largest self-funded plans (Natrona County School District #1, Casper and Laramie County School District #1, Cheyenne), 2. The historical levels of liability premiums for a sample of districts over the past five fiscal years, and 3. Background on the application of the newly developed federal Health Savings Accounts (HSAs). Unfortunately, district responses to the first item have not been received by LSO as of this writing. Furthermore, limited responses to the second item have been submitted to LSO. Table 8 provides a five-year summary of liability insurance premiums for three districts responding to LSO's request. (Note that officials from Uinta #1 reported increases in deductible limits: $500 to $750 to $1,500 for auto liability and $500 to $5,000 to $2,500 for property and liability during the time period in question. Deductible levels for the other districts were not requested.) Table 8. Snapshot of Historical K-12 Liability Rates. Uinta #4, FY Sheridan #1, Ranchester Mountain View Uinta #1, Evanston '00 $3,826 $12,246 $101,362 '01 $12,169 $11,326 $132,477 '02 $7,826 $13,357 $156,104 '03 $24,649 $22,762 $234,453 '04 $27,000 $28,068 $198,773 '05 $20,394 $10,461 NR Source: LSO summary of district responses. With respect to item number three, Health Savings Plans are federally tax-exempt custodial accounts that may be used for the payment of qualified medical expenses. Several criteria must be met in order to use these plans. Notably, an individual must have qualified health insurance with a minimum deductible of $1,000 for individuals and $2,000 for families. Currently, most school districts offer insurance with lower deductibles. (For additional information on this topic, see below.) ADDITIONAL READING Congressional Research Service, Health Savings Accounts (RL32467), July 14, (Available to Legislators upon request through LSO.)