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Despite Special Session Fix, Teacher Insurance Issue Looms

LITTLE ROCK — An issue so urgent that it demanded a special legislative session less than five months ago remains and is getting worse, lawmakers have learned, but the issue has been overshadowed during the current fiscal session by the private option debate.

“I think there has been so much focus, rightly so, on other matters during this fiscal session that we may have lost sight of the impending … crisis that lay before us,” said Sen. David Sanders, R-Little Rock, after a meeting last week of the Special Language Subcommittee.

The crisis Sanders was referring to is the continued escalating cost of teacher insurance premiums.

The Legislature during a special session in October earmarked $43 million from the state’s budget surplus to hold what would have been a nearly 50 percent increase in teacher premiums to 10 percent, beginning in January. Lawmakers also lopped another $36 million annually from other state sources to shore up the public school employees’ health insurance system and created a task force to study the system and recommend structural changes for its long-term stability.

In recent weeks, however, lawmakers have learned that the self-described “Band-Aid” they put on the wound in the special session isn’t holding as well as they had hoped and that Arkansas’ health plans for public school employees will need about $71 million in new money just to keep rates next year at current levels.

Bob Alexander, director of the state Employee Benefit Division, told a subcommittee of the State and Public School Life and Health Insurance Board recently that next year’s insurance rates will be announced in July and that a number of options should be considered to hold costs at current levels, including eliminating coverage for part-time employees and dropping coverage for spouses of covered employees.

During the Special Language Subcommittee meeting last week, Sanders presented an amendment to House Bill 1045, the budget for the state Department of Finance and Administration’s Management Services Division, which would allow the Employee Benefit Division to receive the tax savings school districts receive through cafeteria plans, specifically health savings accounts, they offer to teachers and employees.

Lawmakers were told not all districts offer such plans, but the total amount of tax savings received by the districts was estimated as high as $6 million annually. Districts that reap the savings have been using the money in the general operating budgets.

Along with infusing that money into the teacher retirement plan, the EBD also would take over management of the cafeteria plans health savings accounts and cafeteria plans, Sanders said.

Cafeteria plans allow employees to choose from a variety of benefits to formulate a plan that best suits their needs. The benefits are then paid pre-tax. Health savings accounts are employer-sponsored tax-advantaged accounts that are owned by employees and used to pay for out-of-pocket health care expenses.

The amendment was discussed during two Special Language Subcommittee meetings last week. While lawmakers agreed that something needs to be done to address escalating insurance premiums, some questioned the amendment, saying some school districts would lose a substantial amount of money.

Rep. Stephen Meeks, R-Greenbrier, told Sanders the amendment would cost the Greenbrier School Districts about $54,000 annually, and the Conway School District nearly $240,000 a year.

Sen. Jim Hendren, R-Gravette, said it would cost the Springdale School District about $300,000 a year. Jerry Guess, superintendent of the Pulaski County Special School District, told the panel it would cost his district about $400,000 annually.

“These are real concerns that those school districts have,” Meeks said. “I’m sure this is going to be replicated in school districts across the state. … School districts are having to feel that impact.”

Sanders said he appreciated their concerns, but urged lawmakers to consider the big picture.

He said lawmakers “get to look at the state in its entirety and we get to think of teachers on both the micro level but also on the macro level, and the impact not only to school districts but to the entirety of the state budget — the impact to higher education, the impact to human services, the impact to prisons.”

Lawmakers “don’t have the privilege of only looking at these policy arguments … maybe as someone who works in a school district’s administration,” he said.

He added that although he didn’t have the votes to get his amendment out of the subcommittee, he thought the discussion was good and opened the eyes of fellow lawmakers on an issue that will have to be addressed soon.

“Sometimes, you have say it once, sometimes you to say it twice, sometimes you have to say it three times,” he said.

Meanwhile, Hendren told the subcommittee that a legislative task force which he chairs is continuing to dicuss possible changes to the health plans.

The task force was a key component of the package approved by the Legislature to shore up the public school employees’ health insurance system. It is to submit its findings and make recommendations for changes by June 30, 2014, in time for consideration in the 2015 regular session.

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