WORKING FOR HIGH QUALITY SCHOOL EMPLOYEE HEALTHCARE THAT'S AFFORDABLE FOR EVERYONE
Vermont Education Health Care Benefits Update #1
March 10, 2022
School boards across Vermont are currently reorganizing after the March 1 election. As we start this new term and emerge from the pandemic, a variety of issues, old and new, will surface on your radar. They are all important and merit your attention.
At this time, however, we want to remind all school board members that health care expenses make up a growing and significant component of your education spending. In Fiscal Year 2022 (FY22), for example, the estimated $231 million cost of health care benefits paid by Vermont school boards, constitutes 12.6% of total education spending. As recently as FY18, health care benefits averaged less than 10% of the budget. This trend must slow down.
Health care rates and contracts are set at the state level, but costs are passed on to and paid for through your local education budget. We urge school board members to remain mindful of the rising expense associated with providing health care benefits to your teachers and staff. If health care continues to grow at double-digit levels and consume a greater portion of your budget, you will likely need to reduce staff and eliminate educational programming in order to maintain control of your overall spending.
Now is clearly the time to focus attention on factors that increase the cost of health care. Actions we set in motion over the next year to better manage health care costs can help minimize increases in your future budgets.
At this time, you should be aware of two recent developments that impact health care spending in your school district:
Vermont Department of Financial Regulation (DFR) approves the Vermont Education Health Initiative (VEHI) FY23 Public School Employer/Employee Health Care Rates
On March 8, 2022, the DFR approved VEHI’s proposed health rates for FY23.
Overall, FY23 premiums for active employees will rise by 5%. These rates are most likely reflected in your projected FY23 budget.
This rate of growth for FY23 is lower than the double digit annual increases experienced over the last five years.
Since FY18, for example, premium rates for our most popular health plan (Gold CDHP Family) have increased at an annual rate of 9.9% per year. (See table below)
The annual cost of that family plan has risen from $17,394.12 per year in FY18 to a projected FY23 amount of $27,847.92 - a 60% increase in just five years.
If annual rate increases return to an average of 10% the next two years, the yearly premium cost for insuring one family in FY 25 will be $33,696 – an amount of $16,301.88 higher than FY18, nearly double the cost.
In FY23, VEHI’s lower 5% projection benefits from stable reserves, favorable investment performance, cost-saving measures in the pharmaceutical arena, continued low utilization of primary and specialty care, and a claims trend projection of zero percent for the third year in a row for hospital services. These helpful developments cannot be assumed to continue.
It is likely that issues such as a return to normal health care activity as we emerge from the pandemic, stock market volatility, and continued inflation in medical expenses will add pressure on Vermont’s Employee Health Benefits budget in the years ahead.
Employee/Employers Health Care Commision: Arbitration Panel Ruling for FY23-25
In December 2021, the Commission on Public School Employee Health Benefits completed its work for the 2023-25 bargaining cycle. The decision set by the Arbitration Panel determines the health care premium percentage paid by employees and employers. It also establishes the formula for payment of out-of-pocket expenses.
Employee/Employers contributions guidelines are now in place through June 30, 2025 (FY25).
Negotiations for Employee/Employers contribution guidelines beyond FY25 are currently scheduled to start in April 2024.
The two year wait before the next round of Employee/Employer negotiations creates an opportunity. The Employer Commissioners will use this time to shift their attention from negotiation to working with the Employee Commissioners, Vermont School Boards Association, the Vermont Education Health Initiative (VEHI), and the Vermont Legislature on developing cost containment measures regarding health care benefits. At each step in this process we will communicate with school boards, superintendents, human resource directors and business managers. The goal is to maintain a focus on containing the rise of health care costs that can limit resources needed to educate our children.
Statement Regarding Arbitration Decision
December 2, 2021
The Vermont Commission on Public School Employee Health Benefits for teachers and staff has completed the 2023-2025 bargaining cycle. During months of negotiations, mediation, and fact-finding, the Commission resolved major issues including paid premium percentages, eligibility, and cash in lieu of coverage.
In November, the Commissioners representing the Employers and the Employees presented their positions to a three-person arbitration panel regarding two unresolved issues: Out-of-Pocket (OOP) expense sharing and statewide grievance procedures. The Employee Last Best Offer (LBO) mirrored the fact finder report which called for a fixed rate for OOP over the three years of the agreement and a simple grievance process. The Employer LBO proposed a $100 decrease in employer contributions toward OOP during both the second and third years of the new agreement as well as a more detailed grievance process. On December 1, 2021, the Arbitration Panel elected to follow the fact finder’s report and resolved the issue in favor of the Employee LBO.
In its ruling, the Arbitration Panel stated that both the Employer and Employee Commissioners worked toward a resolution that would maintain quality health benefits for educators.
“Both of the parties’ last best offers are rational proposals ... The parties presented thoughtful and legitimate arguments for their respective proposals and their representatives forcefully presented the merits of their respective positions.”
The Arbitration decision amplified the notion that public educational employees continue to receive one of the most generous publicly-funded health benefits packages in the state.
The conclusion of this latest statewide bargaining cycle creates an opportunity for the Commission to now focus its collective attention on the goal of lowering overall healthcare expenditures. Although the next round of bargaining does not commence until April 2024, the Employer and Employee Commissioners must use this upcoming two-year window to work collaboratively with healthcare experts and the Legislature to better contain ever increasing healthcare costs which are relentlessly placing an ever greater financial burden on local school districts.
For now, the challenge is not to argue over which party pays what percentage share, but how the Commission can make strides toward lowering total health expenses. The money saved from this effort can lower tax rates and allow Vermont to preserve vital educational programs for its children.
The Commission looks forward to continuing its work of finding solutions which will bring resolution to these common goals.
For more information, contact Elizabeth Fitzgerald, Chair of the Vermont Employer Health Care Commissioners, at firstname.lastname@example.org.
After two rounds of statewide bargaining, we should take time to assess whether the Commission has made any gains with regard to the Legislature’s original intent. Our letter to legislative leaders.
Both the employer and employee commissioners have submitted their last best offers. You can view them here.
The fact finding report has been released. Read it here.
The Employer Commissioners recently provided an update on the status of statewide healthcare negotiations to school board members throughout the state. More information can be found on our Resources for School Boards page.
The Vermont NEA has recently sent teachers and support staff to school board meetings with a prepared statement claiming that out-of-pocket costs will quadruple (or quintuple) based on the employer commissioners current proposal in negotiations. In response we've created a new section of our website devoted to helping school boards respond to this and other claims from the Vermont NEA.
The Employer and Employee Commissioners concluded three days of Fact Finding on August 12. The Vermont NEA argued that school districts have plenty of money from federal COVID relief funds to further subsidize healthcare costs for employees.
The Employer and Employee Commissioners met on July 7 for mediation. In the initial proposals, the Employee Commissioners raised four issues and the Employer Commissioners raised six; there was shared overlap on three of those issues.
Governor Scott Responds to H.81
Unfortunately, H.81 does not adequately address cost containment. To the contrary, it puts taxpayers on the hook for still higher costs by removing uniform cost-sharing arrangements for premiums and out-of-pocket costs.
WHO WE ARE
Established by Act 11 of 2018
The Statewide Commission on School Employee Healthcare Benefits was established via Act 11 of 2018. It created a 10 person commission charged with negotiating healthcare benefits for all school employees. The first round of bargaining completed in 2019 when an arbitrator selected the employees last, best offer. The next round of bargaining began April 1, 2021.