Although Gov. Rod Blagojevich says public schools can save tens of millions of dollars if they let the state run their employee health care, skeptical local officials are alarmed by the failings of a similar arrangement in Texas, as well as Illinois government’s uneven history of managing the health plan for its own workers.
Much as Blagojevich plans to do here, Texas took control of health insurance from all but its biggest districts in 2002 and set up a massive health insurance pool for 400,000 active and retired school employees and dependents. After just one year, the Texas plan was $854 million in the hole and teachers faced reduced benefits and big increases in premiums.
In Illinois, the state worker health plan, which would be a model for the centrally run teachers pool, has long been plagued by funding shortfalls and lengthy delays in settling claims that cost the state millions of dollars in late-payment fees. Though the problems have eased under Blagojevich, they have left many local school officials distrustful of the state’s ability to run a common health-care plan efficiently.
The takeover of a health-care system estimated to cost more than $1 billion a year is one of the most controversial parts of an education reform proposal recently unveiled by the governor.
Blagojevich wants to overhaul the state’s education system by transferring authority from the State Board of Education to a new Cabinet-level agency under his direction, then by consolidating expensive programs for local schools. Such a move, he argues, would eliminate waste, streamline bureaucracy and free up hundreds of millions of dollars that could be spent on classroom instruction.
`We’re just not convinced’
But many Illinois educators and industry experts have expressed doubts about the state’s ability to create a money-saving bureaucracy that will ease spiraling health-care costs. Local school officials also bristle at Blagojevich’s idea of having them pick up a bigger share of the tab for health premiums even while forcing them into an untested system that he would control.
Downstate Carlinville Supt. Michael A. Collins–who runs one of the impoverished, rural school districts that Blagojevich is counting on to support this giant pool–said he’s desperate for any idea that could stabilize health costs. But Collins has no faith in the governor or his money-saving promises.
“If we can save money, then to hell with local control,” Collins said. “But we’re just not convinced that’s going to be the case. He’s saying, `Trust us–if we all pull together, we can save money.’ That’s just really hard to swallow. And if they’re going to throw a $50 million bill back on the local districts, they have not only not solved the problem, they’ve made it worse.”
Blagojevich wants schools to support a mandatory program that would consolidate some 800 district-managed health plans into one state-managed plan paid for entirely by local districts. It would cover an estimated 240,000 school employees, retirees and their families, while shifting $54 million that the state now pays for retirees’ insurance back to local districts.
With the backing of teachers unions, Blagojevich is pushing the reform as a way to ease runaway health-care costs, one of the most unpredictable financial drains facing schools nationwide. Top aides to the governor acknowledge that school management and some rank-and-file teachers will resist this kind of sweeping change, especially in suburbs where schools are better funded and teachers enjoy generous health packages.
Michael Rumman, director of the state Central Management Services Department, said districts would lose some autonomy over their health plans but could still have flexibility in the plans they offer.
The administration argues that the school pools’ sheer size would mean big discounts in insurance costs. “Local control should not trump hundreds of millions of dollars in savings,” Rumman said.
Texas offers example
Texas brought massive scale to the table in 2002 when it was negotiating for teacher health care, but it didn’t lead to big savings and nearly caused the system’s collapse. The program required all districts with fewer than 500 employees to join a program expected to cost $1.4 billion this year.
Unlike Blagojevich’s proposal, the Texas government covers most of the costs of its state-controlled school insurance plan.
Minnesota and Montana also have proposed pooling all their school employees under state-run health plans. Minnesota just completed a study that estimated the consolidation could save schools $223 million.
“It’s a huge issue for every state, every local we work with because the costs are just killing state budgets,” said Carol Malone, a health-care specialist for the National Education Association union. “It’s not an easy sell, but short of a national solution, pooling is the best way.”
Illinois’ new health-care program would be run by Central Management Services, which Rumman argues has a solid record of keeping overhead costs low and managing the $1.5 billion health-care program for state workers.
A review of Illinois records indicates that administrative costs are low and funding problems have lessened since Blagojevich took office last year. Still, in the fiscal year that ended in June, the state spent $5.3 million in interest to health-care providers that served state workers because a cash crunch forced delays in paying bills.
In some cases, this caused state employees to pay medical costs upfront because their doctors were no longer willing to wait for payments. A governor’s spokesman promised that payments will be more timely this year, typically within a month, although Blagojevich’s budget has set aside $4 million to cover interest for late payments.
`It’s a money issue’
Though districts now run health plans for their current employees, the state controls the retired teachers health plan. It also is plagued with funding shortfalls that only intensify skepticism among local school leaders about the state’s ability to manage another health insurance bureaucracy.
“It’s not a turf issue. It’s a money issue,” said Allen Albus, assistant superintendent for Naperville District 203, where teachers enjoy generous benefits and below-market premium costs.
Albus said he is nervous about turning control over such an important and expensive program to state bureaucrats who do not answer to teachers or local property tax payers.
“If you create a pool that works, schools will join it,” he said. “But if there is no way to opt out, and we’re just handed a bill, that’s going to be a problem.”
Teachers union leaders support Blagojevich’s plan because they said it would improve equity among districts by mandating a basic level of health coverage for all school employees–teachers and janitors alike.
Such coverage now varies widely. Some suburban districts offer top-notch, fully paid policies with low deductibles to employees and families, covering everything from infertility treatments to dental care. Other districts can afford only to cover their teachers with the most basic medical coverage.
“It would be a solution to a problem that’s only going to get worse over time,” said Charlie McBarron, spokesman for the Illinois Education Association union. “There is no doubt this is a controversial plan, even within our organization. We’re certainly aware a lot of administrators are worried. And in the suburban areas, even our own members are not on board. But we believe we have to look at what the best solution is for education employees statewide.”
