Legislators consider state takeover of school health plans to lower costs

School districts currently manage their own health insurance plans. They pick their own providers, they decide how much of the premium they want to cover, and their employees can bargain for better benefits. But now, a senator from the Mat-Su Borough is pushing for the state to take over management of school health plans, and a report commissioned by the Legislature backs that proposal up as a way of saving money. 

Alaska’s school districts spend a quarter billion dollars just on employee health care. It’s a big number that’s only expected to rise, and there isn’t one obvious solution to keeping costs down. But a consulting group hired by the Alaska Legislature thinks it has a few ideas, and all of them involve putting every one of the state’s school employees into the same insurance pool.

Malinda Riley with the Hay Group presented to the Senate Finance Committee on Tuesday.

“You’re saying that all of employees will go to this network, and as a result achieve better discounts because of the volume of employees that would be utilizing those providers,” Riley told legislators.

The Legislature contracted with the Hay Group to find out what might happen if they passed a bill putting the state in charge of managing health plans for Alaska’s 16,000 school employees — and their dependents. Mike Dunleavy, a Republican senator from the Valley, introduced the legislation this past spring.

The Hay Group surveyed all the state’s school districts, and they interviewed the trust and the insurance companies that currently handle school health plans. Their conclusion is that districts could save up to $34 million every year if the state acted like a broker for schools, without putting them in the state’s existing AlaskaCare employee health program.

“It maximizes the savings through a centrally managed program, so you’re getting that low-hanging fruit of leveraging your size to get the best contracting,” said Riley. “But what it also does is it helps to minimize some employee disruption when it comes to plan design.”

The Hay Group does see some downsides to that arrangement, though. Districts lose the ability to pick and administer their health plans. A change like this would also affect contract negotiations for teachers.

Ron Fuhrer is the president of the National Education Association’s Alaska affiliate, and he thinks the bill would take power away from unionized employees.

“The way it’s written, it’s going to strip the right of education employees to negotiate their health plan benefits and costs. Under current Alaska statutes, health benefits is a mandatory item of bargaining.”

The NEA manages plans for about a third of the state’s school employees through the Public Education Health Trust. Chief Financial Officer Rhonda Kitter says that on top of their concerns about the bill, they also have questions about the Hay Group report. She’s skeptical that districts would be able to achieve the savings projected in the report, and she says the study doesn’t factor in the $100 million in startup costs the state would need for a takeover.

“We too are concerned with the medical inflation in Alaska, but strongly feel private enterprise is more efficient and more cost effective than government interference with health insurance, and is more nimble in responding to cost savings opportunities,” says Kitter.

Lawmakers will continue their review of the bill when the Legislature reconvenes in January. The Finance Committee has a continuing $350,000 contract with the Hay Group, and about $200,000 has been spent on their study so far.

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