Showing it’s never too late (or early) for lawmakers to come to agreement on bill language, during the early hours of the 2nd Special Session of 2012 a compromise was reached on SB 5940 (Regarding reforms to school employee benefits purchasing). The enacted version adopted 53-45 in the House and 25-20 in the Senate requires new reporting requirements for K-12 health insurance costs while providing a carrot and stick approach to reducing costs in the system.

As illustrated by the less than ideal path SB 5940 took to final passage, those impacted by the requirements of the bill are still trying to understand its impact, including one legislative committee (JLARC) that for the first time will have the power to award grants.

Here is a description from the bill report on why changes to K-12 health insurance became an issue during 2012:

“In 2010 the State Auditor’s Office conducted a performance review of the public school employees’ health benefits purchased by 295 school districts. The report became available to legislators during the 2011 legislative session, and included three main recommendations: streamline the benefits array of school employees to improve efficiency, transparency, and stability; standardize coverage levels for more affordable and equitable health care benefits; and reduce costs by restructuring the health benefits array. Legislation passed in the 2011 special session (section 213 of the state budget) directed the Health Care Authority (HCA) to develop a proposal for consolidating the purchase of school district benefits to improve administrative efficiency, transparency, and equity. The HCA report delivered in December identified that over $1 billion in public funds is spent each year on school employee benefits for 109,000 employees and the additional 94,000 dependents that are enrolled in benefits.

The state provides funding to school districts to support the purchase of health benefits for employees. For the 2011-13 fiscal biennium, the state provides $768 per full-time equivalent employee (FTE). The amount of the school funding rate is commonly passed through as an allocation to each school district employee through bargaining agreements. In addition, some school districts have, in some instances, bargained local funds that are added to the state allocation.

. . . Recent studies indicate that significantly more than 1,000 funding pools are operated in Washington’s 295 school districts. Employee premiums may vary significantly between districts and funding pools. There is also substantial variation in the share of the costs employees pay between those insuring only themselves, and those insuring families. Full-time school district employees that are insuring only themselves on average pay about 4 percent of the cost of benefits, while those full-time school district employees that insure their families on average pay about 43 percent of the cost.

During study of the school district health benefit system in 2011, the HCA stated that it was unable to collect some of the needed demographic, payroll, and benefits data. The HCA identified a number of the obstacles to data collection that it found and would need to be dealt with to enable analysis of the effectiveness of the administration and purchasing systems employed by districts. Among the obstacles to data transparency identified were (1) variations in district budget practices; (2) contracts with third party administrators that made it difficult to assess administrative costs; and (3) contracts with benefits carriers which allow the carriers to withhold information about the make-up of premiums, including components of administrative fees, and claims information at the school district, employee bargaining group, or individual member level.”

Among the changes made by SB 5940 to address this:

“School districts must modify their benefits for employees to require every employee to pay a minimum premium for the medical benefit coverage, subject to collective bargaining, and ensure that employees selecting a richer benefit plan pay a higher premium. School districts offering medical, vision, and dental benefits must (1) offer a high deductible health plan option with a health savings account similar to that required for state employees; (2) make progress toward employee premiums for full family coverage that are not more than three times the premiums for employees purchasing single coverage, unless a different target is developed in future reports; and (3) offer employees at least one comprehensive health benefit plan in which the employee share of the premium for a full-time employee does not exceed the share of premiums paid by state employees (approximately 15 percent). All school district contracts must be held to responsible procurement or contracting standards, and school districts must make progress on promoting health care innovations, cost savings, and reduced administrative costs.”

The stick to bring compliance with these requirements is found in Section 3 (9) of the bill:

“Upon notification from the office of the insurance commissioner of a school district’s substantial noncompliance with the data reporting requirements of RCW 28A.400.275, and the failure is due to the action or inaction of the school district, and if the noncompliance has occurred for two reporting periods, the superintendent is authorized and required to limit the school district’s authority provided in subsection (1) of this section regarding employee health benefits to the provision of health benefit coverage provided by the state health care authority.”

This means that two straight years of non-compliance with the new transparency reporting requirements will result in that school district’s employees being placed in the state health care system.

The carrot is found in Section 7 (4) of the bill:

“(a) In the 2015-2016 school year, the joint committee shall determine which school districts have met the requirements of RCW 28A.400.350 (5) and (6), and shall rank order these districts from highest to lowest in term of their performance in meeting the requirements.

(b) The joint committee shall then allocate performance grants to the highest performing districts from a performance fund of five million dollars appropriated by the legislature for this purpose. Performance grants shall be used by school districts only to reduce employee health insurance copayments and deductibles. In determining the number of school districts to receive awards, the joint committee must consider the impact of the award on district employee copayments and deductibles in such a manner that the award amounts have a meaningful impact.”

The “joint committee” referenced is the Joint Legislative Audit and Review Committee (JLARC). As the Legislature’s auditor, JLARC has never before been authorized to award public funds. The authority granted by Section 7 (4) of SB 5490 is a new role for JLARC as an awarder of the performance grants. JLARC is still trying to determine how this role will work and not compromise its independence as an auditor. Not surprisingly, JLARC was not consulted about this new role since it was added to the bill after 2 a.m. on the morning the bill was adopted as noted below.

Also of note about this section is the requirement for a future Legislature to appropriate the $5 million that will be used by JLARC in 2015 to award the grants with.

Here is video of Governor Gregoire noting that the final version of SB 5940 that was voted on early the morning of April 11 wasn’t even written until sometime after 2 a.m. that morning:

(click here for video)

This could explain why JLARC wasn’t consulted first about its new authority to award grants and is still trying to work through how that process will be implemented.

Also, here is video of the 4 a.m. April 11 Senate floor debate on SB 5940 where Sen. McAuliffe complained about the lack of transparency on the new language prior to final passage:

(click here for video)

It is ironic that a bill focused on improving the transparency of K-12 health insurance was enacted in such a nontransparent way.


[Reprinted from the Washington Policy Center blog; feature photo credit: thanker212]