Health Insurance Premium Increases for the 5 Largest School Districts in the United States, 2004-2008

Local school districts are one of the largest employers in the United States, employing roughly 8 million employees in 2008.¹ Locally, they are often one of the largest (if not the largest) employers in the communities they serve. Like many large employers, school districts offer an array of benefits to their employees, including health insurance. Employee benefits comprise 34.3% of total compensation for publicsector employees,2 with health insurance representing 10.9% of total compensation.²

Public Employer Characteristics
Carolyn Watts and colleagues highlighted some of the unique constraints public employers face, including balancing budgets in a political climate, a unionized workforce, and the ever-present consideration of the taxpayer impact of any financial decision.³ School districts experience these same constraints. In addition, they shoulder the social responsibility that accompanies being the largest employer, and they must consider the impact their financial decisions have on wages, employment, and take-up rates.

The recent economic crisis has been particularly difficult for public employers, because tax revenues have sharply declined, and the competition for dwindling financial resources has intensified. School districts increasingly face intense pressure to balance various stakeholders' needs and continue to offer affordable and competitive health benefits to their workforce. Although surveys have reported slowing growth trends for health insurance premiums for purchasers in general,⁴ the specific experience related to health insurance premiums in major school districts has not been analyzed.

This article reviews the health insurance premium and employee costs for the 5 largest school districts in the United States, from 2004 through 2008. The school districts included in this survey are:

• New York School District (NYSD)⁵
• Los Angeles Unified School District (LAUSD)⁶
• Chicago Public Schools (CPS)⁷
• Miami-Dade County Public Schools (MDCPS)⁸
• Clark County School District (CCSD),⁹ which represents the greater Las Vegas, Nevada, area.

NYSD, MDCPS, and CCSD are the largest employers in their communities. LAUSD and CPS are the second largest employers in their respective communities.^6,7 The 5 school districts reflect large, diversified metropolitan communities.

The combined 2008 health insurance premium for these school districts was nearly $4.9 billion, which provided coverage for 534,237 insured enrollees. In comparison, according to James Loftin, Research Program Specialist for the California Public Employees' Retirement System (CalPERS), CalPERS is the third largest purchaser of employee health benefits in the United States,¹⁰ providing coverage for 588,019 enrollees and $5.5 billion in premiums in 2008.¹¹ Echoing Carolyn Watts and colleagues' commentary,³ public employers have the ability to influence the market because of their purchasing power. Similarly, school districts have the potential to be market leaders in their communities and leverage their purchasing power to maximize coverage and affordability for their employees and dependents.

Study Data and Methods
Data for this study were drawn exclusively from a survey sent to the 5 largest school districts in the United States.¹² The survey requested 3 data elements for each benefit plan offered from 2004 through 2008, including enrollment, employee costs, and employer costs. All 5 school districts responded.

Enrollment
Enrollment figures for each distinct benefit plan and rate tier were requested. As used in the survey, rate tier represents the distinct monthly rate charged based on the number of dependents covered by an employee. For example, a 3-tier rate charges a different monthly premium for employee-only coverage, for employee plus 1 dependent coverage, and for employee plus =2 dependents coverage. Single coverage is health insurance that covers the employee only. The study defined family coverage as coverage for a family of 4. If a rate for a family of 4 is not offered, family coverage is considered coverage other than single coverage. Average single and family premiums were weighted by number of employees.

LAUSD offers a composite rate, which charges the same rate regardless of dependent coverage. Because LAUSD offers only a composite rate, it was unable to provide enrollment figures by dependent status. The enrollment distribution for LAUSD was estimated by determining the enrollment mix for single and family coverage for the remaining 4 school districts for each policy year. The resulting weighted average was used as the assumed enrollment mix for LAUSD.

NYSD is part of the City of New York benefits program, which provides coverage for 3 categories of employees—civilian nonpedagogical, uniformed, and the Department of Education. Enrollment data for the Department of Education employees, however, were unavailable. The analyzed enrollment data reflect all the employees covered by the City of New York's health insurance policy. Rates and benefits are the same for all 3 categories of employees, and therefore are included in the survey.

For CCSD, the analysis includes rates, benefits, and enrollment for the Clark County Teachers Health Trust. This is a self-funded health trust that provides benefits to all licensed employees (ie, teachers) of the CCSD.¹³ The welfare trust is funded by the CCSD, and therefore is included in this analysis.

Premium Rates The survey captured the monthly premium rates charged by insurers for each benefit plan and rate tier. If the benefit plan was self-funded, the survey requested the equivalent fully insured monthly rates. Rates are inclusive of medical, pharmacy, and behavioral health benefits.

The survey requested the cost of health insurance charged to employees, by benefit plan and rate tier, net of any employer subsidy. Employee costs are referred to as employee premiums. CPS employee premiums vary depending on employees' salaries. Employee premiums are determined as a percentage of the employee's salary. To estimate employee cost, the analysis calculated the average salary for all district employees using financial records from CPS.¹⁴ Aggregate salary data for all school district personnel were divided by the total number of positions as reported in the financial records.

The employer's share of premium was determined by calculating the net difference between employee premiums and insurance premiums. This calculation provides the implicit school district employer contribution toward employee health insurance, because some school districts provide additional financial contribution (ie, "flex" dollars) in excess of the premium rates charged.

The analysis utilized premium and enrollment data for policy periods from 2004 through 2008, summarized on a calendar-year basis. Not all the policy periods reviewed were on a calendar-year basis. In such instances, premiums for policy periods that overlap a calendar year were calculated by using the enrollment and premium rates for the corresponding months of the policy within the analyzed calendar year.

LAUSD, CCSD, and MDCPS policy years coincide with a calendar-year period. MDCPS was primarily on a calendar year policy, except for 3 months in 2006 during which there was a midyear premium change. CPS changed to a calendar-year policy beginning in 2005; only calendar year 2004 was calculated using 2 distinct policy periods. NYSD is on a July through June policyyear basis for the study period.

Data Analysis Premium growth trends are compared with other purchasers—the 2008 Kaiser/HRET (Health Research & Educational Trust) Employer Health Benefits Survey4 (all firm sizes) and the Federal Employee Health Benefits Program (FEHBP),¹⁰ the largest purchaser of employee health benefits. Premium costs, employer contribution, and employee costs, however, are compared only with the Kaiser/HRET survey.⁴ Data provided from the school districts were not independently verified.

This study does not analyze the value of the benefits offered by the school districts. Product types were disclosed; they included HMOs, exclusive provider organizations, point of service plans, and preferred provider organization plans.

Regarding funding mechanism, NYPS, LAUSD, and CCSD offered both fully insured and self-insured benefits. MDCPS's benefits were exclusively offered on a fully insured basis, whereas CPS's products were exclusively on a self-insured basis.

All data were reviewed for reasonableness and consistency, and it was determined that these data were sufficiently reliable.

Results
Growth Rates, Premium
The 5 public school districts' premium data were aggregated to form the school district index (SDI). The average annual growth rate for the SDI was 7.5% for the study period. This average rate of growth is higher than the other purchasers reviewed in this analysis. The Kaiser/HRET survey reports an average annual growth rate of 6.9%.⁴ The FEHBP has managed an average annual growth rate of 4.6%,10 nearly 3% less than the SDI. The SDI demonstrates a slowing in annual premium growth consistent with the Kaiser/HRET survey and FEHBP.¹⁰
 

Figure

Premiums for the SDI increased by 5.9% in 2008, which is the lowest annual premium increase in the study period. However, annual premium growth has not slowed as rapidly as for other purchasers. The Kaiser/ HRET survey reflects a 4.5% reduction in the rate of annual premium growth, from a high of 9.2% in 2005 to 4.7% in 2008.⁴ The FEHBP rate of growth has slowed by 5.9%, from 7.9% in 2005 to 2.0% in 2008.¹⁰ The SDI showed just a 2.9% decrease in the rate of growth from a peak of 8.8% in 2005 to 5.9% in 2008 (Figure).
 

Table 1

The SDI's employer share of health insurance premium totaled approximately $3.96 billion (ie, $3968 million), or $7428 per employee per year (PEPY) in 2008 (Table 1), a 32.4% increase over the amount school districts spent in 2004.
 

Table 2

Overall inflation, as measured by the Consumer Price Index, increased by 14.3% during the same time period.¹⁵ Employees paid the balance of the health insurance bill. SDI employees paid $1646 PEPY for health insurance in 2008—39.9% more than employees spent in 2004, or 2.8 times the rate of inflation over the same time period. The SDI's 2008 average premium for single coverage was $5665 PEPY, or 20.4% more than the Kaiser/HRET survey average of $4704 PEPY.4 Premiums for family coverage were $12,178 PEPY, or 4.3% less than the Kaiser/HRET survey for 2008 (Table 2).

Employer Share
The school districts' share (84%) of premiums for single coverage is slightly less than the Kaiser/HRET average of 84.7% in 2008.⁴ The school districts' cost for their share of a premium for single coverage increased by 27.4% since 2004. This is roughly equal to the 27% increase in employer costs for single coverage reported by the Kaiser/HRET survey since 2004.⁴
 

Table 3

For family coverage, the SDI provides the most generous employer contribution (80.9%) compared with the employer contribution reported by the Kaiser/HRET survey (73.5%) in 2008.4 However, the school district's cost for its share of family coverage is increasing at a faster rate than the other purchasers reviewed in this analysis. The SDI employer cost for family coverage premium has increased by 36.6% since 2004. This is substantially more than the 27.8% increase in employer costs for family coverage reported by the Kaiser/HRET survey⁴ (Table 3).

Employee Costs
School district employees pay more for health insurance for single coverage than the national average, but pay considerably less for family coverage. In 2008, school district employees paid $908 PEPY for single coverage and $2318 PEPY for family coverage. The Kaiser/HRET survey reflects a 2008 PEPY cost of $721 for single coverage and $3354 for family coverage (Table 2).⁴ Despite the comparatively lower cost for family coverage, enrollment in this coverage type has actually declined by 1%, whereas single-coverage enrollment increased by 6.6% among the school districts. The total number of covered lives in the SDI has increased 3.5% since 2004.
 

Table 4

Although an analysis of the drivers behind this trend is outside the scope of this article, this author speculates that the relative annual cost for family coverage compared with single coverage (2.5 times) in absolute dollars is deemed unaffordable in a difficult economic climate. Regionally, the variances are more pronounced. As shown in Table 4, NYSD and CPS employees paid more for single coverage in 2008, as a share of premium and total annual premium, than other employees in their respective regions. LAUSD, MDCPS, and CCSD employees paid substantially less for single coverage than other employees in their respective regions in terms of share of premium and total annual premium. For family coverage, employees at LAUSD, CPS, and CCSD paid substantially less, as a share of premium and total annual premium, than other employees in their respective regions. NYSD employees paid slightly less for family coverage than their peers in the Northeast. Although MDCPS employees, as a percentage of the premium, pay slightly less for family coverage than other employees in the South, their employees pay 19.2% more for family coverage than other employees in that region and the most of all 5 school districts evaluated in this study (Table 4).
 

Table 5

There are notable variances in employee premiums and employer contributions within the 5 school districts, as demonstrated in Table 5. LAUSD provides the most generous subsidy, paying 100% for either single or family coverage. MDCPS contributes slightly more than 100% for single coverage by providing an additional financial incentive for certain benefit plans. MDCPS provides "flex" dollars, ranging from $10 to $50 per employee per month if employees select an HMO plan. However, MDCPS contributes the least of the school districts surveyed, in terms of employer share, toward family coverage.

Although MDCPS's employer share as a percentage of family coverage premium was low in terms of total contribution (70%), MDCPS's commitment was the second highest of the evaluated school districts ($10,311 PEPY), with only NYSD having a higher total employer contribution ($10,495 PEPY) toward family coverage.

The average annual employee cost in MDCPS for family coverage—$4482 PEPY—is the highest of the analyzed school districts, and 19.2% higher than other purchasers in the region.

Regional total premium costs for family coverage were calculated using employee premium contributions for the South region ($3760 PEPY) from the Kaiser/ HRET survey, and the corresponding employee share of total premium. The total calculated premium for family coverage in the South is $11,750 PEPY. Not surprising, family coverage enrollment for MDCPS was extremely low. The SDI reports 47.6% of employees electing family coverage in 2008.

The Kaiser/HRET survey reports that 36% of the workforce is enrolled in family coverage. Only 8.4% of MDCPS employees elected family coverage in 2008. Compared with the other school districts surveyed, MDCPS supports the highest annual premium cost ($14,793 PEPY) for family coverage (Table 5). The drivers responsible for these high costs could not be determined from the data provided by the schools and are beyond the objectives and scope of this article.

Finally, the school districts' health insurance benefit offerings reflect a high level of importance given to the need to provide various benefit choices to their employees. With the exception of MDCPS, all the school districts reviewed offered more than 1 insurance carrier. MDCPS is unique in allowing employees to select 1 benefit plan, and the dependents can select a different plan. All the 5 school districts offer their employees at least 4 benefit options, with an average of 7 options for the SDI.

Discussion
The premium growth for the 5 largest school districts in the country has slowed and is consistent with other health insurance purchasers. However, the decline in premium growth in these school districts has been less than the experience of other purchasers. Although this study does not analyze the value of the benefits offered, it is the experience of this author, and is also suggested by Carolyn Watts and colleagues,³ that school districts generally offer benefit plans that are considered richer than private companies.³ As a percentage of premiums, the school district contributions toward single health insurance coverage are on par with other purchasers.

On average, the school district's share of health insurance premium for family coverage is more generous than other purchasers, with the notable exception of MDCPS. An opportunity exists to increase take-up rates for family coverage in this South Florida school district, which is the largest employer in a community with the highest uninsured rate (28.7%) in the state.¹⁶ Two school districts, LAUSD and CPS, reflect progressive approaches toward maximizing coverage and affordability. LAUSD's decision to subsidize 100% of the insurance premium is the most generous contribution method of any of the school districts reviewed.

CPS's use of a variable contribution strategy minimizes the regressive impact of a defined contribution model on low-wage earners. CPS employee contributions, as a percentage of salary, range from a low of 1.3% to a maximum of 2.5%, depending on rate tier and plan selection. The Kaiser/HRET survey reports that 10% of employers vary employee contribution based on salary.⁴

Conclusion
The 5 school districts surveyed demonstrate a commitment to provide affordable health coverage for employees and their families, by offering a choice of benefits and innovative contribution strategies. These school districts have managed to slow the rate of premium growth, albeit at a slower pace than other purchasers. Declines in tax revenues will increase the challenge for school districts to accelerate the decline in premium growth, while maintaining coverage levels. School districts need to balance these budget constraints without undermining the various social obligations school districts have. Policymakers are encouraged to look at costmanagement initiatives of other purchasers, and even some of their peers, for possible solutions.

References

1. US Bureau of Labor Statistics. Employment, hours, and earnings from the current Employment Statistics survey (national): local government education, all employees, thousands. Series ID: CES9093161101. http://data.bls.gov/cgi-bin/dsrv. Accessed March 11, 2009.
2. US Department of Labor, Bureau of Labor Statistics. Employer costs for employee compensation-December 2008. Press release 09-0247. March 12, 2009. www.bls.gov/news.release/archives/ecec_03122009.pdf. Accessed March 4, 2010.
3. Watts C, Christianson JB, Heineccius L, Trude S. The role of public employers in a changing health care market. Health Aff (Millwood). 2003;22:173-180.
4. The Henry J. Kaiser Family Foundation and the Health Research Education Trust. Employer Health Benefits 2008 Annual Survey. http://ehbs.kff.org/pdf/7790.pdf. Accessed May 20, 2009.
5. The influentials: Wall Street. New York's largest employers. New York. May 15, 2006. http://nymag.com/news/features/influentials/16908/index2.html . Accessed May 20, 2009.
6. Los Angeles Almanac. Largest employers in Los Angeles County. www.laalmanac.com/employment/em21e.htm. Accessed May 20, 2009.
7. Chicago Fact Book. CPS is the 2nd largest employer in Cook County, Illinois. http://egov.cityofchicago.org/city/webportal/portalDeptC ategoryAction.do?deptMainCategoryOID=-536886120&deptCategoryOID=-5369039 93&entity Name=Planning+And+Development&topChannelName=Dept&contentType=COC_EDITOR IAL&Failed_Reason=Invalid+timestamp,+engine+has+been+restarted&com.broad vision.s ession.new=Yes&Failed_Page=%2fwebportal%2fportalDeptCategoryAction.do. Accessed May 20, 2009.
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9. Nevada Department of Employment, Training, and Rehabilitation Research and Analysis Bureau. Nevada Workforce Informer. Nevada's largest employers 3rd quarter 2009: Clark County. www.nevadaworkforce.com/?PAGEID=67&SUBID=169. Accessed May 20, 2009.
10. US Government Accountability Office. Federal Employees Health Benefits Program: premium growth has recently slowed, and varies among participating plans. GAO Publication No. GAO-07-141. December 2006. www.gao.gov/new.items/d07141.pdf. Accessed July 29, 2009.
11. Personal e-mail correspondence, March 20, 2009.
12. US Department of Education. Institute of Education Sciences, National Center for Education Statistics. Table 91: Selected statistics on enrollment, teachers, dropouts, and graduates in public school districts enrolling more than 15,000 students, by state: 1990, 2000, 2004-05, and 2006. 2008 Digest of Education Statistics. http://nces.ed.gov/programs/digest/d08/tables/dt08_091.asp. Accessed June 27, 2009.
13. The Clark County Teachers Health Trust. http://teachershealthtrust.org/AboutUs.aspx. Accessed May 20, 2009.
14. Chicago Public Schools/CPS. FY Budget, 2006-2008. www.cps.edu/About_CPS/Financial_information/Pages/Financialinformation.aspx. Accessed May 9, 2009.
15. Bureau of Labor Statistics. Consumer Price Index. US city average of annual inflation (April to April), 2004-2008, not seasonally adjusted data from the Current Employment Statistics Survey, 2004-2008 (April-April). http://data.bls.gov/cgi-bin/srgate. Series ID CUUR0000SA0. Accessed May 9, 2009.
16. Duncan RP, Porter CK, Garvan CW. Miami-Dade County Health Insurance Survey. Commissioned by the Public Health Trust of Miami-Dade County. Prepared by the University of Florida Department of Health Services Administration. June 2004.