School District Pays For Health Care But Can't Get Itemized Bill
About a year ago at a Miami-Dade County school board meeting, superintendent Alberto Carvalho was happy to announce the district and the teacher's union had just ratified a new contract.
"I believe that this contract honors and dignifies what you do every single day," he told the school board members. It included bonuses for most teachers and it settled how to handle health care expenses after yet another year of rising costs.
"We know exactly what the district pays out in terms of claims, because we are the insurance company. There's no profit to be made," he said.
Like most large employers, the Miami-Dade school district is self-insured. It bears the financial risk of covering its own employees.
The school board's reaction to the health care costs in the new contract was incredulous. They are an elected board and didn't look forward to telling the teachers their prices were still going to go up. One board member after another questioned the rise in prices.
"Do we sit with our employees, knowing what their salaries are, and help them carve out the best options insurance-wise?" one asked. "Twenty-seven hundred more for his family's health — can you comment on that?" asked another. Yet another lamented, "Our employees are tired of hearing about rising health care costs."
This was not the conversation the superintendent expected.
"I thought we were coming here today [to] first and foremost celebrate something pretty remarkable," he said.
Now, a year later with another new contract, the school board is still grappling with health care costs. Teacher contributions to insurance will mostly stay the same, but it means the district will absorb another 4 percent increase in costs.
Fedrick Ingram is head of the Miami-Dade County teacher's union, which represents nearly 15,000 members.
"Our salaries have not gone up in the same way that health care costs have gone up," he explains. So he's been urging the school district to figure out where the money is going.
"We have to know who's driving up costs," he says. "What's going to affect the bottom line for our premium costs, and what is actually contributing to that."
Turns out, that is incredibly difficult to do. But it's a conversation more businesses should be having, says Uwe Reinhardt of Princeton University.
Businesses and employees need to stop taking for granted that rising health care costs are inevitable because they make tradeoffs, Reinhardt says.
"Employees actually pay for what they think is company-provided insurance, by lower wages," he says. But it's so hard to get costs under control because the actual prices are secret.
Self-insured organizations like Miami-Dade County schools have to hire an insurance company to manage the claims process and negotiate rates with hospitals and doctors. But insurers and providers keep the rates secret, even from those employers hiring them.
Carvalho's right: The district knows exactly what it pays overall for health care claims. What it doesn't know is how much it's paying to any one hospital or provider for a given service.
That means it doesn't know who's the most expensive provider, or who is the cheapest. That may drive prices higher for employees, Reinhardt says.
"It's almost like blindfolding people, shoving them into Macy's and saying, 'Buy efficiently for a shirt.' " Reinhardt says. "Well, you come out with a pair of shorts."
The school district is subject to the state's open records laws, but Cigna, the insurance carrier they use for employees, refused to share accounts of what was actually paid out, citing trade secrets. Even though the county school district, which is taxpayer-funded, takes on that risk, it's not allowed to see the contracted prices.
The district is seeking ways to get around the legal obstacles. It's planning to shop for a service that can work with its limited claims data and at least figure out average costs. Ideally, district officials say, they'd like to know enough about costs to offer incentives for employees who choose less expensive options.
Until there's more transparency, Miami-Dade teacher's union member, Cheryl Collier thinks the situation would offend even her second-graders.
"They would be angry that they are being forced pay for something, not really fully understanding the value of what they're paying for," she says.
It's a lesson the school district and other employers are starting to learn.
This story is part of a partnership with NPR, WLRN, the Miami Herald and Kaiser Health News.
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Transcript
SCOTT SIMON, HOST:
If you get insurance through your job, most likely you've watched prices go up every year. Increasingly, companies think consumers will be more frugal when they shop for care if they have more money on the line. Turns out, the company doesn't know what doctors and hospitals actually charge for care. Insurance companies and providers keep it secret. And as member station WLRN Sammy Mack reports, what we don't know may cost us.
SAMMY MACK, BYLINE: About a year ago, at a Miami-Dade County school board meeting, Superintendent Alberto Carvalho was happy to announce the district and the teachers union had just ratified a new contract.
(SOUNDBITE OF ARCHIVED RECORDING)
SUPERINTENDENT ALBERTO CARVALHO: And I believe that this contract honors and dignifies what you do every single day.
MACK: And included bonuses for most teachers and it settled how to handle health care expenses after yet another year of rising costs.
(SOUNDBITE OF ARCHIVED RECORDING)
CARVALHO: We know exactly what the district pays out in terms of claims because we are the insurance company. There's no profit to be made.
MACK: And that's because, like most large employers, the Miami-Dade school district is self-insured. It bears the financial risk of covering its own employees. But the school board's reaction to the health care costs in the new contract was incredulous. They're an elected board and didn't look forward to telling teachers their prices were still going to go up. One board member after another questioned the rise in prices.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED WOMAN #1: Do we sit with our employees knowing what their salaries are and help them insurance wise?
UNIDENTIFIED WOMAN #2: Twenty-seven hundred dollars more for his family's health - can you please comment on that?
UNIDENTIFIED WOMAN #3: Our employees are tired of hearing about the rise in health care cost.
MACK: This was not the conversation the superintendent expected.
(SOUNDBITE OF ARCHIVED RECORDING)
CARVALHO: I thought we would be coming here today and first and foremost celebrate something pretty remarkable.
MACK: And a year later, with another new contract, the school board is still grappling with health care costs. Fedrick Ingram is head of the Miami-Dade County Teachers Union, which represents nearly 15,000 members.
FEDRICK INGRAM: Our salaries have not gone up in the same way that health care costs have gone up.
MACK: So, Ingram says, he's been urging the school district to figure out where the money is going.
INGRAM: We have to know what's going to affect the bottom line for our premium cost and what is actually contributing to that.
MACK: Turns out that is incredibly difficult to do. But it's a conversation more businesses should be having, says Uwe Reinhardt of Princeton University. Businesses and employees need to stop taking for granted that rising health care costs are inevitable because they make trade-offs, says Reinhardt.
UWE REINHARDT: Employees actually pay for what they think is company provided insurance by lower wages.
MACK: But it's so hard to get costs under control, says Reinhardt, because the actual prices are secret. Self-insured organizations, like Miami-Dade County Schools, still have to hire an insurance company to manage the claims process and negotiate rates with hospitals and doctors. But insurers and providers keep the rates secret even from self-insured employers taking the financial risk.
Carvalho's right - the district knows exactly what it pays out overall for health care claims. What it doesn't know is how much it's paying to any one hospital or provider for a given service, which means it doesn't know what providers are the most expensive or who's the cheapest, which may drive prices higher for employees.
CARVALHO: It's almost like blindfolding people, shoving them into Macy's and say by efficiently for a shirt. Well, you come out with a pair of shorts.
MACK: The school district is subject to the state's open record laws. Still, the insurance carrier they use for employees - Cigna - refused to share accounts of what was actually paid out, citing trade secrets. Even though the county school district, which is taxpayer-funded, takes on that risk, it's not allowed to see the contracted prices.
The district is seeking ways to get around the legal obstacles and at least figure out average costs. Ideally, district officials say, they'd like to know enough about cost to offer incentives for employees who choose less expensive options. Until there's more transparency, Miami-Dade Teachers Union member Cheryl Collier thinks the situation would offend even her second graders.
CHERYL COLLIER: They would be angry that they are being forced to pay for something not really fully understanding the value of what they are paying for. Yeah, even a second grader would be upset.
MACK: It's a lesson the school district and other employers are starting to learn. For NPR News, I'm Sammy Mack.
SIMON: This story's part of a reporting partnership with NPR, WLRN and Kaiser Health News. Transcript provided by NPR, Copyright NPR.
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