High health insurance claims have put Vermilion Parish School Board in financial pinch

The Vermilion Parish School Board has a unique health insurance policy that may run them broke if they don’t stop the bleeding.
The school system is self insured up to $175,000 per claim when it comes to providing health care insurance for its employees.
What that means is that after an employee reaches his or her deductible, the school system will pay the rest of the medical bill, up to $175,000. The school system has its own health insurance plan that pays all claims that are larger than $175,000.
The school system collects an average of $1.2 million a month in insurance premiums from its employees. The money it collects is used to pay the medical bills.
A great month is when the school system collects $1.2 million, but only pays $900,000 of insurance claims, thus saving $300,000, which goes into the insurance fund account.
A bad month is when the school system has five school employees who have five claims that average $100,000 per claim. The school system has to pay the total $500,000 (5 times $100,000 per claim) , plus, pay the average $900,000 in claims which are the non-high cost claims. With only $1.2 million collected in premiums, it leaves the school system short with $200,000 to pay medical bills.
Over the last year, the school system has been having more bad months than good months.
According to School Board member Anthony Fontana, twice the school board took out $1 million from the general fund to pay for high insurance claims.
“There is no way we can continue to go to the general fund to support the insurance fund,” said Fontana, who is chairman of the insurance committee. “We have no source of revenue to replace this.”
In March, the school board changed the health insurance plan for its employees, hoping it would “fix” the financial problem for health insurance costs.
In the last quarter of last year, the news got worse because the school system was hit with 12 new high cost health insurance claims. They ranged from $50,000 to $175,000.
The school system finished the year with 34 high claims cost.
“Because of that, we lost a lot of money,” Fontana explained. “We put $1 million back into the health insurance plan.”
Then came June and the School Board was hit with a health insurance total bill of $1.7 million, which is $500,000 more than what the school board collected in premiums. The school system lost $500,000 in a month.
“We can not sustain that,” Fontana said.
Over the summer, school personnel have been having meetings with United HealthCare to figure out a way to fix the insurance problem that is bleeding the school system.
The bleeding continued even with a new health insurance plan, Fontana said. In July, the school system had only an $18,000 loss, and then in August and September, the school system began hemorrhaging and is expected to lose a total of $500,000.
“The problem is we are not collecting enough premiums to cover the cost,” he said. “What do we do about it?”
Fontana has heard from employees who told him to leave the insurance the way it is and not raise the premiums. That is not going to happen.
“I don’t like telling you, but your premiums are going up and your benefits are going to be cut,” Fontana said. “That is the only thing we have control over to help control the debt.”
Even with the school board expected to adopt a new health insurance plan that is going to raise the health insurance premiums, Fontana is not confident it will eliminate the high-cost insurance claims. His fear, even with a new plan, is that the health insurance fund could still go broke by the end of the year unless the bleeding stops.
There is a reserve of $1.1 million in the insurance fund today. If the school board continues to be hit with insurance bills that total $1.3 million over the next five months, Fontana said taking out an extra $200,000 over five months will deplete the $1.1 million in reserve.
“It would wipe out the insurance fund. So, what do we do?” Fontana said.
The school board would have to begin taking money out of the general fund to pay insurance claims if there is no reserves left in the health insurance reserve. He said if the school system does not increase premiums or decides not to do anything, then look for the general fund to go broke.
“If we don’t make the tough choices, right now, today, I will tell you what the choices will be. You have limited options. We can go back like 1992 and close schools. No one wants to do that.
“How else can we pay our bills? We can cut positions and increase class sizes. I don’t think that is an option everyone wants to think about either.
“Third option is worse -across the board paycut.”
Fontana left the door open by asking if anyone has a better plan or a way to raise money to pay for high health insurance cost, he wants to know.
“If we don’t get our hands on this thing now, that is where we are heading,” Fontana said. “It is a dollar and cents deal now. Our backs are up against the wall. It is time for us to make the cuts and get a handle on everything.”
The new health insurance plan that is expected to go into effect in January, will bring in $1.5 million a month, which is $300,000 more than the present plan.
The school board is expected to vote on the new insurance plan at tonight’s school board meeting.