News
Prescriptions for Budget Busting

Educators confront spiraling health costs led by drug price hikes. It's time to boost buying power.

Warren Baab holds a job you might envy. In the rural calm of Idaho's Whitepine Joint School District No. 288, he shuttles between Bovill Elementary and Deary High School to help teachers and students work with new technology.

Baab is pleased to work for a district that "has a strong commitment to education" and that offers a video editing class in a rural high school that graduates just 20 students a year. And he's proud of his technical set-up at Deary High, including a school TV station and a digital video editing lab.

But Baab is aware that this technology, while crucial, is expensive. And he's keenly aware that his district "needs to do even more to assist kids from different backgrounds and knowledge bases," while offering instructional programs that are "relevant, motivate, and reduce frustrations."

But each time Baab, the president of the Whitepine Education Association, goes to the bargaining table, he sees fewer bucks in the "one pot of money" that pays for everything from pencils to programs.

The top of that pot is sinking from state aid cutbacks, and the bottom is leaking lots of change to school employee health care costs--which, Baab reports, shot up by "just" 13 percent in the last school year.

Baab and his superintendent are worried. They know that district employees have already sacrificed by accepting higher health care co-pays and deductibles, but health costs keep spiraling upward, due in no small part to skyrocketing prescription drug costs.

If drug prices continue to increase at an annual rate ranging between 14 and 18 percent, educators' prescription plans--many of which already have three tiers of co-pay prices--could be shunted to "co-insurance" plans requiring a larger percentage payment.

"People, especially those who take medications on a regular basis, think about the price of these drugs without a reasonable co-pay and it scares them," says Baab. "We need to address rising prescription drug costs quickly."

National Problem, Local Solutions
Even before the September 11 tragedy, health insurance rates were climbing due to factors like drug costs, higher physician/hospital costs, and industry pressures for profitability.

But when those hijacked airliners hit their targets, "the insurance industry's three largest reinsurers lost 30 to 40 percent of their wealth in one day," says Mike Gibler, a salary and benefits specialist for NEA's Illinois affiliate. "Everyone else down the line will now pay that money back, which means a severe load on premiums."

Across the country, NEA state affiliates are confronting the health cost crisis in unique ways. Just two examples:

• Illinois educators are facing health costs projected to rise by at least 15 percent a year over the next 5 years.

  Faced with $11.6 million in debt, the state's second-largest school health insurance consortium went bankrupt last summer, forcing 100 participating districts to scramble for new coverage.

  Worse yet, 40,000 members of the state's Teacher Retirement Insurance Program have been notified that their plan will not have enough revenue to pay claims starting January 1.

  In response, the Illinois Education Association-NEA is formulating an emergency legislative program to strengthen the health care purchasing power of school employers.

  The plan, now under discussion by IEA-NEA leaders, would mandate the formation of large regional insurance purchasing groups, each including active and retired educators. Each of these state-regulated groups would offer a set of core, quality benefits and be run by an employer-employee control board.

• In the Keystone State, where sharp health cost increases have produced tough bargaining and strikes, the Pennsylvania State Education Association has teamed up with administrators, school boards, and the Pennsylvania Federation of Teachers to create a jointly run health care trust.

  This self-insured plan, now at 6,000 members and growing, focuses on labor/management cooperation and delivery of standardized, quality care.

What NEA Is Doing
Not every NEA state affiliate can deal with the health cost crisis alone. NEA can assist affiliates through health care expertise, bargainer training, conference planning advice, and help with legislative efforts and coalition work.

Moreover, NEA and the American Federation of Teachers have formed a strong health care partnership that has yielded bargaining conferences, joint publications, and groundbreaking strategic research by the Lewin Group, a leading health care consulting firm.

The Lewin findings, based on the study of four states with statewide insurance programs for education employees, offer NEA state affiliates a comprehensive list of best practices and a "framework" for effectively purchasing health care on a large-group basis.

"The theory that underlies this project is that in health insurance, bigger is almost always better," notes the Lewin Group report. "By banding together, education employees will increase their purchasing power relative to their prior smaller groups."

Other benefits of "pooled purchasing," the report stresses, include the spreading of risk over a large group and cost predictability--plums that spur price competition among insurers.

"Sometimes, there are local market conditions--like some current members' physicians not being available to participate in a new plan--that prevent creation of a larger health care purchasing group," concedes Stan Wisniewski head of NEA's Office of Compensation and Collective Bargaining.

"But an option NEA strongly recommends," he adds, "is to get a handle on drug costs by creating larger 'carve-out' pharmacy benefit groups, separate from smaller, existing medical plans." This offers the advantage of drug purchasing leverage, spreads the risk, and gets people used to working together in larger groups--while making them comfortable about exploring what else they can work on together.

Side Benefit: Stronger Relationships
NEA local leader Warren Baab is already comfortable about "working together" for quality, affordable care.

In October, Baab and his superintendent, Daryl Bertelsen, attended a health care conference jointly sponsored by their health care consortium and the Idaho Education Association, with planning assistance from NEA.

There, superintendent-union teams from 85 districts heard about the Lewin Group framework for health purchasing and pondered a direction for Idaho health care.

Whether or not Idaho educators seek a single statewide health plan is a matter for democratic debate.

But Warren Baab knows one thing for certain: "Where administrators and teachers see common problems and work together educationally, the 'us versus them' starts to become just 'us.' By working more together on health care, we can build stronger relationships in other areas."

For information on how to compare and choose health care plans, go to www.healthchoices.org.

Start counting those pills

In 2002, predicts the Aon Corporation, a leading "risk management" and reinsurance consultant, HMO insurance rates will increase by 13.6 percent, PPO (preferred provider organization) rates by 16.4 percent, and pharmacy rates by a whopping 22.3 percent.