MCS teachers face cuts to 'rich' health plan
Seth Slabaugh
MUNCIE – State-appointed emergency managers seeking budget cuts at Muncie Community Schools are zeroing in on teacher health insurance costs.
“That’s an area that looks to us to be something that really needs to be looked at carefully without taking away all the benefits to the teachers,” emergency manager Steve Wittenauer told the state’s Distressed Unit Appeal Board (DUAB) recently. “It’s near and dear to their heart that they have been able to negotiate a situation where they have been able to have a very rich plan, if you will, and that the school corporation has probably paid a little bit more into those plans than they probably should have.”
That’s mild compared to what Wittenauer told DUAB in June when he submitted a bid to become emergency manager of MCS for a fee of $300,000: “Based on our previous involvement with Muncie Community Schools, we feel the following must take place for us to be successful.”
READ THIS:Ex-CFO's journal exposes costly MCS health plan
He listed five things, including, “Enforce HB 1260, as they do not appear to be in compliance with the law. (School corporation) contributions (to the health care plan) are way above what the law allows.”
He was referring to legislation known as House Bill 1260 enacted by the state Legislature in 2011. It requires school corporations to annually report their average health care costs per employee for comparison with the average cost of the state's health plan per employee. If a school corporation's plan costs 12 percent more than the state's, the school must enroll in the plan for state employees.
During contract negotiations with the teachers union in 2014, when MCS was paying 26 percent more than the state plan, Chip Mehaffey, a chief financial officer for MCS, urged the school district to move to the state plan to save millions of dollars per year. The school superintendent, school board and union opposed the idea, and Mehaffey quit after half a year as CFO. There have been five CFOs at the district in the past four years.
As Mehaffey predicted, the school’s financial problems reached the crisis level. Earlier this year, the Legislature declared deficit-ridden MCS a “fiscally impaired” school district and authorized DUAB to appoint an emergency manager to oversee the district.
Now, it’s the emergency manager representing the school district in negotiating a new collective-bargaining agreement with the teachers. The next bargaining session is Monday (Oct. 31).
“One of the things we are looking at was … to go on the state plan,” Wittenauer told DUAB members. That could save $2 million a year. Bids from insurance companies also have been solicited.
Wittenauer and DUAB Director Courtney Schaafsma have declined to publicly release or discuss any bids. Wittenauer said labor negotiations are confidential. He has said the teachers union has been cooperative, helpful and collaborative during the negotiations.
Wittenauer was mistaken about the plan being out of compliance with the law, says Pat Kennedy, president of Muncie Teachers Association. When Wittenauer made that allegation, “he didn’t have hardly any information about our insurance plan," Kennedy said.
"We work hard to comply with the law, even when it squeezes us pretty hard," Kennedy said. “Our benefits are richer than most other plans, but that doesn’t mean it costs more, because we are not paying a profit to an insurance company. We have a self-funded, customized plan where we get more bang for the buck.”
It’s a “much better plan than the state’s,” she added. “The state’s plan is closer to a catastrophic plan. It’s a barrier to care. Very few schools have gone to the state plan (five out of 401). The benefits are not good and there are a lot of up front, out-of-pocket costs for employees. But it’s our responsibility to show that Muncie Community Schools isn’t paying an outrageous amount for our insurance, and we are willing to make changes in the design of the plan… Our main goal is to reduce barriers to care. I don’t know when in this country it became a negative to try to … have decent health insurance.”
Ball State University economist Michael Hicks told The Star Press, “From what I have seen, the problem with the MCS health plan is not the conditions of the coverage but the employer’s share of payments. The health care costs borne by individual teachers is as low as any plan I am currently aware of.”
Kennedy noted that teachers have agreed to reimburse the school district about $700,000 for underpayment of health insurance premiums over the two previous school years. She called the payback offered by the teachers "very reasonable when compared to the catastrophic payback dollars" the school district had sought during a contract dispute.
Monique Morrisey, an economist at the Economic Policy Institute, described the health plan for Muncie teachers as “generous but fairly standard for the public sector,” where compensation is tilted toward benefits rather than salary — just the opposite of the private sector. “I see nothing in there that is lavish or egregious. Cops, firefighters and teachers don’t become rich but they have job security with benefits. Unions tend to prioritize benefits over pay.”
On the other hand, the Indiana state employee’s health plan doesn’t look particularly generous, by public-sector standards, to Morrisey, based on a study by the Pew Charitable Trusts in 2014. And HB 1260 seems misguided to her. Using average cost as the yardstick penalizes older groups of workers and those in areas like Muncie/Delaware County, where health care costs are higher than average compared to the rest of Indiana and the country as a whole (using Medicare costs as a measure of overall health care costs), she added.
Robert M. Costrell, professor of education reform and economics at the University of Arkansas, declined comment to The Star Press on the Muncie teachers plan but referred to his 2015 national study of health insurance costs at school districts, published in the Journal of School Choice.
The study cited Bureau of Labor Statistics data showing that unionization is associated with higher total premiums, higher employer costs, and lower employee contributions in both the public and private sectors.
“Rising costs for employer-provided health insurance have long been a matter of national concern, both in general and specifically for K-12 education,” the study reported. “The high-profile battle in 2011 over Wisconsin’s collective bargaining on public-sector benefits, as well as lower-profile battles in Ohio and Massachusetts, was, to a great extent, about district health insurance costs for teachers.”
Nationally, Costrell found that annual employer insurance costs are 17 percent to 23 percent higher for teachers than for private-sector professionals, consistent with the K-12 sector’s higher unionization rate. “This gap has widened from 2004, but narrowed from its 2011 peak of 30 percent to 36 percent, suggesting that under prolonged fiscal duress some districts have begun to adjust their policies toward private sector norms.”
Morrisey responded that Costrell's study ignores age and gender, "which speaks volumes." "Teaching is a female-heavy profession, and health care costs for women are significantly higher due to maternity care," she told The Star Press. Union workers are older, on average, than non-union workers.
In Wisconsin, the question is whether cuts to public-sector-workers' compensation will "stick" if schools have trouble recruiting or if public service suffers, Morrisey said.
"How severely can they cut teachers' compensation package and still think they're going to remain here?" Kennedy asked. "We've already lost 150 teachers, experienced teachers who have taken jobs elsewhere. If we have such a gold-plated contract, we wouldn't have seen 150 teachers resign." MCS employs 359 teachers.
A collective-bargaining dispute between MCS and teachers over compensation and other issues had to be settled by a state fact finder this year. The teachers won.
At that time, the school district's annual share of premiums for health insurance was $9,671 per teacher for the single plan (teachers paid $425, or 4 percent of the premium), and $21,179 per teacher for the family plan (teachers paid $4,951, or 18 percent of the premium). The teachers agreed in their "last best offer." which was accepted by the fact finder, to increase their share of the cost to 9 percent for single coverage and 23 percent for family coverage.
MCS wanted to increase the amount a teacher paid for single coverage from $425 to $4,780 and from $4,951 to $14,000 for family coverage. Fact finder Sandra Jensen calculated that the school district's proposal, which she rejected, would have saved the district $2.9 million a year.
"The fact finder acknowledges the trend for employers providing health insurance coverage to encourage wise and cost-effective decision-making by all employees relating to health care coverage through the use of high-deductible insurance plans combined with health insurance savings plans," Jensen wrote. "The current teacher health insurance plan, as described in the fiscal years 2007 through 2014 collective bargaining agreement, does not appear to be consistent with this trend."
The fact finder also "recognizes that MCS must address its debt; nonetheless, the cuts proposed by MCS … are extremely aggressive."
She concluded: " … MCS's plan to both reduce salaries and increase insurance costs to teachers appears to present a potentially catastrophic situation for some teachers. However, in the future, MTA should be willing to consider a reasonable restructuring of the teachers' insurance program to reduce fluctuating and unpredictable percentage-based premiums, which would assist MCS' ability to anticipate and better judge for those costs.
"The fact finder acknowledges that MCS's financial condition must be stabilized. As part of the process involved in stabilizing and rebuilding its financial status, MCS must accept the consequences of past actions, (and) act fairly and honestly with integrity and transparency in developing a logical and carefully considered budget strategy."
MCS appealed to the Indiana Education Employment Relations Board (IEERB).
During a hearing, IEERB members were admittedly confused by conflicting evidence presented by the parties, evidence the board members called "complicated," "very muddled" and "very difficult to understand."
A school corporation attorney called the teachers health plan one of the finest in the country. While that's wonderful for them, "the last school district in this state that can afford it is Muncie," the attorney told board members.
Seth Slabaugh is a reporter at The Star Press who can be reached at (765) 213-5834 or seths@muncie.gannett.com