School administrators here say they are alarmed and confounded by the looming, new costs they face with the implementation of the Affordable Care Act.
“We've been talking about it (in anticipation) the last two years. I wish there was somebody smarter than me to find a solution,” said Chris Hipp, director of the North Central Kansas Special Education Cooperative Interlocal 636. “We are not built to pay full health benefits for non-certified folks who work a little over 1,000 hours a year. I've spent hours and hours running every possible scenario. We can't pay for any of them, so it’s all kind of an academic effort really."
As part of the federal health reform law, commonly referred to as Obamacare, larger employers across the country have a new set of insurance coverage obligations and fees they must pay. The new rules apply to commercial enterprises with 50 workers or more but also to public employers such as cities, school districts and the state of Kansas.
Kansas officials estimate the new fees alone will cost the State Employees’ Health Benefit Plan at least $4.7 million in 2014, or about $63 per worker. That’s without reckoning the added costs of the law’s new coverage requirements, much of which the plan already is absorbing.
For many businesses and larger governmental units, the new obligations are unwelcome but not unmanageable because they can be passed through either to customers or, at least partially, to health plan policyholders.
And for some governmental units, the expected costs represent a small percentage of overall spending. Lawrence officials, for example, estimate the new Obamacare fees will cost the city $137,200 in 2014, which could be considerably less than the potential costs of complying with a new conceal-carry firearm law passed earlier this year by state lawmakers.
Rural school districts
But the new health reform rules are particularly challenging for rural school districts and special education cooperatives, where officials say they have little or no place to turn for additional money, especially since state school aid has been held flat or reduced and more often than not the so-called “local option” school budget authority already has been maxed out.
“A lot of the districts and co-ops are looking at various options, including the option of getting out of offering health insurance and acknowledging that the most economical step for them is to pay the penalty and have their employees go to the exchange and get what's available through the marketplace. But a lot have not made that decision yet,” said David Shriver, assistant executive director for insurance services at the Kansas Association of School Boards.
The situation at the Phillipsburg special education cooperative offers a stark example of the complications many Kansas schools are facing, Shriver said.
The interlocal co-op is funded by 11 participating school districts that together cover an area of about 4,500 square miles spanning eight rural counties slightly west of the geographic center of the conterminous United States. It is square in the heart of the heartland. The districts collectively serve about 3,700 students, of which about 670 are in the special education program.
Hipp said NCKSEC Interlocal 636 has about 85 “certified” employees (mostly teachers) but also employs about twice that many people as “non-certified” teacher assistants or “paras” and other support staff.
Those workers, earning close to minimum wage, also are offered health benefits by the co-op. But about 100 of them don’t take it because it is too costly for them. The imbalance between their wages and their health insurance costs is so pronounced, Hipp said, that some of the para-educators who use the co-op’s health plan end up writing checks to the co-op two or three times a year just to cover their share of the benefits.<a name="continued"></a>
Under the health reform law, Hipp said, the interlocal must offer health coverage that meets the federal standard of affordability or pay a penalty for each employee that gets insurance through the subsidized federal exchange. The exchange — sometimes called a marketplace — is scheduled to be in operation by Oct. 1, with the coverage effective for policyholders beginning Jan. 1, 2014.
Here’s the dilemma for the co-op and similar organizations: On one hand, they can’t afford to pay their “non-certified” workers enough to make premium costs an affordable percentage of their incomes. But nor can the organizations afford to maintain a health plan and pay the annual penalties that must be paid by employers that have workers who opt for coverage through the insurance exchange.
Hipp said NCKSEC and officials at the member districts can at least try to budget for the new employer fees the co-op must pay to satisfy Obamacare requirements because those are known or predictable sums.
But trying to figure out in advance how many of its workers might end up going to the exchange for coverage is mere guesswork that has become a hair pulling exercise for him and others like him around the state. Schools officials must submit their budget plans for next year to state officials by the end of the summer.
One less-than-desirable option, Hipp said, would be for the co-op to simply stop offering health coverage and pay the federal penalty. If the penalty were $3,000 per worker, multiplied by 200 (everyone on the co-op’s staff), that would cost the co-op or its member districts $600,000 or about $300,000 less than the co-op currently spends for its health benefits.
“In the end, it could be cheaper for us to get out of the health care business altogether and tell all of them to go to the exchange,” Hipp said. “We’re right at $1 million in benefits right now…$900,000ish and it would be saving us about 30 percent. But that $3,000 fine will go up over time. Not to mention what does that do to our ability to recruit and retain (employees) when they know we don't offer health insurance benefits?”
(Note: See comment below from the Health Reform Resource Project on the variety of fees and how they will be applied.)
Hipp said the co-op was caught between the proverbial rock and hard place — with the rock being the federal law that requires districts to provide “free and appropriate” schooling to disabled children and the hard place being a second federal law requiring affordable health insurance be offered to employees.
Larger school districts
The problem is less thorny for the state’s larger school districts, including Topeka USD 501. Among other things, most large districts already have insurance plans that meet federal quality and affordability standards, or come close. They also can afford staff attorneys, accountants and/or consultants to help them wade through any vagaries in the new regulations and help craft solutions.
“I really feel sorry for those smaller districts,” said Mike Jones, director of financial service for the central Topeka district. “When you’ve got one or two people (in administration), a superintendent and a secretary, that’s a heck of a burden to put on people. They’re not going to have a good row to hoe.
"I think most people go along with the idea that we need to improve our health care system. The law isn’t going away, like a lot of people — Republicans — thought. So we might as well get it going and get it worked out. But it won’t be fun," he said.
“The issue facing a lot of school districts is that our funding right now is stagnant,” Jones said. “Unlike a business, when we need more money we can't put up another store or run a sale.
“I always tell people it’s a world of chaos right now” he said, noting the widespread discussion among administrators about Obamacare and school funding issues. “But come August the schools will be open. It will work out. Right now, nobody believes it. But it always happens. People in Kansas pull together and we get things done. We'll scream and holler a lot but the kids will be there with their schoolbooks open and maybe one less football game.”
'It could put us all out of business'
The co-op in Phillipsburg is among those expected to reopen in August but it will be without Chris Hipp. He said come July, he’s taking a new job with AFLAC in Hays. The stress of trying to solve the co-op’s problems wasn’t the only factor in his decision to change careers, he said, but it was among them.
“KASB (the association of school boards) put on a little roundtable about a month ago and had some high brass consultants in,” Hipp said. “That's the way they essentially started the program, by telling us there ain’t no running, ain’t no hiding (from the Affordable Care Act). I guess we're just waiting for the shoe to drop and see what happens.
"But it could put us all out of business or change significantly how we do business," he said. "Within our 11 districts everyone understands that when this thing goes, if we have a lot of (people) going to the exchange, we'll have to start cutting people like crazy. And for us, when we cut a para-educator that we're paying not much better than minimum wage, we don't save a ton of money. But we do hurt services for kids pretty significantly.
“I’m getting out of education,” he said. “I don’t want to sound like I’m running away from a fight, but it looks to me like a fight we can’t win anyway, so it doesn’t matter if it’s me here or someone else.”
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