Who is Really Being Hurt by the Great Recession from a School District Perspective?

April 2010Alerts Education Alert

For those school districts that currently have aid ratios of 0.4 or less (i.e., the wealthiest school districts in the Commonwealth of Pennsylvania), the real squeeze is currently taking place on districts – and we are only seeing the beginning. The base Act 1 index for 2010-2011 is 2.9 percent. This represents a 1.2 percent reduction over what was available in the current budget for those districts that have aid ratios of 0.4 or less. It is fully expected that this index will trend downward over the next few years, since the index is composed of the statewide average weekly wage, as well as the employment cost index for secondary schools, both numbers that have been trending downward.

In this environment, health benefits, which are not an exception to the Act 1 index, still continue to outpace inflation and the index by a substantial degree. According to the Employer Health Benefits 2008 Annual Survey prepared by the Henry J. Kaiser Family Foundation, the average monthly worker’s premium contribution over the time period of 1999-2007 for single coverage was $58.00 per month and for family coverage $273.00 per month. According to the same study and over the same time period, the average covered worker contributed 16 percent for single coverage and 28 percent for family coverage over the same time period. This has clearly not been the case in the Commonwealth of Pennsylvania or in collectively bargained contracts.

What is a school district to do? The only way to do this is to negotiate health benefit programs that do not substantially outpace the cost of the index.

Because of a school district’s obligation to maintain the “status quo” at the expiration of a collective bargaining agreement or face an unfair labor practice with the Pennsylvania Labor Relations Board or an allegation of a lockout before the Pennsylvania Unemployment Compensation Board of Review, teachers’ unions continue to come to the bargaining table taking the position that unless they get a substantive increase in salary, they would be better off living with the current collective bargaining agreement from a health benefits perspective.

Putting aside efforts both on a statewide and federal perspective to overhaul the health benefits system, including the Commonwealth of Pennsylvania’s push for a statewide healthcare plan (that will benefit some districts and hurt many other districts that currently do not provide coverage levels for certain classes of employees), there is already legislation on the books that is causing a substantive increase in the cost of health benefits.

For example, Michelle’s Law prohibits employers from terminating group health plan coverage for seriously ill or injured college students. The coverage must be continued for up to one year. Under the law, group health benefit plans cannot terminate coverage of a dependent child due to a medically necessary leave of absence before the date that is the earlier of: (i) the date that is one year after the first day of the medically necessary leave of absence; or (ii) the date on which such coverage would otherwise terminate under the terms of the plan or health insurance coverage.

Effective July 1, 2009, the Pennsylvania State Legislature passed an autism mandate where coverage must be provided for the treatment of autism up to $36,000.00 per benefit period.

In addition, the Mental Health Parity and Addiction Equity Act was signed on October 3, 2008, as part of the emergency economic recovery bill. In addition to the current requirement, the Act known as the Wellstone Act added significant new parity protections under a group health plan including:

  • Adds protections for substance use disorder benefits on the same basis as the protections for mental health benefits;
  • Prohibits differences in copays, deductibles, coinsurance, and out-of-pocket costs for mental health and substance use disorder benefits as are applied to medical/surgical benefits;
  • Prohibits the use of day or visit limits for mental health and substance use disorder benefits that are more restrictive than treatment limitations applied to medical/surgical benefits; and
  • Adds new requirements for employers seeking a cost exemption.

All of these pieces of legislation have added new demands on our healthcare dollars that did not exist before that period of time. This is an important issue that all school districts need to address in the Commonwealth of Pennsylvania.

If you have any questions about the information contained in this Alert, please contact Jeffrey T. Sultanik or any member of Fox Rothschild’s Education Law Practice.