Report Finds Lower Savings From Consolidated Teacher Health Insurance

Feb 8, 2017

One of the cornerstones of Gov. Sam Brownback’s plan to balance the budget is anticipated savings from a statewide health insurance pool for Kansas teachers.

The governor said that could save $40 million in the fiscal year that starts July 1 and $80 million a year after that.

But that’s not what the Legislative Post Audit Division discovered in its evaluation.

Download the Legislative Post Audit Division report on a consolidated K-12 health insurance plan.

“The time needed to implement a consolidated K-12 health insurance plan and several other factors will make it difficult for the state to achieve the savings outlined in the Governor’s FY 2018 budget,” the report said.

The report said there eventually could be about $63 million in total annual savings if the state goes to a statewide insurance pool for teachers.

The report was given first to the Joint Legislative Post Audit Committee. It also will make its way to K-12 Budget and Appropriations in the House and Ways and Means in the Senate.

A Legislative Post Audit Division report says Kansas is unlikely to save $40 in the next fiscal year if it moves all teachers to a statewide health insurance pool.
Credit Susie Fagan / Kansas News Service

The report contradicts a consultant’s recommendation that suggested the state could save $80 million a year. Some Republicans and Democrats legislators were skeptical of the Alvarez and Marsal report commissioned last year by the Legislature at a cost of $2.6 million.

The Legislative Post Audit report says there are two ways to save money on health insurance. The first is an estimated $38 million in annual savings from efficiencies by reducing administrative costs and eliminating the need for catastrophic coverage.

But the rest of the savings would come, according to the report, by shifting the cost of care from school districts to teachers. Cutting some coverage or increasing deductibles and copays could save $25 million a year.

That suggestion set some lawmakers on edge.

“But when you start looking at cost sharing and switching responsibility, I’m not sure there’s any appetite in the Legislature to do that,” says Rep. John Barker, an Abilene Republican and chair of the Joint Legislative Post Audit Committee.

Senate Minority Leader Anthony Hensley, himself a teacher, says the current system works just fine and lawmakers shouldn’t think of changing health coverage for educators as a way to balance the budget.

“In my opinion this is a no-brainer,” Hensley says. “It just shouldn’t be part of our budget discussion.”

Mark Tallman, from the Kansas Association of School Boards, agrees.

“But I think one thing is pretty clear: You are not going to be able to achieve these kind of savings next year, which was anticipated in the governor’s budget, and you are not going to be able to achieve these kinds of savings without shifting to employees, which I think will be a real concern all the way across the board,” Tallman says.

In a statement the governor's office suggested there might be more savings than the report said. "The Legislative Post Audit study reviewed 101 school districts, or approximately 75 percent of the potential savings from a statewide insurance pool," the statement said.

Some members of the committee asked whether any additional savings could be realized when if all districts were surveyed. Legislative Post Audit said perhaps a little more, but not much.

The other issue the report addressed was how the state and not school districts actually realize savings. Right now, districts pay for health care costs and any savings would go to them.

The report had three options:

  • Districts could keep the savings “as a form of additional funding.”
  • The Legislature could “recoup any savings realized through consolidation by reducing school district funding.”
  • The state could pay for the whole thing and reduce state aid by the entire cost of coverage.

Sam Zeff covers education for KCUR and the Kansas New Service. He is co-host of the political podcast Statehouse Blend. Follow him on Twitter @SamZeff.