Recent local and national changes to employer benefit systems have added another layer of planning that Charlottesville and Albemarle Schools must account for as the two divisions head into budget season.
In the coming months, the two school divisions will provide greater numbers of employees with health insurance, and are being forced to adapt to alterations within the Virginia Retirement System that are shifting more investment responsibility to teachers and administrators.
In August, the University of Virginia announced that they would stop providing health insurance to the spouses of employees who were eligible to receive coverage through their employers.
This decision, which takes effect on January 1, 2014, will see 32 individuals added to Charlottesville City Schools’ books, and approximately 40 to Albemarle County Public Schools’.
Despite similar numbers, the two schools divisions are forecasting different futures. Charlottesville predicts increased costs due to new health insurance enrollees, whereas Albemarle predicts adding individuals to existing plans.
Charlottesville fully insures its employees, which means the division pays a premium to an insurance company, which in turn processes and pays claims and assumes the risk of providing coverage for insured events. The premium fluctuates, depending on the number of people on an employee’s plan. Fully-insured plans are generally more expensive because the health insurance company is carrying more of the risk.
Albemarle self-insures, and therefore acts as its own insurance company, directly paying claims to healthcare providers. Unlike the city schools, it pays a flat contribution per employee. Self-insured entities generally bear more of the risk of extending health benefits.
Budget documents show that the City Schools will incur about $92,000 of additional costs for the first half of 2014. The potential cost for the 2014-15 budget year is estimated at $193,000.
That number could increase to about $225,000 if employees choose expensive plans, said Carole Nelson, Charlottesville Schools’ Director of Human Resources.
Lorna Gerome, Albemarle’s Director of Human Resources, said that because January is a time of flux for insurance plans due to open enrollments, and because many of the new individuals coming onto the County’s plan are spouses of current employees, the impact is not expected to be significant.
What’s more, Gerome said, the relatively large pool of insured employees at the county schools—there are roughly 6,000—will help buffer against a major cost increase there.
In addition to discussing the impacts of UVA’s decision, at its November 12 meeting, the Charlottesville School Board began discussions on whether or not the division should follow suit with UVA, and require eligible spouses to receive health insurance through their employers.
Nelson said that this conversation is not uncommon in the area.
“That’s what other entities are going to be deciding over the next couple of months,” Nelson said. “We did talk to a number of different employers when we first became aware of it and a lot of them, the great majority of them, were just going to kind of look and see what was happening right now.”
Charlottesville School Board Member Ned Michie said that since the division’s health insurance was taxpayer-funded, he didn’t think it was “irresponsible” for the Board to think about it.
“The people who would be forced off insurance wouldn’t likely be harmed because they would have other health insurance available to them through their employers,” City Schools Finance Director Ed Gillaspie said.
But Charlottesville School Board Member Jennifer McKeever disagreed with the move, arguing that employees’ families would lose out.
Charlottesville School Board Chair Juandiego Wade said the division isn’t planning on forcing eligible spouses from the division’s health insurance, but that the possibility is there.
“We, as well as other districts, are looking at this situation, and we just have to keep all of our options on the table,” Wade said. “But we are cognizant of costs and the impact this would have on employees.”
Gerome said that Albemarle is “not planning on taking that action at this time.”
With respect to extending health insurance, Albemarle and Charlottesville are also in the early days of the Affordable Care Act.
Currently, both divisions are in what the ACA has deemed a “measurement period,” in which employers must measure how many hours per week part-time employees average.
Under the ACA, employers will be required to offer health insurance to employees who average 30 or more hours of work per week during their contract periods.
Officials from both divisions said that long-term and frequently-used substitutes, tutors, and instructional assistants make up the positions that are most likely to qualify for insurance.
Superintendent Dr. Rosa S. Atkins said that while the division values all of its employees, the approximately $6,000 per person could add significant costs.
“Look at the effect 35 employees coming on to our health insurance could have,” Atkins said, referring to UVA’s decision.
“When we think of the hundreds of tutors that we have in our system, and substitutes, we could hit another 35 members in our health insurance coverage,” Atkins added.
Albemarle offers part-time employees health insurance, Schools spokesman Phil Giaramita said, so the extent to which the ACA will impact the County would be seen in premiums going up or down, depending on how the market reacts, but not in new enrollees.
However, Albemarle is projecting an eight percent medical cost increase and a five percent dental cost decrease for FY14, benefit documents show.
While health insurance changes impact teachers and administrators in the present, changes to the Virginia Retirement System are impacting how they might spend their golden years.
Currently, five percent of each paycheck goes into VRS. Once the changes take effect, all new employees and all existing employees who chose to opt in, will see four percent contributed to the VRS’s traditional pension plan, and will have to choose how to invest the remaining one percent.
“Human Resources has been very focused on trying to develop communication opportunities so that employees are aware that they have to make this decision,” Gerome said. “Everyone is going to have to make this decision based on their own individual circumstances.”
Currently, both divisions’ HR departments are spreading the word to teachers and administrators. The enrollment period is from January 1-March 31, 2014.
In addition to financial decisions teachers and administrators will be making, school divisions across the state are expecting a nearly three percent increase in mandatory VRS payments, from 11.66 percent of full-time payroll going into the system, to 14.5 percent.
This would result in about an additional $2.4 million in expenditures for Albemarle and $900,000 in for Charlottesville.
"We certainly support fully funding the retirement system,” Gillaspie said. “It's regrettable that the General Assembly did not fully fund the system all along, since now we are in the position of playing catch-up with costs that significantly impact our budgets."