Oshkosh public schools seek bids for insurance coverage

Oshkosh public schools hope to drive down health insurance costs by taking advantage of newfound competition as unions can no longer bargain over their benefits.

Consultants working for the district recommended last week the school board seek bids from insurance companies hungry to break into the education market, which has so far been dominated by the Wisconsin Education Association Trust, a non-profit provider run by the state teachers’ union.

A bidding process has the potential to save the district millions of dollars without having to switch providers, said Mardi Burns, a benefits consultant from of Associated Financial Group.

“In general, there’s a bit of a feeding frenzy in the school district market right now,” she said.

A recent bidding war in the Appleton school district between four companies — WEA Trust, Network Health Plan, Humana and Wisconsin Counties Association Group Health Trust — yielded an estimated $3.1 million in savings.

WEA Trust ultimately revised its original proposal of a 2 percent rate reduction to an 11 percent reduction in order to keep the district’s business. A second year rate increase is capped at 12 percent, said the district’s business director, Don Hietpas.

“That (rate reduction) was 100 percent due to the competitive bid process that went on,” said Burns, who is also contracted by the Appleton district. “We’d like to recommend following that same process (in Oshkosh) to see if we can achieve similar results.”

Many districts, including Oshkosh, have previously tried to switch providers for lower rates, but local unions staunchly refused the offers. They argued for-profit companies would make up the difference with larger rate hikes in future years.

The Oshkosh school board retained Associated Financial Group a year and one half ago to assist in lowering health insurance costs. At the time, union leaders lambasted the decision to explore alternative providers as a ploy to lead the public against the unions, which have fought hard for their benefits.

Unions no longer have a say in the matter since the state legislature stripped away their ability to bargain over anything but wages. Employees have also been more willing to explore cost-saving changes since they must now pay a larger share of the premium, said Patti Vickman, human resources director for Oshkosh schools.

Oshkosh unions negotiated a one-year contract extension that requires employees to pay 12 percent of their premiums. They previously paid 5 percent. Other districts across the state are expected mandate similar cost-sharing arrangements when their contracts expire.

The increased responsibility on employees to pay more for their benefits has many willing to more seriously explore cost savings options.

“The more we save, the more they save on their health insurance premiums and, in turn, get more in their salaries,” Vickman said.

The district’s current contract with WEA Trust ends June 30. The provider has offered the district three-renewal options with varying fixed rates spanning three years.

According to information provided by Associated Financial Group, the first option includes a 4.7 percent rate hike in the first year and caps the increases at 3 percent in year two and 5 percent in year three. Another option holds rates steady the first year and caps increases at 6 percent in year two and 8 percent in year three.

Each option raises costs about $2.5 million over three years.

Burns said she hopes opening the door to competition will drive those costs lower.

She recommended the district consider a sealed bid process, whereas Appleton used an open process.

The district intends to finalize its renewal agreement with WEA Trust this week and will solicit bids beginning in August for alternative providers. Any changes would go into effect beginning Jan. 1, 2012, pending board approval.