Rockwood Exploring Options to Fund Insurance Plan Shortfall

It was a case of good news/bad news at a recent Rockwood School Board meeting. 

First, district CFO Tim Rooney delivered the good news: Rockwood had ended the year with an unexpectedly large budget surplus. However, he then pivoted, explaining that the district is facing a looming fiscal challenge for its self-funded health, dental and vision insurance plans.

Currently, the plans are running at a slight loss, with the premiums paid in by district employees falling short by about $241,000 per year compared to the amount of claims paid out. 

Becky Pitzer, the district’s Human Resources Director, said this could be addressed by changes to the plans the district offers its employees, likely meaning higher co-pays and/or deductibles.

The more pressing issue, and the one that will requie more drastic action, Rooney and Pitzer said, is that the fund’s reserves have fallen below the industry standard, which recommends that they have on hand four months worth of claims.

That would amount to around $7.2 million, significantly above the district’s current reserve, which stood at about $3.1 million as of April 30.

“Somehow, we need to get that fund reserve re-established,” Rooney said.

Achieving that goal will likely require more than just changes to the plan and Rooney listed several possibilities, including pulling money from Rockwood’s operating funds and charging higher premiums, something that is not allowed under the district’s current contract.

They could also reduce the difference significantly with a one-time injection of about $600,000 that had previously been budgeted to help cover costs associated with the federal health care reform law.

“The Affordable Care Act had several components, one of which was a requirement to provide insurance for any employee who works 30 hours per week consistently,” Pitzer said.

The law is scheduled to go into effect in 2014, but President Barack Obama recently opted to delay implementing that provision until 2015, freeing up the $600,000, Pitzer said.

The district is still investigating how the district ended up with such an imbalance in the health fund. In response to a question from board member Lauriel Monolee, Pitzer said it might be related to the way claims have come in to the district in the last several years.

“We did have as much as $9 million [in the fund’s reserves] at one point,” she said. “We are working with our consultant to see what the specific problem may have been.”

Following the presentation, the school board asked for more information about what district employees pay in premiums and deductibles compared to other St. Louis County Districts.

Rockwood Interim Superintendent Terry Adams instructed Pitzer and Rooney to prepare a range of options that the district could pursue to fix the problem to be presented to the school board for final approval at a future meeting.