District Costs for Teacher Health Insurance: An Examination of the Data from the BLS and Wisconsin. The Productivity for Results Series No. 8
Author: Costrell, Robert M.
Date: 2015-01-00
Type: Numerical/Quantitative Data
Subjects: Health Insurance,Costs,School Districts,Public School Teachers,Collective Bargaining,Private Sector,Comparative Analysis,Unions,Employers,Compensation (Remuneration),National Surveys,Teacher Participation,Fringe Benefits,Elementary Secondary Education

Rising health insurance costs have been a source of fiscal distress for school districts. In this paper, I closely examine data from the National Compensation Survey (NCS) of the Bureau of Labor Statistics (BLS) to address a few basic questions: (1) Are district costs for teachers' health insurance higher, on average, than employer costs for private-sector professionals?; (2) If so, how much of this represents greater access to and participation in employer plans?; (3) How does the difference in employer cost break out between that of the policies' total premiums and the employer's share of those premiums?; and (4) What is the impact of collective bargaining on total premiums, employer cost and employee contributions? To address the first question, I convert BLS' published estimates of employers' hourly cost to annual cost, since a shorter work year for teachers inflates the hourly cost of year-round benefits. Using unpublished BLS data on annual hours worked, I find average annual employer insurance costs for teachers to be 25 to 29 percent higher than for private-sector professionals. Adjusting for participation rates, the cost is 15 to 18 percent higher. Direct estimates of employer medical premiums present a mixed picture: higher employer premiums for teachers with single coverage, but not family coverage. In both cases, total medical premiums are higher for teachers than for private-sector professionals, but for family coverage the teachers cover the extra premiums themselves. Employees incur out-of-pocket costs, in addition to premiums. One reason teachers' insurance plans are more expensive is that plan design features (such as generally lower deductibles) reduce their out-of-pocket costs. The BLS data show that unionization is associated with higher total premiums, higher employer costs, and lower employee contributions in both the public and private sectors. This suggests that the high unionization rate among teachers plays a significant role in districts' higher average cost. Varying strength of teachers unions across states also helps explain the wide variation in district costs. In some nonunion states, teacher health insurance benefits are not particularly generous, due to high out-of-pocket costs (e.g. high deductibles) or high teacher shares of premiums (as in Arkansas). In other states, with strong unions, district insurance costs can be very expensive. It is in those states that the opportunities for district cost reduction are most promising. I examine newly available data from Wisconsin to quantify the impact of that state's recent change in collective bargaining law, Act 10. I find a sharp reduction in district costs from lower-cost policies and higher teacher contributions: 13 to 19 percent in the first year after Act 10, and 18 to 23 percent after the second year, relative to projected district costs. [Tables and Figures providing data on employee and employer health care benefits statistics are included.]