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Paying For Health Care But Kept In The Dark

Lynne Sladky AP
Alberto Carvalho, superintendent of Miami-Dade County Public Schools at Southside Elementary School, Wednesday, Aug. 27, 2014 (AP Photo/Lynne Sladky)

About a year ago, at a Miami-Dade County school board meeting, superintendent Alberto Carvalho was happy to announce the district and the teacher's union had just ratified a new contract. "I believe that this contract honors and dignified what you do every single day," he told the school board members. It included bonuses for most teachers and it settled how to handle health care expenses after yet another year of rising costs.

"We know exactly what the district pays out in terms of claims because we are the insurance company there isn't profit be made," he said.

Like most large employers, the Miami-Dade school district is self-insured. It bears the financial risk of covering its own employees.


The school board's reaction to the health care costs in the new contract was incredulous. They are an elected board and didn't look forward to telling the teachers their prices were still going to go up. One board member after another questioned the rise in prices. "Do we sit with our employees, knowing what their salaries are, and help them carve out the best options insurance-wise?" one said. "Twenty-seven hundred more for his family's health care—can you comment on that?" said another. And yet another lamented, "Our employees are tired of hearing about rising health care costs!" This was not the conversation the superintendent expected. "I thought we were coming here today to first and foremost celebrate something pretty remarkable," he said.

And a year later with another new contract, the school board is still grappling with health care costs. Teacher contributions to insurance will mostly stay the same, but it means the district will absorb another 4% increase in costs.

Fedrick Ingram is head of the Miami-Dade County's teacher's union, which represents nearly 15,000 members. "Our salaries have not gone up in the same way that our health care costs have gone up," he explains. So, Ingram says, he's been urging the school district to figure out where the money is going.

"We have to know who's driving up costs. What's going to affect the bottom line for our premium costs and what's actually contributing to that." Turns out, that is incredibly difficult to do. But it's a conversation more businesses should be having, says Uwe Reinhardtof Princeton University.

Businesses and employees need to stop taking for granted that rising health care costs are inevitable because they make tradeoffs, says Reinhardt.


"Employees actually pay for what they think is company provided insurance by lower wages," he says. But it's so hard to get costs under control because the actual prices are secret.

Self-insured organizations like Miami-Dade County schools hire an insurance company to manage the claims process and negotiate rates with hospitals and doctors.

But insurers and providers keep the rates secret even from those employers hiring them.

Carvalho's right: the district knows exactly what it pays overall for health care claims. What it doesn't know is how much it's paying to any one hospital or provider for a given service. That means it doesn't know who's the most expensive provider, or who is the cheapest. That may drive prices higher for employees, says Reinhardt.

"It's almost like blindfolding people, shoving them into Macy's and say, 'buy efficiently for a shirt.' Well you come out with a pair of shorts."

The school district is subject to the state's open records laws. Still, the insurance carrier they use for employees—Cigna—refused to share accounts of what was actually paid out, citing trade secrets. Even though the county school district—which is taxpayer-funded—takes on that risk, it's not allowed to see the contracted prices.

The district is seeking ways to get around the legal obstacles—it's planning to shop for a service that can work with its limited claims data and at least figure out average costs. Ideally, district officials say, they'd like to know enough about costs to offer incentives for employees who choose less expensive options.

Until there's more transparency, Miami-Dade teacher's union member, Cheryl Collier thinks the situation would offend even her second graders.

"They would be angry that they are paying something or forced to pay for something not really fully understanding the value of what they're paying for." It's a lesson the school district and other employers are starting to learn.

This story is part of a partnership with NPR, WLRN, the Miami Herald and Kaiser Health News.

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