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OSBA Board sets rates to cover costs
Message from Kevin McCann, OSBA
Executive Director
The OSBA Board voted to continue OSBA's current health insurance plans with an overall maximum average premium rate increase of 17.84 percent for the plan year starting Oct. 1, 2007. Historical rates are noted at the end of this message. This will be the maximum increase; the final rate will be determined in late June, based on members' claims experience through May.
The decision was made on May 20 in Salem after recommendations by OSBA's Insurance Oversight Committee, working with Mercer Health & Benefits consultants. To reflect actual costs of the program, Mercer had negotiated this rate down from an 18.96 percent rate increase proposed by Regence BlueCross BlueShield of Oregon.
Several circumstances lead to the rate increase:
- Higher than expected claims cost so far this year (and expected to continue) added 10.2 percent to the increase.
- Included in expected future claims are the new state requirements for certain mental health and chemical dependency benefits, called mental health parity. This added 1 percent to the rates.
- The OSBA Boards discontinuation of the rate subsidy from the previous year accounted for 4.8 percent of the increase.
- Current rates set last year by Regence were not high enough to cover claims, which required a 3 percent adjustment in this years increase.
The only cost offset resulted from the removal of the AdviCare chronic disease program. Savings from dropping AdviCare are estimated at $3.8 million, and will reduce the rate by about 1 percent (included in the 17.84 percent). Because Regence recently developed the internal capability for a similar chronic illness service, the board and insurance committee felt strongly this was the right decision.
In some years, OSBA has applied reserves to subsidize or buy down large rate increases. However, with the
termination of the OSBA Health Insurance Trust caused by the
mandatory insurance pool to start next year, the trust is no longer a renewable resource for rate stability. The OSBA Board ended the trust at a meeting on May 5 and preserved its assets for a future unforeseen need of OSBA members, as stated in the Trust Agreement.
We discussed a buy-down from the remainder of reserves to soften the rate increase, but in the long-term, this would be irresponsible and goes against the direction the board has taken to preserve assets to keep OSBA and its services strong. In an earlier statement when the board decided to end the Trust, our President-elect Craig Prewitt said "A strong OSBA means that school boards and taxpayers will continue as the primary policy drivers for public education."
Lowering costs through a buy-down is only temporary. As you can see by the spikes in our rates over the years, rates eventually rise to the needed level. For example, almost five percent of the new rate increase resulted from OSBA buying down rates last year. We can't afford to buy down with a non-renewable asset -- an asset we need to preserve in the best interest of all OSBA members.
The OSBA Board appointed the Insurance Oversight Committee after voting to end the insurance trust. The committee includes Craig Prewitt (Phoenix-Talent) as chair (former chair of the OSBA Health Insurance Trust); OSBA Past-presidents David Beeson (Silver Falls) and Sherry Duerst-Higgins (South Lane/Lane ESD); and
Executive Director Kevin McCann as program administrator.
Specific rates for medical, dental and vision plans that become effective Oct. 1 will be posted online at
http://osbahealth.org/officials
in late June and e-mailed to districts in July.
All benefit plan provisions will remain the same, other than the mandated expansion of the mental health and chemical dependency benefits. Services for those conditions will now be covered the same as other illnesses, without visit and day limits.
For questions, contact OSBA Associate Executive Director Ron
Wilson  via email or
at 503-588-2800 or 800-578-6722.
Recent rate increase history, below. For rate swings since 1984, see
this chart.
2000... 19.30 percent
2001... 13.43
2002... 26.15
2003... 16.65
2004... 9.26
2005... 8.00
2006... 1.40
2007... 17.84
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