School district costs for teachers’ health insurance rose at an average annual rate of 4 percent above inflation from 2004 to 2012



By 02/13/2013

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CONTACT:
Robert M. Costrell  costrell@uark.edu University of Arkansas
Jeffery Dean  jrdean@email.uark.edu University of Arkansas
Janice B. Riddell (203) 912-8675 janice_riddell@hks.harvard.edu, External Relations, Education Next

School district costs for teachers’ health insurance rose at an average annual rate of 4 percent above inflation from 2004 to 2012

Early results from Wisconsin’s Act 10 indicate promise of significant savings

CAMBRIDGE, MA—Rising health insurance costs for teachers have placed increasing pressures on school budgets, but specific quantification of those costs has been scarce.  Now a new study, analyzing published and unpublished data from the Bureau of Labor Statistics (BLS), has found that health insurance costs for teachers in 2012 were, on average, 26 percent above those for private-sector professional employees ($8,559 for teachers versus $6,803 in the private sector); when adjusted for higher participation rates in health care plans among teachers versus private-sector professionals, the costs are 16 percent higher for teachers ($9,838 versus $8,490 in the private sector).  School district costs for teachers’ insurance rose at an average annual rate of 4 percent above inflation from 2004 to 2012.

Recognizing that recent battles over collective bargaining in Wisconsin and other states have focused significantly on health insurance costs, the study also examines new data from Wisconsin to quantify the impact of that state’s recent change in collective bargaining law, finding a reduction in district health insurance costs of 13 to 19 percent.

Robert M. Costrell and Jeffery Dean conducted the study, which will appear in the Spring, 2013 issue of Education Next as “The Rising Cost of Teachers’ Health Care,” and is now available online at www.educationnext.org.

Comparing unionized and non-unionized workers in both the public and private sectors, the authors find that “unionization is associated with higher total premiums, higher employer costs and lower employee contributions in both the public and private sectors.”  Widely varying teacher unionization across states helps explain large differences in employer and employee health insurance costs.

In states with strong unions, such as Wisconsin, note the authors, “district insurance costs can be very expensive.”  With the passage of Governor Scott Walker’s proposed Act 10 into law, Wisconsin can be seen as a “natural experiment in changing teacher union strength,” they state.  Wisconsin’s teacher health insurance costs have long been very high; average employer costs for participating teachers in 2011 were $8,311 and $19,356 for single and family coverage, respectively, or about 50 and 80 percent higher than the national averages for teachers.  At the same time, Wisconsin teachers’ contributions to insurance premiums have been low:  in 2011 they made no contribution at all for single coverage in 43 percent of the state’s districts, nor for family coverage in 31 percent (among private sector professionals, the non-contributory rates for single and family plans were 17 percent and 9 percent).

Act 10 removed benefits from local collective bargaining, giving districts greater freedom to shop for less expensive plans and establish higher employee contributions.  Using data from the Wisconsin Association of School Boards (WASB), the researchers examined the change in health insurance costs in 2012, after implementation of the Act.  They found a sharp drop in employer premiums from 2011 to 2012.  When they adjust their savings estimates to account for the expected growth in premiums that would have occurred (using average growth from 2007 to 2011) they estimate savings of $2,614 for family coverage and $1,304 for single coverage, or savings of 13 to 19 percent from the projected district premiums for 2012.

The authors note that the Wisconsin results from the first year of Act 10 are likely to be underestimates of school district savings, as some districts are under insurance contracts that predate the Act.

About the Authors

Robert Costrell is professor of education reform and economics at the University of Arkansas and fellow at the George W. Bush Institute.  Jeffery Dean is distinguished doctoral fellow at the University of Arkansas.  The authors are available for interviews.

About Education Next

Education Next is a scholarly journal published by the Hoover Institution that is committed to careful examination of evidence relating to school reform.  Other sponsoring institutions are the Program on Education Policy and Governance at Harvard University, part of the Taubman Center for State and Local Government at the Harvard Kennedy School, and the Thomas B. Fordham Foundation.  For more information about Education Next, please visit:  www.educationnext.org.

For more information on the Program on Education Policy and Governance contact Antonio Wendland at 617-495-7976, pepg_administrator@hks.harvard.edu, or visit www.hks.harvard.edu/pepg/.




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