Legislators heard good news and bad news about deficit school districts from Superintendent Whiston and the Department of Treasury in their quarterly reports to the Legislature. We'll start with the good news.
Whiston reported that the number of school districts in deficit dropped from 58 to 41-that's the first time since 2003 that there has been such a dramatic decrease. Only five districts went into deficit last year, while 20 districts emerged from deficit and 21 reduced their deficits.
The report from the Michigan Treasury was not as optimistic. It will be conducting a preliminary review of 11 financially distressed school districts next year. The districts have been in deficit for five consecutive years and under
PA 109, the new early-warning and intervention law, the districts will have to submit an enhanced deficit elimination plan to be approved by Treasury as part of the review.
The 11 districts facing a preliminary review include: Bridgeport Spaulding, Clintondale, Flint, Hazel Park, Lincoln Consolidated, Mackinaw City, Mt. Clemens, New Haven, Southgate, Vanderbilt and Westwood.
If the review confirms financial stress, Gov. Snyder would appoint a formal review team which could recommend the appointment of an emergency manager for the school district, a consent agreement with an ISD, or bankruptcy.
Retired teachers can return to the classroom without loss of pension benefits
HB 4059--the bill that would allow certain retired teachers to return to the classroom without risking their pension--is on its way to Gov. Snyder for his signature. The bill continues until 2018 the provisions of a similar 2012 law that expired last year.
Under the bill, retirees hired in critical shortage areas could work three years without affecting their retirement benefits. However, retirees can't use the time or money earned to recalculate their retirement benefits.
HB 4059 also applies to those who retired between June 30, 2010 and Sept. 1, 2015 and wish to return to work as substitutes, instructional coaches, or school improvement facilitators. They could receive full benefits as long as they don't earn more than one-third of their final average compensation in a year.
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Paying for Healthcare
The differences between Self-funded and Fully-insured plans
by Mark Howard
For group healthcare plans, there are two basic ways of paying for healthcare: self-funded and fully-insured. The differences between the two have a major impact on how a plan is administered. Office of Retirement Services uses both funding methods for different plans and for different reasons.
The medical PPO plan, the pharmacy benefit manager, the vision provider and the dental provider are selected using the State's competitive bid process. Those contracts are self-funded. A self-funded plan is one where the employer/union/agency pays for each individual claim. The insurance company serving as the plan administrator is paid a separate fee to administer the plan. Because the retirement system has the responsibility to pay all of the claims costs, ORS monitors the plan very closely to ensure that the plan being provided is a high quality plan at a low cost. ORS monitors the plan administrators to be sure they are operating accurately, efficiently, and valuably and that the plan design is sustainable. ORS monitors and recommends modifications to the plan design (through the Strategic Initiative Process) of the self-funded plans to provide essential, life-saving and life-improving services for our members while ensuring the longevity and viability of the plans. This self-funded arrangement allows ORS more influence over the plan and ensures the MPSERS Board of Director's decisions are being faithfully carried out.
The Health Maintenance Organizations (HMOs), Blue Care Network, Health Alliance Plan, and Priority Health, operate differently. They are fully-insured plans, meaning that the retirement system pays a premium each month for each member enrolled in the plan. The HMOs pay for all the claims that members incur, regardless of the number and cost of those claims. The amount the retirement system pays does not change month to month regardless of a member's actual healthcare use. Since the HMOs are taking on the risk for the claims costs, the retirement system is not as involved in the day-to-day management of those plans. We do require that the HMOs meet the quality standards laid out in our contracts with them, and that the health insurance plan they provide has the same overall financial value as the self-funded plan. By including this requirement, ORS can focus its efforts on the self-funded plans and still be sure the fully-insured plans remain viable options.
Self-funded plans require more oversight but are less expensive overall because the risk is all on the retirement system. Fully-insured plans require less oversight but are more expensive because the healthcare plan takes on the risk. Because MPSERS has such a large population in our self-funded plans, the risk is very low and completely outweighed by the cost savings. The added oversight and influence ORS gains from the self-funded arrangement results in improved contract compliance and better quality overall from the plan administrators.
Here are some examples to illustrate how the self-funded and fully-insured arrangements work:
For self-funded - I pay you $20 a month to go grocery shopping for me. You buy groceries for me, and I pay you back once you give me the receipt. Since I have to pay for whatever you spend, it is my job to make sure you are spending my money well. If there are any sales on items, I benefit directly while you don't benefit at all. Likewise, if the price of produce goes up, it affects me and not you. If my costs are too great, I may ask you to purchase generic products or cut out non-essential items. Your main focus is to keep me satisfied so I keep using your service.
For fully-insured -I give you $500 a month to buy groceries for me. I tell you, in general, the things that I want to buy, and I tell you that you can keep whatever you don't spend. You will probably try to be as frugal as possible in order to maximize your profit. I will not need to make sure you are spending the money well because my cost is fixed. If there are any sales, you benefit directly while I do not. If milk is $5 a gallon, it doesn't affect my cost, but it does eat into your profits. If you cannot buy what I need with the money I give you, you will have to look for cheaper products, use coupons, or find a new store to shop at. Your main focus is ensuring that you are providing me what I need, while keeping your cost to a minimum.
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