Miami Herald: Without competition, school insurance rates rise

November 3rd, 2009

The Miami Herald published this article on October 31, 2009.

With the competition removed, Broward school district's insurance provider is increasing its rates by up to 45 percent.

With the competition removed, Broward school district's insurance provider is increasing its rates by up to 45 percent.

If Adriana Martin, a science teacher at Glades Middle School in Pembroke Pines, wants to include her 1-year-old son on her health insurance, it's going to cost about $600 a month, up from $400.

``It's really outrageous,'' Martin said. ``I've gone to other insurance companies -- I have a quote right now for $200 a month for better coverage than I have right now.''

Until last year, Broward schools employees could pick between two companies for health insurance plans -- so competing Humana and Vista Healthplan kept their perks attractive and prices low.

Now the district has one carrier, Vista -- and the company is increasing its rates by up to 45 percent for parents wanting to insure their kids starting Jan. 1.

Rising healthcare costs across the country have some private businesses and government agencies scrambling to provide adequate insurance at acceptable premiums for employees.

But not all have seen the same eye-popping jumps as Broward schools.

Miami-Dade schools employees, for example, will see no changes in their dependent costs next year, though some teachers got hit with an increase this year.

Both school districts -- and the two county governments -- pick up the entire tab for employee health insurance. But employees pay for their dependents. That's the cost that's climbing for the Broward school system.

District officials say the problem could have been worse: At one point, it looked like even the employee's coverage might come with a price.

``We didn't think we were going to be able to do it,'' said School Board member Stephanie Kraft, chairwoman of the superintendent's insurance advisory committee.

Kraft and the School Board have faced criticism for picking Vista in the wake of last month's arrest of suspended board member Beverly Gallagher in a federal corruption probe, which called into question how the district doles out lucrative contracts. (Gallagher has pleaded not guilty.)

And Kraft has drawn scrutiny after the recent revelation that her husband worked for influential board lobbyist Neil Sterling -- who also represents Vista before the School Board.

Speaking at her lawyer's Fort Lauderdale office Thursday, Stephanie Kraft showed The Miami Herald a pages-long chart she created last year comparing bids from companies seeking the district's $1.7 billion health insurance contract.

The chart shows Kraft's rankings based on dozens of criteria, including whether a company had a customer service phone with a local area code and whether it offered in-network coverage for children of schools employees going to college outside South Florida.

``It wasn't an arbitrary decision for me,'' Kraft said. ``It was thought out.''

Vista and its affiliates contributed $2,000 to Stephanie Kraft's 2006 reelection campaign, and $2,000 to her husband's unsuccessful Coral Springs City Commission campaign that same year. Stephanie Kraft also accepted $500 from Humana.

And Vista has given to other board members, among them Gallagher, Robin Bartleman, Phyllis Hope and Jennifer Gottlieb.

In a written statement, Michelle Johnson, Vista's communications director, said the insurance company, which has been a school district provider for 14 years, had no knowledge during Mitch Kraft's commission race that the school district would go out to bid for a sole benefits provider two years later.

``There is no connection,'' the statement says.

The School Board hired Vista as its only insurance company last year based on a unanimous recommendation from the insurance committee -- even though most members originally wanted to keep the two providers, Vista and Humana.

But Humana had asked to raise its yearly rates more than Vista had -- so much more, that the committee told Superintendent Jim Notter to just go with Vista without putting out bids.

Notter disagreed. He sided with two committee members -- Pat Santeramo, head of the Broward Teachers Union, and Dan Reynolds, head of the Federation of Public Employees -- who said the district would have to put the contract out for bid if there was no longer a choice between Vista and Humana.

So that's what the committee did.

But they found out the insurance companies were not open to a two-provider system -- and a previous ruling by a judge forbid two district vendors providing one service.

That meant the committee had to choose a single company out of five bids.

Records from the Oct. 8, 2008 insurance committee meeting show 12 of 15 committee members -- including School Board members Kraft, Bartleman and Bob Parks -- gave Vista the highest score.

Kraft, who was previously insured by Humana, said she picked Vista in part because it offers a popular kids' plan. Bartleman has said the same thing, and on Thursday, Parks concurred.

``People think that lobbyists had something to do with the whole deal,'' said Parks, who also used to have Humana. ``Well, the reality is, we look at the numbers and the figures, the benefits, the pros and cons -- all was in Vista's favor.''

A transcript from the committee meeting shows Kraft and others were worried about the cost increases that could follow from eliminating the competition.

``My concern is that in a year. . .they're going to come back and want these 23, 25 percent increases,'' Jane Turner, the district's budget director, said at the time. ``We don't have two carriers now, one to pit against the other one.''

Former benefits director Ron Weintraub, who is now retired, agreed: ``We don't want to be held hostage, which happened last time.''

When the three-year Vista contract came up for its annual renewal in July of this year, the company proposed increasing the kids' plan rate 45 percent, the PPO plan rate by 35 percent and the HMO rate by 10 percent.

It based its increases on how many people were enrolled in each plan and how many medical services they have used in the past, according to Vista's statement.

The increases are costing the district $11.5 million more than last year.

Santeramo and Reynolds, the union heads, were not at that meeting, having left the insurance committee in protest a few months earlier.

``The committee itself was really weighted heavily toward the district,'' said Santeramo, adding that he has questioned why the 15-member group has three board members. ``It's a little unusual.''

They might not have to worry about that much longer. A newly appointed blue-ribbon commission is expected to examine how the district awards big contracts.

And board members sound reluctant to keep their seats on the once-coveted insurance committee.

``If somebody else wants to take it, let them take it,'' Kraft said at a workshop meeting earlier this week.

Miami Herald staff writers John Dorschner and Amy Sherman contributed to this report.