The Roaring Fork School District faces a potential $4 million to $6 million in losses after moving to a self-insured health care plan in 2023, Superintendent Anna Cole told the school board at Wednesday’s meeting.

Cole presented an update on the district’s health insurance program. The report highlighted significant challenges with the current self-insured health care plan, Think Health, and the possibility of switching back to the district’s previous managed care plan, Colorado Employer Benefit Trust (CEBT).

The discussion focused on financial risk, the decision-making process, and potential changes that could affect the 2024-2025 school year and beyond.

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Current situation with Think Health

RFSD is currently using a self-insured plan called Think Health, which was implemented in the summer of 2023. According to Cole, the district underestimated the true costs of administering and funding the plan. As a result, RFSD faces potential losses between $4 million and $6 million for the current fiscal year.

“We underestimated the true cost of the self-insurance plan, both in terms of capacity to administer the funding needed and the funding required to implement the plan without significant financial risk,” Cole said. “So in order to address this, the district needs now to consider a mid-year pivot back to a managed insurance plan in order to mitigate risk and potential financial losses.”

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The Think Health plan gives the district more control over plan options and premiums, which, in theory, should lead to cost savings. However, the district has encountered unexpected high claims and costs, leaving them financially vulnerable. On top of that, managing the plan requires skilled oversight, cash on hand to cover claims, and stop-loss insurance to mitigate further risks.

Cole explained that managing a self-insured plan requires an internal management team that the district was not adequately prepared for. The district didn’t properly calculate future risks when setting premiums, leading to the current financial instability.

The managed care option: CEBT

Before switching to Think Health, RFSD used CEBT, a managed care plan. Under CEBT, all costs were built into the premiums, which meant no additional risk to the district. However, this option also had its drawbacks, such as limited control over plan options and premiums, as well as year-to-year increases that the district could not regulate.

“Before the fall of 2023, our employee health insurance was delivered by a managed care plan through the nonprofit trust CEBT,” Cole said. “This meant that we had limited options of how benefits were structured and how we could minimize costs annually. What we experienced was that CEBT increased costs, sometimes significantly, without much district control.”

Although CEBT offers more financial predictability, the district would have less flexibility in managing health care costs for its employees. However, with the mounting financial risks associated with Think Health, Cole and the district’s financial team are seriously considering pivoting back to CEBT.

Financial concern

Cole painted a concerning picture of the district’s financial situation. Staying with Think Health without significant changes could lead to financial struggles. Switching to CEBT mid-year, while potentially stabilizing, would still require additional funding beyond what was originally budgeted for 2024-2025.

“We are projecting, right now, that losses this year could be anywhere from $4 million to $6 million,” Cole said. “Any option at this point, whether we pivot to a managed plan or stay with our current self-insurance plan, will require additional funding above and beyond what we budgeted for in 2024-2025, and most likely, above and beyond what we have in available, unallocated fund balance reserves above the minimum fund balance required by the district’s policy.”

The decision to either continue with Think Health or switch to CEBT is not an easy one. The projected costs for Think Health, adjusted to “de-risk” the plan, could dramatically increase premiums. For example, staying with Think Health means an employee’s premium could jump from $875 to $1,330 for individual coverage. Under CEBT, the comparable rate would be $1,077. For employees with family coverage, the premium could rise from $1,900 to $2,888 under Think Health, while CEBT’s comparable plan rate would be $2,693.

The decision-making process

The district’s decision-making process is divided into two phases. The first phase, which is currently underway, focuses on whether the district should stick with Think Health or pivot back to CEBT mid-year. This phase will include input from staff and various leadership teams, including certified, classified, and administrative Interest-Based Bargaining (IBB) teams. The district is gathering feedback through staff surveys, virtual Q&A sessions, and public comments at upcoming board meetings.

Cole and her team will make a recommendation to the Board of Education at the Oct. 23 meeting, which will be the deadline for deciding whether to switch plans. The urgency of the timeline is driven by the need to start open enrollment for the new plan, if they switch, by November.

“We are targeting the October 23 board meeting as the deadline where administration will come before the board and make a recommendation to the Board of Education regarding our 2024-2025 health insurance plan and a potential mid-year pivot,” Cole said.

Addressing the funding shortfall

Phase two of the decision-making process will focus on how the district will pay for health insurance in the 2024-2025 school year, regardless of which plan is chosen. Both options will incur additional costs beyond what was budgeted. The district is exploring several solutions, including using reserve funds, reallocating budgeted funds, and adjusting plan components such as copays and deductibles.

To help navigate these challenges, the district has retained legal counsel, employee benefit experts, and actuarial consultants. They have also consulted with former RFSD Chief Financial Officer Shannon Pelland to review the financial situation.

“We have retained a pretty strong team to support us in our decision-making and analysis,” Cole said.

Additionally, Cole emphasized the importance of involving employees in the decision-making process. The district has shared a video with staff explaining the situation and is holding information sessions to gather feedback. Cole acknowledged that this has been a difficult year for employees as they navigate the challenges of the self-insured plan.

Looking forward

Cole expressed the district’s commitment to finding a solution that minimizes financial risk while ensuring that staff continue to have access to quality health care. Cole stressed that employee well-being is a top priority, and that the financial stability of the district is closely tied to how this issue is resolved.

“This is a challenge that’s hitting us right at our key priorities,” Cole said. “We are deeply committed to finding our way through this quickly, transparently, and in collaboration with our staff and the Board of Education.”

The board is expected to make a final decision on Oct. 23, with further updates on funding strategies to follow.