Most retired employees of the Buffalo school district receive a benefit not enjoyed by their counterparts in suburban school districts – lifetime health insurance. And not just any old health insurance, but about the best money can buy.
This coverage, provided to an average of about 4,200 retirees, including teachers and administrators, doesn’t come cheap.
The bill for the budget year that is winding down is a projected $66 million. That’s more than the $64 million the district is spending on health insurance for active employees.
One parent leader criticized the spending in light of the district’s subpar graduation rate.
“You’re going to spend the majority of taxpayer’s dollar that’s there to educate their kids in the system today on paying the health care of people who are retired,” said Samuel Radford, president of the Buffalo School District Parent Coordinating Council.
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District officials say the cost of health insurance for retirees needs to be addressed.
“This is something that has become a priority in any negotiation that we engage in,” said Nathaniel Kuzma, the district’s general counsel. “Otherwise we’re going to see as part of our budget bigger and bigger chunks being taken out not going into the classroom because we have these contractual obligations to provide benefits to our employees.”
Recent changes to the contracts covering teachers and administrators saved the district about $9 million in retiree health insurance costs for this budget year. Retired teachers and administrators pay into the plan, but their contributions cover a small share of the cost.
Health insurance costs averaged $15,318 per retiree for the fiscal year that ended last June. The district could not provide a breakout between those receiving single and family coverage.
Teachers who retire after July 1 of this year will pay $650 annually to obtain an individual plan and $1,500 for a family plan. Those payments represent increases from previous contracts under the October 2017 settlement between the district and the teachers’ union.
State taxpayers bear most of the financial burden, as Albany provides the district with more than 80 percent of its funding.
Other changes in the teacher contract include increases in co-pay contributions. For example, most plans for teachers call for a $15 co-pay for a doctor office visit.
And while the new contract eliminated an insurance rider for elective cosmetic surgery for active employees, retirees still enjoy the benefit, district officials said. But it is now subject to tax, and district officials said they expect retirees will begin using it less frequently as a result.
While contract changes are producing savings in the short-run, costs are projected to grow from nearly $70 million in the budget year starting this July, to $80 million in 2022.
Health insurance costs are determined by several factors, starting with the amount of health care services retirees consume, and older people tend to generate more expenses. Another factor is the level of benefits retirees receive – the amount of co-pays for doctor visits and prescriptions, for example.
Chris Purtell, the founder of Buffalo DataPro LLC and a health care consultant, reviewed the plans offered to retired teachers and noted how generous they are.
“These are typically the highest cost plans available in the marketplace,” he said. “They do fall into what we call the platinum tier.“
The plans provide fewer incentives for retirees to use medical services in ways that hold down costs, Purtell said.
The high cost of the plans troubles Radford, the parent leader.
“We’re going to give you platinum level health insurance for the rest of your life and all you’ve got to do is show up. It don’t matter what outcome you get. It don’t matter whether the kids can read, write, or do math.”
Health insurance benefits are one part of a broader compensation package. To Phil Rumore, president of the Buffalo Teachers Federation, this benefit helps to keep teachers in the city.
“This is not an easy district to attract teachers to,” he said. “So you need to build in as many benefits as you can because the salaries aren’t commensurate with what teachers get, the teaching conditions aren’t the same.”
District officials agree that providing health insurance for retirees can help keep teachers in Buffalo. But, according to the district’s chief financial officer Geoff Pritchard, something has to give.
“Do they want it more towards compensation to increase their benefit or do they like having the retiree health care?” he said. “You probably can’t have both.”