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Health trust for Clark County teachers in trouble

The union-created health trust covering one of the largest employee groups in the state – Clark County’s 17,000 public school teachers – is hemorrhaging money and will be “belly up in 60 to 90 days.”

John Vellardita, executive director of the teachers union Clark County Education Association, made the announcement Tuesday in a closed union meeting. There, members received a spreadsheet detailing the dire straits facing their families’ insurance provider, the Teachers Health Trust, which has an annual revenue stream averaging $148 million.

The trust has lost more than $3.6 million since the fiscal year began July 1 because the cost of claims exceeds the trust’s revenue, according to the spreadsheet.

But the river of red ink stretches much further back.

The trust has stayed afloat the past two school years by dipping into and depleting what was a $7.23 million cash reserve. The trust would have bled its savings dry if not for a $5 million line of credit taken from the Bank of Nevada on Nov. 15, 2011, according to trust audits obtained from the Clark County School District and other sources. Less than
$1 million of that credit remained in June.

“The Teachers Health Trust has drawn down its reserves to very critical levels,” Vellardita wrote in his report to members.

Vellardita, however, didn’t disclose how much the trust now has in cash reserves and credit. Neither union officials nor Trust CEO Peter Alpert returned calls from the Review-Journal on Friday to answer questions about whether teachers are at risk of losing health coverage or becoming responsible for unpaid claims.

Amanda Fulkerson, Clark County School District spokeswoman, said the district is “looking at options to ensure our employees and their dependents continue to have health coverage.”

“We believe we will be able to successfully provide this benefit with no lapse in coverage,” she said.

In last year’s contract talks, the union refused to let the district assume responsibility for teacher health insurance though the district coordinates coverage for other employee groups.

Vellardita didn’t directly tell teachers Tuesday that the district may soon oversee their health care options, although he mentioned UnitedHealthcare, which is the provider for other district employee groups.

Unlike other employees of the nation’s fifth-largest district, teachers and their families don’t get insurance through the district, which contributes $546 per teacher per month to the union’s trust for that coverage. District payments to the trust totaled $115.4 million last school year.

If the trust does go “belly up,” teachers could be left footing the bill for claims the trust never paid.

About 7,304 district support workers and their 6,980 dependents faced a similar turn of events in 2001.

Like the teachers union, the Education Support Employees Association – representing bus drivers, janitors, cooks and others – refused to give up control of its struggling health trust. When the trust finally dissolved, several support workers were thrown into collections because of delinquent medical claims. The trust left behind about $8 million in unpaid medical claims and debt.

Whether that would happen in this case remains to be seen. The Teachers Health Trust ends every fiscal year with incurred claims not yet paid, as is routine. But that amount increased from $11.26 million in unpaid claims at the end of the 2009-10 school year to $13 million at the end of last school year.

The district tried to take over health coverage for teachers during last year’s contract negotiations with the teachers union, contending it could negotiate better rates than the trust through leverage gained in representing more than 30,000 workers. But the union and trust refused, arguing the quality of teachers’ benefits would decline.

In the fall, seeking to increase insurance premiums, Alpert asserted that the trust offers “cheaper” and superior benefits to the district’s private plan. But Alpert, who earns about $500,000 annually, made no mention then of the trust’s financial decline.

What is known is that the trust had only $547,000 in cash reserves on June 30, according to the trust’s 2011-12 audit. That is 7 percent of the $7.23 million left in the trust’s pocket after paying its expenses in the 2009-10 school year, the trust’s last year in the black, according to another audit obtained by the Review-Journal.

Expenses started to exceed revenue in 2010-11, creating a $5.5 million loss that year, a $8.64 million loss in 2011-12, and a $3.69 million loss in the first five months of this school year.

Vellardita told teachers Tuesday that the trust is salvageable if it increases premiums.

The trust is requesting $192 more a year from each of the 23,422 participants of the Diamond Plan and $120 more a year from the 11,319 participants of the lower Platinum Plan.

The trust has wanted to increase premiums since the beginning of this school year, but the district refused to take the money out of teachers’ paychecks when ordered by the trust.

“They wanted to put their hands into teachers’ pockets but tell us to do it for them,” said Fulkerson, noting the district’s contract with the union requires changes to be negotiated. She also said that teachers didn’t vote on or approve the change in benefit costs.

In addition to its unsuccessful attempt to raise premiums, the trust instituted higher co-pays this school year that could total an additional $250 per month in prescription costs for those requiring maintenance drugs.

Increases to prescription costs have been outside the district’s control, not occurring through pay deductions. One teacher, who wished to remain anonymous, said a medication that used to cost her $50 now costs $180.

Contact reporter Trevon Milliard at tmilliard@reviewjournal.com or 702-383-0279.

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