Teachers and other school personnel throughout Allegheny County will stay exclusively with Highmark insurance through June 2018, whether or not the insurer's ties with UPMC are severed.
It's a matter of being good caretakers of the public's money, said Jan Klein, director of business for the Mt. Lebanon School District and trustee chair of the Allegheny County School Health Insurance Consortium.
"If we were to partner and go with two providers, then the administrative fees are higher," she said.
The consortium confirmed the extension Wednesday.
The consortium, with a $300 million budget, is self-insured, which means it pays all of its members' claims. As part of that budget, it pays Highmark about $8 million a year to negotiate contracts and manage the plan. That contract expires at the end of 2015.
The consortium represents all Allegheny County school districts except Pittsburgh city schools and North Allegheny and it also covers community colleges in Allegheny and Beaver counties, insuring some 19,000 teachers, administrators, bus drivers, custodians, maintenance staff, food service workers, clerical staff and others. In addition to retirees and dependents of those workers, the consortium provides health coverage for about 41,000 people.
Its large membership means it has a large risk pool, so if a few members develop a serious illness, the impact on the claims is manageable, said Ms. Klein. Including another insurer's plan would shrink that risk pool, potentially raising rates for each plan and adding to the administrative costs.
"If fees go up just 10 percent, that's $800,000 just for breaking our group in pieces and not for great benefit," she said.
And, even if there is a Highmark-UPMC contract, she said, the terms may be prohibitive for the group.
The consortium's position illustrates some unique issues that public employers, unlike private firms, must weigh as they decide what health insurance plans to offer their employees.
Foremost among them: An awareness that the money they spend comes from taxpayer coffers and, in the case of school districts, state law limits how much they can raise taxes to pay higher premiums.
But their perspective is not unique among public agencies when it comes to deciding what course to take if, as UPMC insists, it will not extend its contract with Highmark beyond Dec. 31 now that the insurer is building its own provider network to compete with UPMC.
"It would be fair to say we have the same concerns," said Daniel Egan, spokesman for the Pennsylvania Department of State, which oversees health coverage for 25,000 state employees in the state's most western 28 counties. "If the two sides are unable to reach an agreement, we will have to balance the cost of adding carriers against the impact of displacing our employees from their medical providers of choice, especially those with chronic conditions."
He added that state employees currently have the option of choosing a health plan through United Healthcare, which contracts with UPMC.
As of now, though, "No final decision has been made on what steps may be taken in the event UPMC and Highmark do not reach an agreement," Mr. Egan said.
Locally, Allegheny County Executive Rich Fitzgerald has said the 15,000 county employees and their dependents will remain with Highmark, saving county taxpayers $10 million in 2014 and 2015 -- and, he hopes, acting as a catalyst to bring Highmark and UPMC together.
The city, meanwhile, will offer both Highmark and Aetna's HealthAmerica, which also has a contract with UPMC, for its 7,900 employees and dependents.
Ms. Klein said the school health consortium board understands that if UPMC falls out of network for their members "there will be disruption" as some employees will have to find new physicians and go to different hospitals.
While UPMC has contracted with national insurers such as Cigna, United Healthcare, Aetna and HealthAmerica, Ms. Klein said Highmark historically has offered the best discounts and "even a small difference makes a big difference to us."
UPMC spokesman Paul Wood said Tuesday that Highmark "needs to offer deep financial incentives to retain business. What will surely infuriate employees of the district is that they will no longer have access to Magee-Womens, which is the clear hospital of choice for childbearing women. Employees want and expect choice."
Currently, about one-fourth of the health claims filed by consortium members are for care at UPMC facilities that are impacted by the contract dispute, Ms. Klein said. "If Highmark agrees to a 40 percent increase on 25 percent of our claims, that is unaffordable."
The 40 percent figure is what Highmark officials said their UPMC counterparts were demanding before negotiations broke down three years ago. UPMC has denied making such a demand. But even a 20 percent increase could raise the consortium's yearly cost by $13 million a year, said Ms. Klein.
"We hope they get together and we hope they come to an agreement we can afford, because an agreement at any cost won't work for us. We have to have affordable health care," she said.
If ultimately there is no Highmark-UPMC contract after the current pact expires Dec. 31, or the contract they get is considered unaffordable, she said, "We believe our people will be able to get the service they need without UPMC facilities."
Steve Twedt: firstname.lastname@example.org or 412-263-1963.