News & Notes December 2004

PACD Report on Health Insurance Options for
Conservation Districts

There have been a number of changes in the insurance industry over the past few years. Pennsylvania's conservation districts have been faced with rising premiums, as have other organizations across the state.

During the strategic planning process, which began in the Fall of 2003, PACD heard from a number of districts that they were looking for ways to lower these costs. The result was an action item as part of the PACD Strategic Plan, which seeks to investigate solutions to increasing health insurance premiums.

PACD took a number of steps to investigate the issue:

1. PACD wrote a letter to the Pennsylvania Employees Benefit Trust Fund, asking if district employees might be eligible for coverage under the plan for state employees. The Director responded that only state employees are eligible, so district employees are not currently eligible.

2. PACD looked for a single insurance plan that could be made available to all districts. During the investigation process, PACD discovered that a number of current trends in the industry make this option unworkable:

A. There is no one plan that will provide statewide coverage. Coverage is now being provided on a regional basis, so providing statewide health insurance for districts would involve coverage from multiple companies.
B. The insurance industry now operates on a census basis, so there is no way to apply a single premium across the board. Even within one plan, the premium for health insurance coverage would vary from employee to employee.
C. A significant portion of district employees are county employees, which creates an inconsistent pool of potential participants. This makes shopping for a plan extremely difficult, since premiums are based on the pool of potential participants. In order to obtain pricing, PACD would have to determine how many individuals the policy would cover and obtain census information for each potential employee participant.

In summary, there is no one plan that will provide statewide coverage for districts. Arranging for statewide coverage for districts would entail working with multiple providers, securing specialized staff and expending significant resources. There is no foreseeable way to make this effort a self-sustaining venture for PACD.

3. PACD invited Gary Baker with PCI Insurance to the Conservation Issues Forum at the 2004 PACD Legislative Conference to explain the current state of the health insurance industry. The presentation shed some light on some of the factors behind fast-rising health care premiums, including:

• PA demographics are changing - the PA population is aging
  - PA is the second oldest state in the U.S. behind Florida
  
• Increased consumer expectations
  - Consumers expect insurance to pay for all of their expenses
  
• New technology, more access, more services
  
• Labor costs are increasing
  - We have a nursing shortage in PA
  
• Medical malpractice expense
  - Insurance costs are excessive
  - Defensive medicine is practiced more often
  
• Lack of investment income for carriers
  - Offsets underwriting gains
  
• Government mandates and legislation
  - Government continues to mandate benefits that add additional costs to coverage

4. Based on the results above, PACD has compiled the following table of possible sources of health insurance for districts:

We also asked districts who have investigated this issue on their own to share their solutions. This information is included in the table below. We hope that this information will prove useful to other districts who are seeking solutions to their health insurance needs.

October 2004

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