As schools across the region send their budgets to the voters in a year where the cost of everything seems to be spiking, one increase seems to rise above the rest: healthcare.<\/p>\n
The reason is self-evident.<\/p>\n
Health costs are up 22% for the eight individual school districts and Franklin-Essex-Hamilton BOCES that all belong to the same healthcare consortium. It\u2019s an across-the-board increase, charged equally in proportion to the number of enrollees each member has. Since health insurance is a contractual obligation, it\u2019s something none of these districts nor the BOCES can simply refuse.<\/p>\n
Every district has to account for it, and even if budgets are voted down \u2014 forcing districts to either accept a lesser tax levy increase or a contingency budget with a 0% increase in the tax levy from last year\u2019s budget \u2014 costs will have to be cut elsewhere, as healthcare costs cannot be trimmed.<\/p>\n
That\u2019s because the steep increase was formally agreed to in February when the consortium\u2019s joint governing board unanimously voted 18-0 to accept the increase, with each member\u2019s two representatives voting in favor. These include Lake Placid, Saranac Lake, Tupper Lake, Brushton-Moira, Chateaugay, Malone, Salmon River and St. Regis central school districts and FEH BOCES. This was ratified 7-0 by the BOCES and district superintendents, except for Lake Placid and Salmon River, who were absent.<\/p>\n
Why so much more this year?<\/p>\n
It\u2019s the same voting process used each year to set consortium rates, according to FEH BOCES Superintendent Dale Breault, who co-chairs the healthcare consortium. Ironically, he said this year\u2019s decision was more straightforward than some other years which had a lower rate increase.<\/p>\n
\u201cAs painful as this vote was for everyone, it was easier than many years to reach consensus since we did not have a lot of options,\u201d he said. \u201cWe had spent down the \u2018usable\u2019 portion of our fund balance in prior years to keep rate increases lower (by planning for potential losses) in hopes that the steeper trend in increases would subside. With that \u2018usable\u2019 portion depleted, we had no choice but to go with the projection based on the higher trends.\u201d<\/p>\n
Projections are supplied by the consortium\u2019s consultant, Patrick Cowburn, a healthcare industry veteran, who Breault said pours over the consortium\u2019s healthcare use trends and compares revenues to what prices \u2014 everything from doctors visits to hospital stays to prescription drugs \u2014 will be for the next year so that the consortium can charge to cover costs.<\/p>\n
\u201cThat\u2019s essentially based on the trends that we\u2019re seeing on the usage of the plan itself,\u201d Breault said. \u201cPat tries to give us his best projections as to what we\u2019re going to need to cover our expenses for the following year and then we decide what those premium-equivalent increases are going to look like.\u201d<\/p>\n
This year\u2019s rate spike boiled down to too many years of the consortium not taking in enough money to keep pace with how much it\u2019s spending \u2014 and the former now needs to catch up to the latter.<\/p>\n
\u201cIt\u2019s easy to go back and say, \u2018We shouldn\u2019t have done that, we should have raised our rates a little more,\u2019\u201d he said. \u201cI think that 22% increase is a result of us maybe not making the best decision to keep rates artificially low and utilizing fund balance because the expenses caught up with us. There\u2019s no other way of saying it.\u201d<\/p>\n
Breault said past years\u2019 decisions to \u201cgo low\u201d weren\u2019t completely foolhardy. The last few years, there was uncertainty as to whether these higher medical expenses would be transitory or long-lasting. There was a school of thought suggesting the expense uptick was from enrollees getting around to some medical procedures or treatments that were put off during the coronavirus pandemic, and that these costs would stabilize in coming years \u2014 making it logical to tap the reserves to flatten that curve.<\/p>\n
Breault said there was also data to suggest these increased expenses weren\u2019t short-term, but it wasn\u2019t as certain then as it is now and with competing data at the time, the consortium governing board\u2019s sentiment was to depress rate increases by eating into the reserves. The consortium was also still riding high on what Breault referred to as its \u201cdecade of success\u201d from 2013 to 2023 where its annual increases stayed below healthcare inflation.<\/p>\n
He noted that these weren\u2019t achieved through artificially tapping reserves, but a number of smart active-management decisions that, among other cost-saving measures, took advantage of certain Medicare subsidies and drug rebate programs.<\/p>\n
\u201cWe were able to keep our year-over-year increases significantly lower than what the medical CPI was doing at the time and we built up a significant fund balance in our consortium coffers,\u201d he said. \u201cWhen the increases started coming in larger than that 3% to 4%, we made decisions at the time hoping that the larger increases were maybe not a new trend.\u201d<\/p>\n
During the 2024-25 fiscal year, the consortium budgeted for an anticipated negative budget performance of $7.7 million. It wasn\u2019t enough.<\/p>\n
\u201cWe took that risk in hopes that our increase in costs the prior year was an outlier and that it would settle back down,\u201d Breault said. \u201cIt did not, and we ended up at a negative performance of $11.4 million, which significantly cut into our fund balance.\u201d<\/p>\n
He added that those significant increases in costs appeared to be the new trend as the consortium analyzed the 2025-26 budget performance. As of February, the consortium was projecting another annual loss of nearly $8 million, which Breault said was threatening to nearly wipe out its usable reserve.<\/p>\n
\u201cWe had set rates lower than worse case projections in the few prior years hoping that the higher expense trend would level a bit, but it didn\u2019t,\u201d he said. \u201cSo when we set rates this year, we had to go with the high end projection and set a \u201cbreak even\u201d budget which necessitated the 22% increase. Projected expenses for the 2026-27 school year will be $78.6 million.\u201d<\/p>\n
Its own insurer<\/p>\n
Breault said there\u2019s a common misconception that the consortium is just pooling its roughly 6,600 members \u2014 comprising about 3,500 school and BOCES employees and retirees and about 3,100 dependants such as spouses and children \u2014 together to get a better healthcare rate. In reality, the consortium is the insurer.<\/p>\n
\u201cWe are a self-funded consortium,\u201d he said. \u201cWe don\u2019t buy a commercial insurance product.\u201d<\/p>\n
It contracts with private insurance company Excellus BlueCross BlueShield and pharmacy benefit manager Express Scripts for the administration of its healthcare and prescription drug operations, such as receiving and sending bills from hospitals and doctors offices to the consortium, but this is different from Excellus actually paying the bills.<\/p>\n
\u201cWe pay a small administrative fee to those organizations to do that,\u201d Breault said. \u201cBut at the end of the day, we pay the bills that come in on behalf of our members. And that\u2019s a key distinction, because we\u2019re not at the mercy of whatever the insurance companies price the product at. We actually are, in a lot of respects, our own insurance company.\u201d<\/p>\n
Since its founding in 1991, its status as a municipal cooperative health plan meant to operate at cost has largely allowed it to sustain lower annual cost increases relative to for-profit insurance companies, Breault said. These sorts of consortiums are common for school districts across the state.<\/p>\n
Officially named the Franklin-Essex-Hamilton School Districts’ Health Insurance Consortium, Breault said there\u2019s an important distinction to be made between this and what are otherwise thought of as \u201cBOCES programs,\u201d such as career and technical education classes at its two campuses. While FEH BOCES is the fiscal agent, the governing board assigns each member equal representation.<\/p>\n
\u201cIt\u2019s a consortium of nine entities who all work together to manage the program,\u201d he said. \u201cThe BOCES role is kind of ancillary.\u201d<\/p>\n
It\u2019s also not a perfect overlap with FEH BOCES, as two of its otherwise component districts, Raquette Lake and Long Lake, are not part of the healthcare consortium. Breault said that\u2019s because state law has a minimum staff threshold for joining, which they do not meet.<\/p>\n
During the consortium\u2019s full 2024-25 fiscal year, the total expenditures were about $69.85 million. Of those, 48.3% were hospital costs, 32.2% were drug costs, 14.2% were other medical costs such as regular doctors visits and 5.4% was the combined administrative costs \u2014 including 2.9% for Excellus, 1.5% for the \u201cstop loss\u201d premium, 0.8% for Express Scripts fee and 0.2% being the remainder of the administrative fees, such as the consultants.<\/p>\n
For the first half of the 2025-26 fiscal year, the consortium\u2019s expenditures were almost exactly $37 million, Breault said. Of those, about 45.1% is hospital costs, 35.1% are drug costs, 15% are other medical costs such as regular doctors visits and 4.8% is the combined administrative expenses, which include what is paid to Excellus, Express Scripts, consultant and a special \u201cstop loss premium\u201d \u2014 which is essentially insurance of insurance to pay any any super-high dollar claims enrollees may have.<\/p>\n
Fund balances: a critical pad<\/p>\n
As its own insurer and as critical as healthcare is, Breault said the consortium is legally obligated to keep larger fund balances than school districts or, for that matter, businesses in general.<\/p>\n
\u201cWhen people think of school district fund balance, they often are aware of the fact that the law technically does not allow more than a 4% unreserved balance, and the NYS Comptroller routinely calls districts out for that,\u201d he said. \u201cIn the health insurance business, there are reserves that are required by municipal law for certain consortiums and strongly recommended for ours.\u201d<\/p>\n
It\u2019s significantly higher than school districts \u2014 ideally equivalent to about 38% of the consortium\u2019s annual spending broken up into three different reserves, one of which is the \u201cusable\u201d one and fluctuates. The 38% might seem excessive in comparison to a school district, but Breault said such a margin is critical because healthcare is a human necessity, healthcare consortiums have to basically guarantee they won\u2019t go insolvent in a variety of circumstances.<\/p>\n
An equivalent of about 18% of annual spending is reserved as a true \u201clast resort\u201d reserve, where if the consortium were to, for any reason, shut down today, any bills for treatments and services performed but not yet received could be paid off.<\/p>\n
Another roughly 5% is earmarked for advanced deposit or surplus. This is required so that funds are advanced to the consortium\u2019s administrative partners to begin paying bills on its behalf before billing back. It\u2019s essentially a \u201ccash flow\u201d payment.<\/p>\n
These two reserves can\u2019t be manipulated outside of their very rigid restricted purposes. The aforementioned \u201ctappable\u201d reserve is known as the \u201cclaim stabilization fund,\u201d which is what the consortium can pull from \u2014 if there\u2019s enough money \u2014 to offset a particularly acute annual increase. Conversely, in years where expenses come in less than projected, the consortium can stash that surplus here. While Breault said this should remain at about 15%, it\u2019s dwindled over the last few years. It\u2019s also a mid-year buffer.<\/p>\n
\u201cThe reason that is so important to have something in this reserve is because, what if claims come in even higher than our conservative projections?\u201d Breault said. \u201cIf there is not a \u2018buffer\u2019 amount of money, school districts could theoretically be faced with a mid-year health insurance increase to cover the gap. That would be devastating to districts after passing a fixed budget for the year.\u201d<\/p>\n
Weight loss drugs: a new trend<\/p>\n
Like healthcare consortiums across the state and insurance packages nationally, Breault said new blockbuster GLP-1 drugs like semaglutide and tirzepatide \u2014 commonly marketed under brand names Wegovy and Zepbound for weight loss or Ozempic and Mounjaro for type 2 diabetes treatment \u2014 are climbing to the top of the consortium\u2019s expense list.<\/p>\n
And unlike one-time surgery or acute treatments, GLP-1 drugs are about as certain of a new trend as it gets for sustained higher medical costs. Why? Because their use is steady. The drugs are typically prescribed to be administered, often as a self-injection, once a week.<\/p>\n
The Kaiser Family Foundation \u2014 a prominent national non-profit and non-partisan health policy research organization \u2014 estimated in November through its surveys and analysis that 12% of American adults were currently taking GLP-1 drugs, and 18% had taken them at some point.<\/p>\n
They\u2019re as popular as they are expensive, though. Being relatively new drugs, they\u2019re stuck under patent for some time to come, allowing pharmaceutical giants Novo Nordisk and Eli Lilly to charge prices far above what the drugs cost to manufacture, at least in the U.S. The companies often point to these prices as recouping losses for many other drugs that cost a lot to research and develop \u2014 albeit much of which is offset by taxpayer-funded research grants \u2014 just to fail in their trials and ultimately never make it to market.<\/p>\n
The result is a relatively new, high cost for insurers everywhere. While it may be easy to fixate on a high price tag, Breault said it\u2019s important to understand these drugs in their full context. If they\u2019re allowing users to lose weight or control their type 2 diabetes, and ultimately live a healthier and happier life, not only is there a certain intrinsic benefit, but there\u2019s reason to believe these drugs could save on what would otherwise be costly reactive treatment down the road.<\/p>\n
\u201cYes, absolutely they\u2019re very expensive,\u201d he said. \u201cBut what are the savings on the medical side going to be down the road if we\u2019re keeping people from becoming obese or if we\u2019re getting people out of obesity and we\u2019re keeping them from perhaps developing type 2 diabetes or other weight-related (diseases)?\u201d<\/p>\n
Breault said the consortium, like many of its peers, strongly believes it\u2019s important to not create a stigma around a class of drugs that, while expensive today, could reduce long-term healthcare costs and improve life quality from a general wellness standpoint.<\/p>\n
\u201cThis consortium has always been forward-thinking in terms of trying to focus on wellness,\u201d he said. \u201cWe\u2019re pretty proud of that.\u201d<\/p>\n
One of this year\u2019s new optional wellness initiatives available for its members is an app that Breault said kind of gamifies and incentivizes good health practices in general, with members eligible for certain rewards from uploading completed exercise routines, for instance.<\/p>\n
\u201cThat\u2019s an expense and we don\u2019t really know what the payback will be on that,\u201d he said. \u201cBut we do know that emphasizing wellness and trying to keep people taking their meds regularly and exercising regularly, things like that \u2014 that does pay dividends so we invested in that for all of our members.\u201d<\/p>\n
Demographic trends<\/p>\n
With school enrollment declining throughout the region, Breault said the consortium member\u2019s average age has increased slightly, but this has been balanced by an increase in specialized education services, often required by state education law changes.<\/p>\n
\u201cEven though student enrollment in the region has gone down, the need for specialized services for our students due to special education, mental health needs, academic intervention \u2014 those requirements have increased a lot over the period of the last 10 to 20 years,\u201d he said. \u201cSo we still have roughly the same amount of employees in the plan.\u201d<\/p>\n
Breault was worried, though, that if enrollment trends continue like this over the next several years, the healthcare consortium will start really feeling the squeeze as school districts are often contractually obligated to focus lay-offs on employees that, statistically in general, are at points in their lives that are cheaper to provide healthcare for.<\/p>\n
\u201cWho are those people typically? They\u2019re your younger staff, the ones who came on later, they\u2019re the ones who are healthier, they\u2019re the ones who don\u2019t use the plan all that much,\u201d he said. \u201cWe\u2019re concerned about that over the next few years.\u201d<\/p>\n
Similar to social security, Breault said the healthcare consortium generally relies on younger employees \u2014 through direct and employer contributions \u2014 paying more into the system than they receive while older employees or retirees that haven\u2019t yet reached medicare eligibility tend earn that disparity from earlier in their careers back, and take more out of the system than what they are then paying in.<\/p>\n
Between a rock and a hard place<\/p>\n
Breault said that at the end of the day, costs are skyrocketing everywhere, and there\u2019s no way around it \u2014 for schools and taxpayers alike.<\/p>\n
\u201cBottom line is that there\u2019s no silver bullet for healthcare in the USA,\u201d Breault said. \u201cOur consortium kept rates lower than our neighboring regions for quite a few years because of active governance and wise decisions to participate in various cost savings plans and subsidies, particularly on the drug side of things. Unfortunately, we are now catching back up with our peers and will have to begin looking into other ways to contain costs.\u201d<\/p>\n
While it\u2019s an especially tough year for such a massive increase, and there\u2019s no easy or good option, Breault said it was important to remember that over the entirety of the consortium\u2019s history, its operating at-cost structure has done well to provide its members with quality coverage while saving the taxpayer money relative to what healthcare increases in the private market across the region would have otherwise meant during each school budget season.<\/p>\n
\u201cThe strength of this consortium has always been rooted in its collaborative foundation,\u201d he said. \u201cIt was created with the understanding that regional cooperation would provide greater stability, purchasing power and local control than participation in external insurance markets. That principle remains as important today as it was at the time of its formation.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"As schools across the region send their budgets to the voters in a year where the cost of…\n","protected":false},"author":2,"featured_media":635760,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[274594,274597,274591,274593,274596,97,252,100350,253,274598,274592,274599,274595],"class_list":["post-635759","post","type-post","status-publish","format-standard","has-post-thumbnail","category-health-care","tag-dale-breault-superintendent","tag-excellus-bluecross-blueshield-ny","tag-feh-boces-healthcare-consortium","tag-franklin-essex-hamilton-school-districts","tag-glp-1-drug-costs","tag-health","tag-health-care","tag-health-insurance-rate-increase","tag-healthcare","tag-municipal-cooperative-health-plan","tag-school-budget-healthcare-costs","tag-school-district-tax-levy-impact","tag-self-funded-healthcare-consortium"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/635759","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=635759"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/635759\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/635760"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=635759"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=635759"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=635759"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}