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November 23, 2014

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Teachers Health Trust seeking arbitration to force increase in health premiums

Nonprofit organization operating at $225,000 deficit a month but still sound, trust officials say

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Paul Takahashi

CEO Peter Alpert addresses the media at a news conference at the Teachers Health Trust on Tuesday, March 19, 2013.

With mounting health care costs and stagnant revenues, the Teachers Health Trust is seeking to go into arbitration with the Clark County School District to raise health premiums for nearly 18,000 teachers.

The news comes a little more than a month and a half after independent auditors found significant financial challenges facing the nonprofit Teachers Health Trust in the wake of the recession and the passage of the federal Affordable Care Act.

The Teachers Health Trust is the nonprofit health care provider for some 35,000 people — district teachers and their dependents. The welfare benefit trust was founded in 1983 under an agreement between the School District and the Clark County Education Association, the local teachers union that bargains on the trust's behalf.

The trust has an annual budget of about $142 million. The School District pays about $115 million annually into the trust to maintain its $546-per-teacher monthly contribution.

Teachers with the more expensive “diamond” plan pay $50 extra in monthly premiums. Teachers on the cheaper “platinum” plan — which constitute the majority of trust participants and the bulk of the remaining revenue — pay no extra premium.

Since July 2008, the School District has not increased its contribution to the trust even as health care costs nationally have risen by 15 percent. Whether that's because of the recession or the ongoing contract battle between the district and teachers union is debatable, but the lack of a contribution increase has slowly strangled the trust financially.

According to a 2011-12 audit conducted by accountants Kafoury, Armstrong & Co., the trust had $549,921 in cash and cash equivalents in June 2012. At the same time the previous year, the trust had about $4.9 million in cash and cash equivalents.

The trust is currently running an average deficit of about $225,000 per month, according to trust CEO Peter Alpert. As a result, the trust was forced last year to use $4 million of its $5 million revolving line of credit with the Bank of Nevada. It also began dipping into its reserves.

However, Alpert is adamant the trust's financial situation isn't as bleak as it's been made out to be in the public.

"We are not going out of business," he said. "We are solid."

•••

"The Teachers Health Trust is experiencing cash flow issues, but is still financially strong," Alpert said at a news conference Tuesday morning.

As of March 1, the trust has $27.7 million in investments in AAA-rated corporate and municipal bonds. That's enough to cover health care benefits for the trust's 35,000 members for the next two to two and a half years, Alpert said.

To stave off bankruptcy, the trust slashed administrative costs by half, did not replace retiring staff members and moved to a cheaper prescription drug and laboratory test program, Alpert said.

The trust last summer tried to raise teachers' health premiums, which hasn't happened since 2002. However, the district blocked the trust's attempt to pull as much as $8 per paycheck — or $192 annually — from teachers, arguing the unilateral move violated teachers' contracts and placed too much of a burden on teachers.

"Everyone's expecting us to have adequate cash flow, but the district hasn't given us an increase (in health insurance funding)," Alpert said. "It's insane. You can't run a (health care) business without an increase."

The School District released a statement to media Tuesday morning, saying its first priority is ensuring teachers and their dependents have health coverage. For the past several years, the district has been trying to consolidate its health care plans under private insurers, which it argues will be cheaper in the long run.

"It's been widely reported that this business has an uncertain financial future and we are watching that issue closely so that we can be ready, if needed, to step in and ensure all of our employees have comparable or better health care with no lapse in coverage," district spokesman Amanda Fulkerson said in a statement.

The School District hasn't increased its contribution to the Teachers Health Trust for the past five years because the teachers union has not asked for one during contract negotiations, Fulkerson said.

"We absolutely want to ensure that our teachers have reliable health care," Fulkerson said. "However, negotiating an increase in (heath care) contributions hasn't been a priority (for the union.) We'd be happy to talk about it when it's appropriate to do so."

In response to reopening contract negotiations and possibly arbitration with the union over the trust, Fulkerson said, "it seems beneficial if the conversation focused on what options the district and their association can offer for teachers instead of focusing on a business that wants more money at the expense of our employees to stay afloat."

•••

Terry Van Noy, a health care management consultant with the trust, argued however that the trust was run more efficiently than private health care providers. Van Noy has known Alpert for more than a decade and has done accounting work for the trust in the past.

Claims are paid faster and more accurately, Van Noy said. The trust is also cheaper for teachers, he said.

Most teachers don't pay premiums — only co-pays — and most generic drugs are provided to teachers at no cost to them, Van Noy said.

Just 5 percent of the trust's budget goes to administrative costs, which include overhead and funding for about 70 staffers, Van Noy said. The remaining 95 percent goes to pay health claims for teachers and their dependents, he said.

For comparison, nationally, about 15 percent of an insurance company's budget goes to administrative costs, Van Noy said.

"I'm very impressed by the lack of bureaucracy here," he said. "It's a very lean, mean fighting machine. They do more with the money they have."

However, critics — such as the Nevada Policy Research Institute — argue the trust could cut fat from its budget, pointing to the trust's compensation for top executives. (The same critics also point to high compensation of top district officials.)

According to the Nevada Journal, Peter Alpert was paid more than $540,000 in fiscal year 2010 as the trust's CEO, attorney and certified public accountant. Michelle Spellman, the trusts' COO, earned a $176,000 salary with benefits.

Alpert declined to comment about his salary, saying only: "I know what I do. I know the services I provide." When questioned in the past, Alpert also has urged his critics to take a stab at running the trust.

Van Noy defended Alpert's salary, arguing that Alpert's "unique background" as both the CPA and subrogation attorney makes him a "critical asset for the trust." Contracting either of those duties to an outside firm would cost the trust more money, Van Noy said.

•••

Regardless of the contracted dispute between the union and the district – which seems to have caught the health trust in the crossfire — advocates of the Teachers Health Trust argue it has provided many benefits to teachers.

In addition to paying out claims, the trust has several wellness programs, said Brenda Kelley, the trust's director of public relations and health promotions.

Each year, the trust conducts a health festival, which attracts 70-80 health vendors to the Thomas & Mack Center. The trust also has a 12-week cardiovascular program, and provides free breast and prostate exams during September, October and November. It also offers free mammogram screening year-round and a diabetes awareness day in March.

Unlike the adversarial nature of some private insurance companies, the nonprofit health trust tries to treat its teachers properly, Kelley said. Teachers and their dependents can call and walk into the trust's offices and are often assigned case managers, some of whom make personal calls to the hospital.

"Teachers are real to us," Kelley said. "We don't treat them like numbers or nobodies. They are human beings.

"This is about our teachers and keeping their health so they can teach our kids," she said.

•••

The trust's future will continue to be uncertain until it finds new ways to cut costs or seek additional revenues.

Alpert doesn't know when negotiations between the union and district over the trust will take place. Four negotiation sessions must occur before the union — working on behalf of the trust — could declare impasse, sending the matter into arbitration where a third party decides the outcome.

In the meantime, the trust — and the teachers and their dependents it represents — is left in the lurch.

In 2001, the health trust for school support staffers collapsed, prompting the district to cover them under a private insurance company used by school administrators, police and support staff. The collapse spurred a federal investigation and left many support staff with unpaid claims or collectors at their doors.

The Teachers Health Trust has seen its share of financial troubles. It has cut back insurance plans for retirees and fought back a takeover from the Teamsters Union.

Through it all, Alpert says he remains confident in the trust's future.

"Everyone has concerns, but we've been here for 30 years," he said. “We will do what we have to do. We will be OK."

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  1. Compared to some health insurance plans that I have had over many years of work Teachers Health Trust was one of the better ones, right up there with Group Health in Seattle, my all-time favorite. They were cautious about scam doctors and tests, provided answers to any questions that I had and handled claims promptly and reliably. It's not a surprise that the Trust is struggling....almost every business has during the recession. As for NPRI's comments....it is an organization which seeks to diminish or dismantle trade unions, public education, Social Security, Medicare, assistance for children, etc.,...one of the myriad of right-wing think tanks hiding behind shadowy funding and funders. Perhaps the Sun should investigate the funding of and salaries and perks at NPRI. Oh, and while you are at it please disclose the relationship between CCSD mouthpiece Amanda Fulkerson and the CEO of NPRI.

  2. I find this interesting.

    The CEO and COO are responsible for taking care of the health care benefits of 35,000 and are paid well for their jobs.

    The Superintendent is paid less than they are and he is responsible for the education of over 300,000 of our children.

    The union complains that the Superintendent is paid to much.

    Something is just not making sense here. Pot calling kettle?