Saturday, April 6, 2013

What seemed like the circular firing squad of cost-savings measures is really a Christmas savings account masquerading as free money

When a friend of mine sent me a tip that the Davenport, Iowa community school district planned to take a one month "insurance holiday," I thought I was all set with a snarky and indignant post.  A month without insurance?  That's self-insurance, not always a terrible idea for a local government -- unless you've already entered into an insurance contract under which  you are required to, you know, pay your premiums and all. 

But as I looked into it, my snark gave way to confusion. 

According to this article from the Quad City Times, the cost savings would be $2 million.  According to its website, the school district has has 15,841 students and 2,200 employees.  I'm not an underwriter, but $24 million a year in insurance to protect 18,000 people (plus various bystanders)?  Keeping in mind that the premium is much lower than the insurance limit -- otherwise, what's the point? -- that's some serious disaster planning.  Unless the district is talking about a holiday from health insurance for its employees, in which case the savings is about $900 a month per employee, which seems like a typical premium. Except that then all the employees will quit (or get too sick to work), which doesn't seem like good long-term planning. 

And then there's this quote from the superintendent:

We have an insurance fund and over the years it has built up. so what we would do is use some of that build up rather than taking money out of our general fund to pay a month’s premium.
So, it's not really a cost-saving measure at all.  Or an insurance holiday.  The district was putting money in an account for insurance, and every month it had a little extra, and the little extra accumulated, and now it's using the accumulation to pay its premiums for a month.  That's simply getting caught up on your accounting and fooling some taxpayers along the way into thinking that your failure to stay caught up all along has miraculously produced a windfall. 


1 comment:

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