February 15, 2013

Teachers, Health Care, And Inefficiency

In a study recently released in EducationNext, Bob Costrell and Jeff Dean find that the cost of health care for public school teachers is increasing rapidly in comparison to the private sector. Health care costs for teachers are 26 percent higher than for workers in the private sector, up from a 12 percent gap in 2004 (see graph below).

Costrell_Dean_HealthCare

The authors do not present specific figures for Missouri, but note that across the country, health care expenses contribute to a significant portion of a teacher’s compensation. According to the study, “in 2004, health insurance costs tacked 11.4 percent onto teacher earnings; in 2012, they added 15.5 percent.”

The money spent on teacher health benefits is approximately $560 per pupil per year. If we assume that we spend $560 per student in Missouri, that would be nearly 6 percent of our total operating expenditures on health care benefits for teachers.

So what accounts for the higher health care expenditures on teachers? Costrell and Dean note that teachers’ unions and collective bargaining are driving factors toward “higher total premiums, higher employer costs, and lower employee contributions in both the public and private sector.”

Now, there is nothing wrong with providing teachers good health benefits, but we could improve options for teachers and decrease costs by shifting some of the teacher compensation from the school district to the teacher. Namely, this would align incentives to keep costs down, give school districts greater flexibility, and provide teachers with options.

As Missouri school districts face tight budgets, they must begin to look at ways to not just trim costs but to also improve efficiency. Health care benefits are a good place to start.

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