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).
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.
I am not surprised if the results are actually valid, however there seem to be a few things that are not clear about from this summary report.
1) When comparing to the private sector, are the authors comparing to teacher benefits in private schools or to average benefits among all private sector employees?
2) Related to the first, do the authors control or account for the fact that public school teachers are disproportionately female? Insurance rates for females tend to be higher than for males, so public school districts have a higher-cost pool of employees to insure.
I suspect that teachers’ unions–and a lack of competitive market pressure among monopolized educational systems–have prevented the costs of health care from being shifted to the employees, as the article suggests. But I suspect there are other forces involved as well that the authors may not have taken into account.
Comment by Michael Sykuta — February 15, 2013 @ 1:44 p.m.
Hi James,
I ran across a video that your readers might find interesting regarding the “other” federal takeover…Common Core $tandard$
It’s a panel discussion sponsored by the Independence Institute with very knowledgable speakers. Hopefully Show-Me’s staff will take time to view it and realize that this is definitely a federal intrusion which must be stopped in our state.
http://www.youtube.com/watch?v=Fai4K2ZVauk …
Comment by Lisa Jones — February 17, 2013 @ 10:27 a.m.
Michael,
These are good questions and observations. The data used are from the Bureau of Labor Statistics. The comparison group consists of workers in the private sector, not necessarily private school teachers. The report makes no mention of controlling for the gender of the employees.
Nevertheless, with 15.5% of a teacher’s salary being contributed to health care, on average, I think there is still good reason to consider shifting the cost of healthcare from schools to teachers and increasing salaries. My wife and I were both teachers and had to pay out of pocket for our children’s insurance. The premium we paid for two children was higher than it is now for my entire family of five and that is not even including the premiums paid for me or my wife by our school districts.
The difference is that I now have a high deductible insurance plan with a health savings account, to which my employer contributes. For many reasons, including control, we enjoy having the HAS with a high deductible plan much more than the employer provided plan.
Given the choice, I think most people would prefer to have a 15% higher salary and control over their account.
Comment by James Shuls — February 18, 2013 @ 10:00 a.m.