School districts brace for stiffer taxes funding Obamacare

Daily Item (Sunbury, PA)

Nov. 08--SUNBURY -- A "Cadillac tax" on costly health insurance policies set to begin in 2018 that will divert millions of dollars from schools and teachers' salaries to partially fund the Affordable Care Act promises to become a 2016 presidential campaign issue and may force contract revisions in Valley school districts.

Obamacare calls for a 40 percent excise tax on health plans, from the public or private sector, that exceed $10,200 for singles and $27,500 for families. That's 40 cents on every dollar above the total amounts. Dental and vision plans are excluded.

The Congressional Budget Office estimates $87 billion in tax revenue would be generated over a decade to partially fund ACA provisions, such as providing health care to those who can't afford their own coverage.

The tax is also meant to cut health-care costs by encouraging companies to pay higher wages and reduce tax-free health benefits packages.

For example, if a school district has 200 employees on a family plan $2,500 above the threshold, the district tax bill would be $200,000. That figure would rise exponentially as health care costs continue to trend upward, piling on an already dire economic burden for public schools.

"That's clearly money going out the window to the federal government that could otherwise be spent on things going toward children," said Jeff Ammerman, of the Pennsylvania Association of School Business Officials.

"It doesn't benefit districts," he said. "It doesn't benefit teachers. It only benefits the federal government. It's an odd flow of money."

Health coverage increases on average between 6 percent and 12 percent at Lewisburg Area, according to Superintendent Mark DiRocco. It would take minimum 15 percent increases over the next two years for the thresholds to be met in 2018-19.

Should that occur and if the increase maintains at 15 percent annually beyond that, using the district's current enrollment figures, the tax would exceed $2.4 million combined over the first four years.

Who pays could be a case-by-case basis. The nondeductible tax is on health care providers but it's expected the burden will fall to employers and further down to employees. That's more complicated when union contracts are involved.

DiRocco says the tax would be split down the middle between Lewisburg Area and its employees if contract amendments aren't approved. Existing contracts in the Shikellamy School District call for employees to pay the tax, district business manager David Sinopoli says.

"We have a vested interest to see that doesn't happen, for obvious reasons," Sinopoli said.

Paul Shemansky, spokesman with the Pennsylvania State Education Association, says the union advises its members to not negotiate any concessions regarding the excise tax at the moment. Local unions are encouraged to hire an actuary to develop cost estimates. Beyond that, he says PSEA preaches a wait-and-see approach.

Uncertainty shrouds the tax, Shemansky and school officials say. Aside from fluctuating enrollment and cost projections, existence of the tax itself is at question.

The Cadillac tax is a full-scale campaign issue in national elections, including the presidential race, and its future is in question.

"We say proceed with caution because you don't have hard information. Find out details of the health plan now, know what's in it and stay tuned. We still have 2 1/2 years left," Shemansky said.

If the tax is enacted as it stands, unions and school boards could reopen contracts for negotiation, according to Shemansky.

That could result in slashing benefits and increasing deductibles. Employees and school districts alike would have to weigh the value of paying the tax versus enrolling in a taxable health plan.

"Is that 50 percent worth paying to keep the level of insurance already in place or is it better off reducing insurance benefits so you don't have to take money out of your pocket?" DiRocco asked.

Whether the tax is repealed or amended, DiRocco says change is needed and maybe more than that, clarity.

"How's it going to affect our employees? How will it affect the budget and how we operate our programs?" he asked.

PASBO's Ammerman encourages school districts to plan. Though anything can happen, reactivity isn't a sound strategy.

"If you plan for it to be as it is and you get there and it's not as bad, that's a win," he said.

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