St. Paul Public Schools is bracing for a $4 million bill from its health insurer because the teachers union voted to leave for a different health plan before the contract was up.

The decision by the St. Paul Federation of Educators and Teamsters Local 320 to leave HealthPartners for the state-run Public Employees Insurance Program (PEIP) has pit their 4,500 members against school district leaders and the other 1,500 full-time workers, who will see their insurance costs soar.

Superintendent Joe Gothard and school board chairwoman Zuki Ellis wrote a letter to teachers union leaders Thursday, asking them to stay with HealthPartners for one more year.

The letter noted the $4 million early termination fee will eat up about one-quarter of the additional money the district will receive in 2020 thanks to the voter-approved tax increase that teachers pressed for last year.

“Simply stated, the School District does not have the ability to withstand these sudden, unexpected and unbudgeted costs,” the letter read.

State law allows public employee unions to opt out of their employer’s health plan. Federation and Teamsters members, who include teachers, educational and teaching assistants and community services professionals, voted in April and May to do just that. They intend to join PEIP, a self-funded plan administered by the state, starting in January.

The union was motivated by rising premiums under the district’s plan.

“We believe it’s important to do everything we can to hold down health insurance costs. Entering into a pool of nearly 40,000 public employees will help us stabilize those costs,” union President Nick Faber said before the vote.

The HealthPartners contract called for consecutive 7 percent premium hikes; PEIP does not guarantee its rate structure, but premiums historically have climbed by about 2.5 percent each year.

“The rising cost of health insurance can mean not just adjusting the budget at home but sometimes choosing which bills to pay. I voted for PEIP because I need stability,” Sammie Chapman, an educational assistant at Central Senior High, told the school board Tuesday.

CLOSE 2018 VOTE

It’s no secret employees have been unsatisfied with their health insurance.

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St. Paul schools superintendent gets high marks, but board wants progress on equity, enrollment, student achievement Last year, a committee with representatives from each labor group voted 9-7 to stick with HealthPartners for a new two-year contract rather than switching to PEIP, whose first-year bid was $3.3 million lower.

Still, the district had no indication the teachers would leave the plan halfway through the two-year contract, Human Resources Director Laurin Cathey said.

“If SPFE had informed the School District that it intended to exit the School District’s insurance plan a full year early, the School District would not have entered into the contract,” the Gothard-Ellis letter read.

The move to PEIP should reduce insurance premiums by 5 percent for the federation’s members. But the other 1,500 district employees still on the HealthPartners plan would see premium increases of 22 percent next year.

Custodian Patrick Mulvaney said the teachers’ departure from HealthPartners is legal but “immoral.”

“The bargaining units are spitting in the face” of their colleagues, he said, adding that the teachers should bear the cost burden of their decision.

In addition to paying the $4 million early termination fee due in January, the school district likely would cover a portion of those employees’ big premium increase, Cathey said. That’s because the employer and employees generally share those costs and it’s time to negotiate a new employment agreement.

“The district should not be paying an additional cent to anyone due to this,” school board member Steve Marchese said.

FEE WAIVER?

For their part, federation members are urging district leaders to negotiate with HealthPartners to waive the early termination fee.

Teacher Joan Duncanson likened the fee to “stealing money from St. Paul students.”

Gothard, noting the insurer was set to lose money next year because costs were rising faster than the district’s premium increase, said that’s not likely to work.

“For us to expect them to waive that early termination fee is quite an ask,” he said.

In response to a request for comment Tuesday, HealthPartners spokeswoman Becca Johnson said: “We are hopeful that we’ll continue to serve the employees of the Saint Paul Public School district. If the district moves to terminate early and transition to PEIP it will trigger an early termination fee under the contract.”

Faber wouldn’t say whether the teachers union was reconsidering its decision to leave HealthPartners.

COSTS UNCLEAR

Cathey said that when the district solicited bids last year, PEIP offered lower premiums but fewer perks compared with HealthPartners.

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But employees with higher health costs are likely to pay more under PEIP than they have under HealthPartners, he said. PEIP also requires employees to choose a primary care provider at the time of enrollment and to get referrals for specialty care.

Cathey said having employees on two separate plans will make it difficult to educate them during open enrollment and will “handcuff the district in our ability to negotiate prices.”

The 1,500 remaining employees will have to pay HealthPartners’ standard rate, rather than a “preferred” rate offered to large employers.