Ketchikan’s borough assembly to tackle health insurance deficit

Ketchikan’s Borough Assembly is scheduled to tackle the growing deficit in a key health insurance fund in a work session on Monday.

Since 2019, Ketchikan’s school district has paid out more in insurance claims than it’s received in premiums. As of the end of last month, the school district owed $4 million to the borough for unpaid health expenses.

Ketchikan’s borough and school district don’t have a traditional insurance provider. They’re self-insured, meaning the borough takes in monthly employee premiums and pays out the cost of things like doctor visits and hospital stays. A type of backup insurance, known as reinsurance, protects it from runaway expenses.

As it stands, Ketchikan’s borough pays out claims for school district employees and bills the school district for reimbursement. But in a memo to Ketchikan’s Borough Assembly, the borough’s finance director says the district hasn’t paid enough to cover the costs, leaving the borough to make up the difference.

“Per a long-standing MOA between the Borough and District, both entities are required to transfer the monthly premiums (employee and employer) to the respective funds sufficient to cover claims as they accrue. This has not occurred and the chronic and growing deficit in the school district fund is the result of this underfunding,” Finance Director Charlanne Thomas wrote.

On several occasions, the school district and borough have each tried to shore up the fund with injections of cash. 

But a 2018 contract with the union representing Ketchikan’s teachers that cut premiums by half means there’s a structural deficit in the health insurance program. Simply put, health insurance premiums from the district’s nearly 300 employees are too low to support growing health care costs. 

Borough finance officials have in recent months escalated pressure on the school district to address the issue. Starting next year, the borough plans to send bills from its insurance administrator directly to the district instead of paying them and asking for reimbursement.

“This is intended to serve to remove the Borough from the ‘billing and payment’ cycle in hopes of requiring the District to make full payments directly to the vendor,” Thomas wrote.

As of this month, the borough says it has not yet received a plan from the district to address the deficit.

Ketchikan’s Borough Assembly is scheduled to discuss what comes next in a work session planned for Monday.

Two possible approaches proposed by the finance director involve the district paying back the borough for the $4 million in outstanding health care expenses out of its budget — either all at once, or on a payment plan.

Another option is to provide another cash infusion for the program. But borough officials say they could only provide up to about $800,000 until it starts to count against state education funding. That’s the result of the so-called “cap,” the upper limit of the local funding that Ketchikan’s borough can provide to the local school district under state law. If the assembly chooses to pay off part of the school district’s debt, borough officials recommend charging the district directly for future health care costs.

Ketchikan’s Borough Assembly is scheduled to meet at 5:30 p.m. Monday in the White Cliff Building. The meeting is broadcast on local cable channels and the borough’s website, and opportunities for public comment are available at the beginning of the meeting.

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