St. Paul School District to Pay $4 Million Penalty for Health Plan Change

by Scott McClallen


The St. Paul Federation of Educators (SPFE) is switching to the Public Employees Insurance Plan (PEIP), a health plan that would lower SPFE premiums by five percent but hike HealthPartner premiums by up to 22 percent.

Estimates say that the switch could save the 4,300 SPFE members as much as $175 per month when they join PEIP in January but could raise premiums for the 1,800 HealthPartner members because they would lose their “preferred rate” for large employers.

That decision would trigger a $4 million penalty due Jan. 1 for St. Paul Public Schools for leaving HealthPartners mid-contract.

Kevin Burns, director of Communications at St. Paul Public School, told The Center Square that the contract language was standard.

“It’s no different than the contract we have with our cell phone providers or our school bus drivers,” Burns said. “We have an intent to honor that contract language.”

Superintendent Joe Gothard proposed a solution in a July 19 letter that SPFE delay their decision by one year to avoid the fee because their HealthPartner contract expires on Jan 1 2021.

That $4 million fee would drain about 25 percent of the additional $17.3 million per year the district will receive in 2020 from a November voter-approved tax increase. Most of that revenue will be depleted by inflationary cost increases and contractual obligations.

SPFE counter-proposed on August 13 that they would delay leaving if the district would pay more money to their members for health insurance.

Burns said they are still calculating that cost, but that early estimates placed a minimum cost at $1.5 million – none of which is budgeted.

“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 as long as they notify the district within 30 days of the last day of the contract – June 30 for SPFE.

SPFE President Nick Faber wrote in the Pioneer Press that consecutive seven percent premium hikes drove the group to PEIP, which has had a 2.5 percent yearly climb in premiums.

“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,” Faber said before the vote in May.

Faber didn’t respond to interview requests.

“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 letter read.

Faber said that SPFE didn’t know about the penalty until four months after they notified the district.

American Experiment education policy expert Catrin Wigfall told The Center Square that they found SPFE’s decision to leave mid-contract “selfish.”

“I don’t think it would have been too much for them to think about this prior to negotiating it or to wait a year and a half and then make the transition so that it wouldn’t cost the district this loss of money, and ultimately, affect the students and pull this money away from kids,” Wigfall said.

Wigfall said this would have a “domino effect” on other members.

“They’re supposed to be this collective group and come together in solidarity, and yet they’re making this decision outside of thinking of all the consequences,” Wigfall said.

The $3.1 million budget deficit for the 2019-20 school year didn’t stop the district from spending $32 million more than last year’s budget.

Burns said this proposal would mean the district wouldn’t break a legal contract, pay a $4 million fee, or raise the remaining unions’ premium by up to 22 percent.

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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on and
Image “St Paul Federation of Educators” by St Paul Federation of Educators.






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