Francis Howell R-III Board approves insurance renewals, administration recommends up to 14% district contribution increase and year-end transfers to shore up $6

Chief Finance and Operations Officer Carol Embrey told the Francis Howell R-III Board of Education on May 28 that the district must change insurance vendors, address a shrinking self-insurance fund and consider plan-design and funding changes to limit future operating impacts.

Embry said the district has already transferred $6,000,000 from operating funds into the health fund to cover higher-than-expected claims and reported a self-insurance fund balance of $552,000 in May; she said the district’s informal target is about $7,000,000 to be prepared for claim volatility. "We should be maintaining $7,000,000 at June 30 so that we're equipped to weather the storm of the new bills," Embrey said.

The administration recommended several vendor and plan decisions and asked the board to approve them as a package. The board approved the recommendations by voice vote after discussion. "Motion to approve the employee insurance recommendation as presented," a member moved; the motion passed after members voted by voice.

Why it matters: Embrey said every dollar moved from operating funds to cover health-care costs is a dollar that cannot be used for salaries, staffing or other operating needs. The board and administration tied the insurance decisions to the district budget work for fiscal 2026 and warned that rising insurance costs will affect future salary negotiations and staffing decisions.

Most important decisions and recommendations

- Premium and vendor actions the board approved as recommended: renew dental with Delta Dental (6.3% rate increase), move vision coverage from EyeMed to NVA (about a 17.5% savings, roughly $70,000 annually), and renew life and disability with the incumbent Lincoln Financial Group with no rate change. Carol Embrey presented those vendor recommendations as part of the package the board approved.

- Administration recommended limiting the district’s active contribution increase to a maximum of 14% for the coming plan year (the insurance committee had evaluated a 12.8% model and various other scenarios). Embrey said a 12.8% budgetary impact would add about $3.645 million to the district budget; a 14% scenario would be "just under $4,000,000" in additional annual cost to the district and would be used in budget planning. Embrey told the board that, as a rule of thumb, each 1 percentage point of increased district health insurance cost is roughly $300,000 annually.

- Plan administration and enrollment changes: Embrey said the district must move from passive to active enrollment in a future cycle because current enrollment software (SmartBen) will no longer be available. She recommended consolidating an embedded dual-plan administration into a single plan design to correct anomalous HSA and deductible treatments.

- Health savings account (HSA) and dependent contributions: The district currently provides an annual HSA contribution that is paid as a lump sum in October. Embrey said the district-paid dependent HSA contribution totals about $629,000 per year and recommended considering phasing out the $1,000 dependent HSA contribution or moving to a per-paycheck distribution in future years to avoid overpayments when employees leave before year-end.

- Fund-balance direction: As part of the recommendations, administration asked the board to authorize the end-of-year transfer of unused funds from operating funds (funds 10 and 20) into the health fund, up to the amount available, to rebuild the health fund balance. Embrey said the exact amount to transfer would be determined after final year-end accounting; she described the authority as an administrative recommendation to be acted on after bills are paid and final balances are known.

Discussion highlights

Board members pressed administration on the size and timing of the fund shortfall and the district’s budgeting assumptions. Director Jane Pushkar asked whether transferring unused operating funds would put the district in jeopardy for other future needs; Embrey replied transfers would be considered against forecast and that administrators would ensure any transfer would not "upset the apple cart."

Vice President Kreider and others stressed the uncertainty of state funding (the state adequacy target) and noted many districts are budgeting conservatively. Embrey reminded the board the governor has until June 30 to sign and/or fund changes and that administration had recommended budgeting at 50% of the state adequacy target for planning.

Employees and equity concerns were raised: committee members told administration they were concerned about the burden on employees with family coverage, especially lower-paid support staff, if dependent contributions are frozen or increased. Embrey said the employee insurance committee asked administration to bring recommendations to the board and that committee members "reached consensus that they are not pleased with the options and defer to administration to make the recommendation to the board."

Implementation and next steps

If the board’s budget includes the administration’s recommendation, the district’s active plan year would begin Oct. 1, and open enrollment communications would begin in August. Marsh McLennan Agency (the district broker) will finalize premium-detail materials for employee notification. Embrey said the administration will calculate employee premium impacts and post premium tables for employees in the next days.

What was not decided

The board approved the package of recommendations as presented; the specific per-employee premium amounts under a 14% scenario were not finalized at the meeting. Embrey said Marsh McLennan would compute exact employee premium impacts and administration would post those figures.

Quotes

"We should be maintaining $7,000,000 at June 30 so that we're equipped to weather the storm of the new bills and through claims that will be upon us in the new year," Chief Finance and Operations Officer Carol Embrey said about the district’s target fund balance.

"If we transfer do you have any idea how many years that we have had a 0 sum balance...because if we transfer all of that out, would that put us in jeopardy for future years?" Director Jane Pushkar asked about the proposed year-end transfers.

"Anything that we're talking about relative to this renewal only addresses anticipated claims for that year. It does not address any deficit fund balance," Embrey said when asked whether the premium recommendation would eliminate the existing shortfall.

Ending

The board approved the recommended vendor renewals and administrative plan and funding recommendations by voice vote, and the administration will return with finalized employee premium numbers and any year-end transfer amounts after June 30 closing. The insurance plan year would start Oct. 1 if the design changes are implemented as proposed.