Rising Health Benefit Costs Eroding Teacher Pay and Forcing Cuts in Mission-Critical Areas at Charter Schools Across the Country, BuyQ Survey Finds

DENVER, CO – Rising health benefit costs are eroding total teacher compensation and eating into budgets for other mission-critical areas at charter schools across the country. This startling information comes from a new report released today by national charter school group purchasing organization, BuyQ, based on a survey of charter management organizations (CMOs) representing 15,500 charter school employees and 129,000 students across 13 states.

Among the key findings from the report:

  • 74% of CMOs find it challenging to provide competitive health benefits, largely due to rising costs.
  • 60% of CMOs are limiting investments in other mission-critical areas, including administrative and teacher salaries, number of teachers and administrative staff, facilities maintenance and improvements, academic and support programs, and/or school supplies and equipment, to keep up with rising health benefit costs.
  • 87% of CMOs have increased their teachers’ share of health insurance premiums over the last three to five years.
  • Among CMOs increasing teacher premiums, 45% report those premium increases have either outpaced or closely tracked teacher salary increases, effectively wiping out teacher pay increases.
  • 43% of CMOs say rising health benefit costs are impacting their ability to attract and retain top teachers.
  • Only 35% of CMOs report having a plan in place to manage rising health benefit costs over the long term.

On an average annual basis, revenues aren’t keeping pace with health benefit costs for many CMOs. The cost of providing health insurance to staff is rising – by more than 6% year-over-year for the past several years for the majority (52%) of respondents. However, more than three-quarters (76%) of respondents say year-over-year per-pupil revenue growth averaged less than 6% during the same time period.

“Rising health benefit costs are a significant threat to charter schools,” said Marco Rafanelli, Co-founder and CEO of BuyQ. “These schools already operate on less dollars per student than traditional public schools and salaries for charter school teachers already lag behind those of traditional public school teachers. As health benefit costs continue to rise, the challenge for CMOs to compete in a tight labor market while continuing to fund other mission critical areas only grows.”

Charter management organizations (CMOs) are organizations that operate three or more charter schools. Unlike traditional public schools who typically participate in a state or district health insurance pool, most CMOs sponsor their own employee health plan through a broker or consultant because of the autonomy charter schools have over their operations.

“When you consider all the operational areas CMOs are tasked with managing, the growing cost and complexity of employer-sponsored health plans, and their tight budgets, it’s easy to understand why CMOs are finding it challenging to provide competitive benefits,” said Rafanelli. “Fortunately, the operational autonomy and large employee size of CMOs uniquely position them to take advantage of innovative strategies to reduce costs while preserving, or even improving, benefits.”

A majority (70%) of CMO respondents agree that better management of their health benefits program could result in cost savings. But, a lack of awareness about the cost saving strategies available may be keeping CMOs from pursuing options that are in the best interest of their budgets, their staff and their students.

Less than one-third (30%) of CMO respondents say they have a good grasp on what steps other similarly-sized employers are taking to control health benefit costs. And, survey results show that few CMOs are embracing innovative cost saving strategies popular among large employers in other sectors. For example, only 13% of CMOs report using a self-funded plan to deliver health benefits to their employees while a majority of covered workers at large employers (200+ employees) overall are in self-funded plans.[1]

“As CMOs continue to grow and make up a larger portion of the charter school landscape, aggressively managing health benefit costs becomes increasingly important,” said Rafanelli. “BuyQ is committed to being part of the solution by elevating the discussion, coordinating the sharing of best practices among CMOs, providing education, and ensuring CMOs can access the most innovative solutions on the market. Our goal is to ensure CMOs continue to be employers of choice so they can provide the best possible education to their students.”

Access a full copy of the report: Condition Critical: Findings from BuyQ’s 2018 National Charter Management Organization Health Benefits Survey.

About the Survey

This analysis is based on results of a survey of charter management organizations (CMOs) conducted online by BuyQ, with survey development input from Fisheye Research and HUB International, plus survey distribution assistance from the KIPP Foundation and Bellwether Education Partners. Survey results were collected online between May 16 and June 1, 2018. All survey respondents play an active role in the selection and/or implementation of their organization’s employee health benefits program. Responses were solicited from CMOs with 100 or more employees. The average number of employees per responding CMO was 674. Twenty-three CMOs participated, representing 15,500 charter school employees and 129,000 students across 13 states. Due to the relatively small survey sample size, results are directional only.

About BuyQ

BuyQ (www.buyq.org) is the only national group purchasing organization dedicated exclusively to serving charter schools. BuyQ works on behalf of more than 3,500 charter schools around the United States. By leveraging the combined purchasing power of these organizations, BuyQ delivers significant savings and other benefits on the products and services needed to run a charter school.

[1] Kaiser Family Foundation. 2018 Employer Health Benefits Survey (Washington, DC: Kaiser Family Foundation, October 2018), https://www.kff.org/health-costs/report/2018-employer-health-benefits-survey/.