As COVID-19 costs grew, teachers health trust fell into $43M hole

The health insurance trust that covers Clark County teachers was $43 million in debt as of February, according to records that provide the first indication of the scope of the deficit and show how the COVID-19 pandemic contributed to the tide of red ink.

Records from board meetings of THT Health, formerly the Teachers Health Trust, obtained by the Review-Journal provide the most detailed picture so far of the deterioration of the trust’s financial health and its efforts to avoid bankruptcy.

The trust’s bleak financial picture, which many teachers said has resulted in nonpayment of claims and providers turning away patients, led to a series of changes over the spring and summer intended to keep it afloat. They included a $35 million advance from the Clark County School District and the hiring of a new third-party administrator to process the backlog.

Notes from a Feb. 15 meeting of the board of trustees of THT Health indicate the changes were part of a proposal by John Vellardita, executive director of the Clark County Education Association, that he said would save $14 million over its first year and assist in lowering what was then a $43 million deficit.

“THT will need to develop a dual plan to secure resources from employer and employee,” the notes say. “This is proposed to help the trust be in a better position for the future.”

In an interview Tuesday, Vellardita said that the worst-case scenario the trust faced was a backlog of around $12 million to $15 million in monthly claims that extended for three months — an amount close to the $43 million debt recorded in the minutes of the meeting.

Current deficit unclear

It is not known if that number has changed in the nearly five months since then.

Vellardita said he did not recall providing the figure included in the minutes, and that he could not comment on the current estimate of the deficit. But he added that any estimate from February was immaterial now because of the work the trust has done to draw down the debt.

The Review-Journal received the minutes of THT Health board meetings via public records request from the Clark County School District, which agreed in May to advance $35 million in employer contributions to the trust in exchange for a higher degree of transparency.

The records received include three years’ worth of board meeting minutes and reports on staff and executive compensation but did not include financial statements for the trust for 2020 — a condition of the Memorandum of Agreement with the district.

It was not clear whether THT Health provided those statements. A representative said the school district had “nothing to add” to what was in the documents.

Notes from the trust’s board meetings indicate that a surge in health care claims began late last year, with a September 2020 report projecting that medical expenses would exceed revenue in 2021.

This was a marked departure from late October 2019, when the trust reported being in a “positive financial position,” the minutes show.

Signs of trouble

Signs of trouble ahead were first raised in December 2019 and again in March 2020, with reports that medical expenses were coming in at 90 percent or more of income and outpacing an increased employer contribution from the district.

But the situation appeared to improve temporarily. Board members were told at a June 2020 session that medical costs had actually dropped at the beginning of the COVID-19 pandemic. Presenters noted, however, that they were projected to “be higher than normal as things return to pre-COVID norms.”

That projection was soon borne out. By December 2020, medical expenses were up 6 percent, while the trust reported an operational loss of $2.2 million and a decline in investment income of $54,000. In the next few months, the notes indicate medical and pharmaceutical expenses rose 8 percent and 22 percent, respectively, with the trust “experiencing a large number of high-dollar claimants.”

In March 2021, for example, the trust reported that it had incurred $14 million in COVID-related expenses over the last year, with 1.3 percent of their insured members accounting for 43 percent of costs. High users had also been previously cited by union leadership as a cause of increasing costs.

In April, the trust also estimated $19.4 million in “incurred but not reported” costs.

Growing administrative costs

Other notes from the pandemic months say the trust’s administrative and legal costs grew as the insurer rolled out a COVID-19 testing program for teachers, though that cost was ultimately covered by federal emergency money.

Its staff also grew considerably. A report of the trust employees’ compensation shows that the staff grew from 12 employees in 2018 to 34 in 2020, before dropping to 25 in 2021 due to budget-related layoffs.

In 2021, former Chief Executive Officer Michael Skolnik was paid a salary of $400,000 before his departure from the trust on May 3.

In an interview, Skolnik said he harbors no ill will toward the trust. He added that he believes it is effectively dealing with its funding issues.

The trust’s new CEO, Thomas Zumtobel, is paid a salary of $300,000, according to the report. Other top executives took home between $155,000 for Chief Clinical Officer Tina Meeks and $325,000 for Chief Medical Officer Leslie Jacobs.

The trust has previously found itself in precarious financial and legal positions and faced challenges from teachers, former board members and the school district.

To save or not to save

But as teachers continue to report issues with their medical providers recognizing the new administrator and getting claims paid, a new debate has erupted over whether the trust is worth saving.

Supporters say Clark County teachers are unique in having a self-administered nonprofit trust, rather than depending on a national for-profit insurer. Critics, however, say they’d prefer to have the option to enroll with a larger company, as other bargaining groups within the district have done.

Changes ahead include two new insurance plans set to roll out in September, including one aimed at the higher utilizers linked to the trust’s increasing costs.

Notes from an August THT Health board meeting discussing upcoming benefit changes in 2021 state that the goal is to “simplify benefit structure to make administration easier.”

It projected no changes to deductible amounts or out-of-pocket maximums, but a premium increase of $25 per paycheck.

Premiums for the new insurance have yet to be announced, as the union is still in contract negotiations with the district, according to Vellardita.

Contact Aleksandra Appleton at 702-383-0218 or aappleton@reviewjournal.com. Follow @aleksappleton on Twitter.