With increases to public school funding seemingly frozen by the state’s leadership as the result of a fight between the legislature and the Governor over vouchers, public school districts are being forced to find creative ways to balance their budgets, including discovering new and innovative cost cutting measures. The largest expenses for school districts are personnel costs, generally accounting for over 80% of districts’ budgets. Schools often find it difficult to cut personnel and still deliver quality instruction for an increasingly diverse community of students. The second largest expense is the related costs associated with healthcare insurance. While most districts are enrolled in the Teacher Retirement System’s program, called TRS ActiveCare, some districts have decided to opt out under a 2021 state law that allows them to leave the system as long as they stay out for a minimum of five years. These districts are often searching for creative ways to reduce insurance costs while still maintaining adequate benefits for their employees. Now, little known guidelines under the federal law may provide them with a break.
Due to a 2019 law which allows employers of any size to enroll employees in Individual Contribution Healthcare Reimbursement Arrangements (ICHRA) under the Affordable Care Act (ACA), public school districts not currently enrolled in TRS ActiveCare may replace their district contribution with the federal contribution, in qualified instances, under the provisions of the ACA. In the case of lower paid employees, the federal contribution often covers the entire cost of the plan. This not only benefits the school district, often saving larger districts millions of dollars per year, but directly benefits the employee by providing them with lower cost, federally guaranteed insurance, often with better benefits.
As simple and as sensible as this sounds, to date only one school district in the State of Texas has adopted this approach. Iraan-Sheffield ISD in West Texas adopted this approach for the 2024-2025 plan year. According to Chas Pierce with Benefit Renovations, one of the few companies offering to help with the ICHRA plans, “District leaders immediately saw the benefits to their employees as well as the bottom line of the district.”
As to why more companies aren’t offering to help with ICHRAs, Pierce says “When it comes to group brokers, they are a fish out of water when it comes to individual plans & most of them don’t want to bother learning something new to take a cut in pay.” According to other industry professionals, there aren’t enough fees baked into ICHRA administration for most brokers. Many of them are making $40, $50, or $60 dollars per employee per month on traditional approaches. By contrast, ICHRA plans only yield about $20 per employee per month for plan administration. Some brokers had rather you not know about ICHRA because it’s to their benefit to keep you on their standard plan.
While still a grossly underutilized solution, some public-school advocates see this approach as a readily available solution to school underfunding in the state. Charles Luke, the Director of the Coalition for Education Funding, a group of 85 school districts across the state dedicated to public education funding and the maximization of resources, says “ICHRAs represent a way for school districts to reclaim some of their operating expenses while benefiting their employees.
Luke believes that it’s a matter of time before ICHRAs become more widespread among school districts. “With so many districts in the state in budgetary deficit and the state leadership unwilling to adequately fund public schools, solutions like this should be seriously considered.”
With another contentious legislative session looming on the horizon and no end in sight for the stalemate over public school funding between the state’s leadership and the legislature, federal assistance that is not dependent on statutory action may be one of the only options.
