EDWARDSVILLE — In a vote almost completely along employee-management lines, the Northeast Pennsylvania School District Health Trust rejected a proposal by Lake-Lehman School District to give member districts more flexibility in seeking insurance coverage.
The vote was effectively an ultimatum for Lake-Lehman: Fully rejoin the Trust or quit completely. After legal wrangling with both the Trust and its own union, Lake-Lehman had set up a unique arrangement in 2012, getting medical health insurance on its own while using the Trust for dental and vision insurance.
McGovern said at the time that the move saved the district about $1 million in annual insurance costs. But after Wednesday’s meeting, Trust attorney Scott Gartley said that arrangement was only possible as an indirect result of a lawsuit between two former district members — Dallas and Pittston Area — and the Trust.
The districts withdrew from the Trust in 2007 and sued to recoup what they claimed was their share of a Trust surplus, in excess of $20 million at one point. The crux of the case was whether the Trust is a “segregated trust” that treats each member’s finances separately or a “pooled trust” that uses all assets collectively.
A Luzerne County judge initially ruled in favor of the Dallas and Pittston Area argument that it is a segregated trust, ordering the Trust to set aside about $8 million owed the two districts pending appeal. But an appellate court overturned the decision, ruling it is a pooled trust. The districts lost multiple appeals, going to the U.S. Supreme Court, which declined to consider the case last month.
Gartley said that with the “pooled trust” issue settled the deal with Lake-Lehman can no longer stand, as it would create a segregated trust contrary to the court decision. He said the only way for Lake-Lehman to continue to obtain medical insurance outside the Trust would be to revise the Trust agreement signed by all members.
McGovern asked the board, comprised of representatives from unions and management in member districts, to do just that, revising the agreement to allow districts to be self-insured while remaining in the Trust. The request prompted a one-hour executive session followed by 20 minutes during which union and management members caucused separately.
When the board reconvened to vote on the motion, all 10 employee representatives voted against the revision with one management representative joining them. The seven votes in favor of the revision came from management representatives, with one abstaining.
Once the issue was settled the board dealt with another fallout from the lawsuit: what to do with the $8 million that had been set aside pending the appeals. Gartley told the board a judge had ordered the money be unrestricted.
Consulting actuary Jonathan Sapochak, from Conrad Siegel Actuaries, said about $5.4 million of the $8 million is needed to fulfill the Trust policy of reserving enough cash to cover at least 2-1/2 months of costs. Sapochak said that leaves $2.62 million that can be used to reduce premium payments for one month by about 66 percent for all members. The board voted to reduce premiums in May.