The school board has approved a measure taking the Paterson Public School District out of the state health insurance plan for its almost 3,800 employees to run a self-insurance program for the 2018-19 school year.
Under the self-insurance program, the school system will save $61 million over a three-year period, according to calculations provided by the district last month.
Business administrator Richard Matthews last year began looking at switching to a self-insured program to save the district money. Anticipated savings from the switch was plugged into the 2018-19 school year budget to close a $75 million shortfall.
School board members approved dropping out of the state plan in a 4-1-2 vote last week. Board members Vincent Arrington, Manny Martinez, Joel Ramirez, and Nakima Redmon voted in favor. Jonathan Hodges voted against; Kenneth Simmons and Emanuel Capers abstained.
Hodges worried the savings may not materialize.
“You may go through nine months and see potential savings, then the next three months that’s when the actual costs hit you,” said Hodges on Wednesday night prior to the vote. In the second year, the district may witness a spike in health costs, he said.
Matthews said there’s a “99-percent accuracy” based on input from “experts” and “actuaries” the savings will materialize.
Matthews on Wednesday told the board the district allocated $77 million for healthcare. He had worried under the state plan the cost would climb to $93 million in 2018-19, up from $87 million this year.
John McEntee, president of the Paterson Education Association, the teachers’ union, last month said the switch will come with disruptions. He opposed the switch since Matthews proposed creating a self-insurance program late last year.
“It wouldn’t surprise me, if within a year, it became so unsustainable, that they go back to the state plan,” said McEntee last month. “The idea behind the state plan is to help places like Paterson and keep the costs down.”
McEntee said the union plans to ensure the self-insured program provides the contractually required “equal to or better” coverage for its members.