How Wisconsin School Districts Built Better Health Plans and Curbed Rising Healthcare Costs

[00:00:00] Most people picture healthcare in a hospital, but you see it somewhere else. It's a line item in a school budget that grows faster traditionally than every other line item. It definitely starts with salary increases too. Most school districts are facing 10, 15, 20 percent. They're definitely, you know, looking at cutting back on teaching staff. Frankly, most districts are kind of sick of all the increases. But instead they ask a different question. What if we own this together and more broadly?

[00:00:26] Obviously, when you have more belly buttons and more money going towards that system, then they start to listen. The district saves money. They also save money. Their cost out of pocket is down by about 50 percent from when we switched.

[00:00:56] Several years ago, three Wisconsin employers sat at one table. There were two school districts in a forge and they were public and private side by side. And between them, they covered about 750 people. They each figured out something the market told them that was impossible, that a school district could build a better health plan than the one that was being sold before. And they could have kept that to themselves. But instead, they asked a different question. What if we own this together and more broadly?

[00:01:26] And last time I checked in with Patrick Blackholler, who was on a previous episode, the cooperative was covering 23,000 lives.

[00:01:36] When I finished my book, I think it was a little over 18,000 lives. So teachers, bus drivers, city workers, machinists. And in a state where hospitals charge about three times more than what Medicare pays, which is designed to cover costs for the hospital, some of its members are spending less on health care than they did several years ago.

[00:01:58] And right now, nearly every public employer in America is opening a renewal letter with a double digit number on it of increase. So whether you're a superintendent, a city manager or just a private sector employer, you're having to choose between health premiums and things like teachers and the things that we value in our communities. So this episode is really geared towards them. As I mentioned, Patrick Blackholler was on some episodes ago in Rice Lake, Wisconsin.

[00:02:25] And today we're going to hear how it grew from a person who runs the business office of the school district every day and also leads the cooperative. Brian Adesso is the director of business services for the Menasha Joint School District, and he is the president of the Employer Healthcare Cooperative Wisconsin. Brian, welcome to Relocalizing Health. Thanks, Dave. I'm excited to be on and excited to kind of share our story on where we've been.

[00:02:52] Yeah, absolutely. Well, you know, most people picture health care in a hospital, but you see it somewhere else. It's a line item in a school budget that grows faster traditionally, at least over the last couple of decades, than every other line item. So let's start there. You know, when you think about a renewal landing in a school district business office, what does it actually push out? Put that in the terms, you know, in your community in terms of whether it's teachers or programs.

[00:03:21] Well, it definitely starts with salary increases to, you know, that's the first thing to go. As you stated, most school districts are facing 10, 15, 20 percent. I mean, it seems to be getting much higher each year. I mean, I know I've heard from colleagues that it's up towards 30 percent. So first thing that goes is salary increases, because as most school districts, at least public school districts, run fixed funding through the state.

[00:03:47] I mean, Wisconsin's driven by property taxes and people don't like to pay property taxes. So we can't just keep increasing those to offset the health insurance costs. Yeah. Have you heard, you know, what other sort of cuts other school districts are making when they get those 30 percent sort of premium increases? Yeah, they're definitely, you know, looking at cutting back on teaching, teaching staff and really kind of getting into the classroom.

[00:04:13] They're also obviously looking at cost sharing and moving more money back on to employees, which obviously doesn't help, you know, when you're not getting any increases either. And fortunately, you're in a state where hospitals charge more than three times what Medicare pays. And I believe it's the fourth highest of any state for some reason. I think it's consolidation that's happened there. So why can't a single school district negotiate its way out of that? We just don't have the power.

[00:04:41] I do think that we have the political power just because we are a public entity. And, you know, these mega systems, it doesn't look good on them if, you know, they're beating up on a little taxpayer because it's really impacting the whole community because, again, we're funded by the community. But obviously, when you have more belly buttons and more money going towards that system, then they start to listen and maybe are willing to work with you.

[00:05:07] Yeah, you know, there was actually a TED Talk back in 2011 that Bill Gates gave on basically how health care was devastating education. And he was using California data. And, you know, when I was young, I actually started my K-12 experience in California at that time. It was considered the number one state in the country for education. By many measures, it's like 49th or 50th.

[00:05:36] And that's what's happened, which is super unfortunate. You know, I'm really a product of K-3 university. You know, my mom was a public school teacher as well. And through university, I was in the public system and even coached at the local high school. So seeing it from a few different vantage points. But, you know, employers are now seeing AI driving billing like never before.

[00:06:00] I'm curious if that's shown up yet in your planes and does owning your plan data make it any more visible than, you know, you might have had before or hear about with some of your colleagues? To my recollection right now, AI isn't in our plan. Obviously, I see that it can be in the plans. I know that in the big medical data systems, it's been there for a while and it's more prevalent. It's just patients and employees don't know about it.

[00:06:29] Doctors probably don't even know about it. They're just asking questions and it's going through AI. I guess from my perspective, it does worry me because these are all building language models and our information's all out there. We already see it with data scrapers and things that you get things sent to you if you have diabetes and you didn't tell anyone. And it's just people, you know, scraping information from you getting your prescriptions filled or whatever. So I am concerned about data privacy and what that'll do. And then also what's it going to do to pricing?

[00:06:57] Yeah, I mean, there was Blue Health Intelligence, which is the intelligence arm for the Blues, did some analyses. And, you know, in general, what the story is, is what they call coding intensity. So nothing changed medically from before, but they just, you know, if nobody's watching, they'll jack up the bill even more. Before I think in three years, the rate of postpartum hemorrhage has gone up 3x, even though the rate of transfusions hasn't gone up. So, you know, it definitely tells you it's just a coding thing. So it is very unfortunate.

[00:07:26] So Menasha was one of the first to join Rice Lake. How did that transpire? What convinced you and what did you sort of have to do to convince your superintendent and board to do something different than what you've been doing? I was actually hired on five years before then to Menasha. They liked my background in self-funding health insurance. I was with a smaller district with 100 employees and we were self-funded there. And I actually did another district, which was similar size.

[00:07:56] So the board really liked my expertise in self-funding. We did have an insurance committee. So they were kind of all on board. We were just kind of going through the same thing that everyone goes through every time we go through a renewal. Self-funding always looks like it would be a, you know, 40, 50 percent increase. Because really, you know, we need to fund the aggregate amount. We need to make sure that our risk is very, very low. We just don't want to fund the expected because most people in my job want to keep their jobs.

[00:08:23] And it's never good to go to a school board to say, you know, we need a couple million dollars more because our insurance claims were a little bit higher than we expected. Yeah, yeah, that's interesting. And what was it that made your leadership in the cooperative think about setting up a cooperative? You know, why that structure? And what does member ownership give you that's, you know, different than maybe a purchasing coalition? Yeah, I think it's just, you know, the security of being in a group.

[00:08:50] Most school districts like to be in a group to kind of share the political risk. Right now, we're not sharing any health risk or experience risk. But obviously, it's better to say that, you know, I'm with these three other districts or six other or eight other districts. You know, we're all doing the same thing. It also helps to get the message out there so other districts see that it's possible. So to me, I mean, it just helps overall. It helps share our story.

[00:09:16] And school boards usually feel a little bit more comfortable, too, that this isn't some kind of experiment that they're starting. Well, you've had pretty phenomenal growth. I mean, in about five years up to over 23,000 from what I understand. What have been the things that have driven that growth? It's really organic growth. You know, we don't have someone out there really going out and trying to get brokers or agents and things to get people on. We're really going to the employers.

[00:09:44] We're going to other school districts, meeting them kind of where they're at, sharing our story. And, you know, frankly, most districts are kind of sick of all the increases. School boards are sick of it. And they're ready kind of for some other change. So we're kind of at the right time, the right place. Now, do you get involved in some of the provider negotiations yourself? I do not. We leave that up to Patrick.

[00:10:06] And does he kind of give you a sense of the provider negotiations and sort of how that's evolved, you know, over the last several years? Yeah, I mean, we talk about it a little bit. It's kind of interesting when he talks about it because it seems like the providers are eager for it, too. You know, when we were starting out, providers kind of didn't want anything to do with this because it just wasn't the way. I mean, this was back in 2021, 22, even some, you know, before that.

[00:10:33] Providers just weren't really used to negotiating directly with employers. And now fast forward to today, it seems like they're eager to start doing it. But they're also looking for what can they do for their employees, which we may be able to help them out there also. So, I mean, the times have really changed in five years. And I'm assuming that we'll see exponential change for the next five years. Yeah, I know. There's no question. I mean, it's been even just the last two years. I've seen a lot of difference.

[00:11:00] But you also have some private sector employers in it. What's that dynamic been like where you have kind of a mix of the private and public? Well, I mean, we haven't did private versus public or anything. I think everyone's just looking at their bottom line. I think there's a perception that private employers can just increase their product costs or whatever to cover any costs. It's not true. I mean, they're kind of under the same restrictions that we are. It's just they're funded, you know, differently. They can't just increase their costs.

[00:11:28] They have contracts and, you know, with their suppliers and everything. So, I mean, we're all kind of in it together. We just have different kind of funding mechanisms. Yeah, no, I mean, I will talk to some manufacturers and, you know, they'll be talking about, you know, Lean Six Sigma and these things. And they're, you know, down to the decimal points. And then, you know, they're worrying about 0.2 percent. And then they'll get a, you know, 15 percent increase. So, yeah, no question about that. You think about the staff, right? The teacher, the custodian, the paraprofessional.

[00:11:58] And Manasha, what's different for them in this environment in terms of things like out-of-pocket costs and access and how they're treated when they walk in? What is that kind of average member? What are they experiencing? I'll say that that's also involved over time. You know, 21, 22 providers aren't really used to it. Now it's much, much more common. So we're not treated like this foreign thing to providers. They like it. I think they're starting to see the value, especially independents.

[00:12:28] I mean, this is their lifeline. You know, I'll be honest. Our employees have to be more engaged because they have to do a little bit more work. They have to call to get navigation. They can't just go to wherever they want to go. But they are starting to understand the district saves money. They also save money. Their cost out-of-pocket is down by about 50 percent from when we switched. So we're making sure that we're trying to save them money. Obviously, we're a public school district. Our plan structure is very different than the private employer.

[00:12:58] You know, we still have very low out-of-pocket costs and we're a copay-only structured plan. But even with that structure, I mean, our employees are seeing less of a cost. They like no-cost care or they probably call it free care. Yeah, yeah. Not free to you, but certainly free to them, which is great, right? If they're going to high quality, the math's pretty simple. You know, most employers would rather pay 100 percent of 500 than 80 percent of 5,000.

[00:13:25] You know, you don't have to be a math major for that. But, you know, change is hard and that can scare people. What did you find that helped earn trust in that first year or two? And, you know, what are some of the lessons learned that others would benefit from? Because, you know, it's never without some bumps in the road. I think just having the structures in place. I mean, obviously, you know, Rice Lake was kind of one of the first districts to do it under Patrick's leadership. But they really cut their teeth. You know, it was a kind of a brutal transition.

[00:13:55] I don't think anyone else would want to go through that transition. So ours was a much easier transition. But really, just keep educating, knowing that their employees will save costs. It's getting a lot, lot easier, especially all the contracts. You know, we have about over 150 contracts now. So we're trying to fill in the gaps. You know, there's obviously some areas like oncology that's very, very difficult because they know, you know, it's a given thing that they're going to have people.

[00:14:28] Quick word for me. Rosetta Fest 2027 is set for August 18th to 20th at the Gaylord Rockies near the Denver Airport. It's one event where advisors, employers and clinical leaders who are changing how health care gets paid for and delivered all show up in the same room. If you've gotten anything out of this podcast, this is where the conversation continues in person. Go to RosettaFest.org.

[00:14:55] Use the code PODCAST50 at checkout and you'll get $50 off your ticket. That's PODCAST5050. All one word at RosettaFest.org. Makes sense. Has it spilled over into, I don't know if you're seeing this part of it, but the recruiting and retaining people?

[00:15:18] Because we've heard, you know, in some other states where a less resource school district had lost teachers to higher pay to say some suburban school district. But then they actually came back, you know, because maybe though their W-2 may have said they were earning more, they were paying a lot more out of pocket. Are you seeing any kind of recruiting or retention benefits? Not too many of those. You know, the funny part is, is when we hire someone because there is such a shortage of teaching staff and everything. So we are pulling people from the private sector.

[00:15:49] You know, they're just amazed what our plan looks like compared to what, you know, they had before. So, I mean, that's kind of a testament. I think sometimes, you know, education staff are their own worst enemies because they only know what they know. And, you know, when you have really, really good plans, you just kind of take it for granted compared to when you, when you leave and you don't have such a great benefit plan.

[00:16:10] Yeah, I certainly experienced that, you know, when I left a big company and back in the glory days of no cost sharing and all that, you know, many, many moons ago. But at the end of the day, a dollar is a dollar. For the folks who you've spoken with that haven't joined, what do you perceive as holding them back? I think the workload, you know, they perceive it to be a heavy lift. They perceive it to be maybe a disruption for their employees because, again, they may not be able to go down to doctor's office down the road.

[00:16:38] They may have to go, you know, four blocks over the other way. And obviously that's a disruption. And, you know, insurance companies are still buying customers, just not as, you know, great of a clip as they did before. You know, so, I mean, if you're getting a two to, you know, four percent increase, are you going to take the risk to switch to a self-funded plan? You know this as well as I do. I mean, fully insured carriers really don't share information, which is a huge hurdle.

[00:17:05] So, I mean, you're really taking a leap of faith when you're making these changes because you don't have the data. Obviously, when you switch to this, you'll have the data after the year. Have there been any member stories that have trickled their way back to you in terms of, you know, just something, a better experience, what they'd had before? How has that played out? I think, you know, not any of the, you know, life-saving stuff. I'm sure it's happening all the time, to tell you the truth, Dave. I mean, they may have told you, but, or told me, sorry.

[00:17:32] But, you know, with my HIPAA role in things, I'm real good at like one ear and out the other. But, you know, I'll tell you that there's some cool things that we're able to do because we don't always just look at the savings. We pay for 100% of pregnancy, you know, up from conception all the way through. So, all those appointments are covered no matter where they go. We're also able to offer a pretty cool weight management program that does cover GLP-1s. So, that's about a $600,000 expense over the year.

[00:17:59] And even with that, we're 2% higher than where we were with drug costs in 2020-21, which is really crazy. So, obviously, without the GLP-1s, we'd be substantially lower costs than we were when we switched. Yeah. About how many staff do you have? So, on our plan, there's about 380 staff members. So, we're just over 1,000 belly buttons. Yeah. That's a big number for that. And it sounds like you've reduced cost sharing for the members, too.

[00:18:29] So, did they have cost sharing on the prescription plan before? They did. Yeah. What's the story now in terms of cost sharing on medications? So, it's a lot less because we do have our preferred providers. So, we have a local pharmacy that we work with. So, they kind of work like a cost-plus program. So, that's all no cost. We do have other programs that are no cost. So, there's a lot of medication that's flowing also for no cost. Our clinic also has a pharmacy built into it. So, our employees like no cost or free.

[00:18:59] Yeah. Tell us a little bit about that clinic. Is this an on-site clinic for the school district or is it shared with other organizations? So, it's a near-site clinic. We just didn't have room in our buildings to have an on-site clinic. So, we had one in 21-22 that didn't work. And then we reopened this one in 23-24. We moved the location to a bigger location. And then we also had another employer with us. So, we're kind of open to expanding it with other employers.

[00:19:28] So, right now, we have two medical professionals kind of five days a week filling that time. So, they're quite busy. Yeah. Yeah, no. And how is the governance of that clinic relate to the governance of the cooperative and sort of who is involved in some of the decision-making that you have to do? That clinic is just with our district and another district. So, the EHCW has experimented and they are running their own clinic right now.

[00:19:58] So, obviously, everyone's kind of watching how that's doing because it's a different kind of beast getting a clinic going. So, but that's also something that, you know, the cooperative is kind of targeting. And what can we own? What can we do to keep our costs in check and reduce costs? Are you looking at anything beyond primary care clinics for that? Yeah, so we are looking at ASC, Amulatory Surgical Center, because Wisconsin, or at least in the Fox Valley, they don't really exist.

[00:20:28] It's not like other places in the country that have a lot of them. It's just the systems are so, so strong that even if one does come up, a system will pay five times what it's worth just to shut the doors, which is just really, really unfortunate. So, we do see that we need to get involved to kind of have that stake in it. But independents like it because an employer is part of it, too. So, they have some shielding from the systems.

[00:20:53] So, I want to put a frame around what you've built because I think it's really a national model in a lot of ways and get your candid reaction. You know, in the last episode, I don't expect that you've listened to that yet. I had a solo episode and I talked about something I call the community self-determination framework. And, you know, it really has two parts. You know, the first part, essentially what you're doing. You know, there's no new law.

[00:21:19] Basically, a community like the employers in Wisconsin are doing it today where, you know, local purchasers pull together, redesign their own health plans, do the direct contract you talked about, keep the savings at home. You know, I think that this is really a remarkable example that you have. But the second part comes later. And it's essentially a proposed community self-determination act that is really modeled on what happened with rural electrification.

[00:21:46] In the mid-1930s, nine out of ten American farms had no electricity at all. And farmers formed coops and there was a federal framework that backed them with patient loans. You know, and there was hundreds of cooperatives that are still existing today. I think it's about 900. And the idea is the act would do the same for community health plans, whether it be patient capital or reinsurance backstop and protection so that plans stay locally owned.

[00:22:16] You know, all very voluntary, just like the Rural Electrification Act. And, you know, I really put this together because people are saying, hey, it looks like our system is going through a collapse. And then you could argue it's already happened in rural America. And the question is, what would replace that? So just as a little, you know, sanity check on that, because it's early in this process of sharing it with folks. Does that first part kind of match how you see what the EHCW did?

[00:22:46] And what do you think other communities around country need to do that it doesn't have today to do something like that? I think that's kind of hitting the nail on the head. Before I was in the EHCW, we were working with a small group of seven districts right around us. And we worked with, I apologize, I forget his name, but he kind of worked on the state's cooperative law. So that's our state statute 193.

[00:23:12] And then he was actually part of the ACA law when it kind of came to forming those groups. So I learned a lot about cooperatives and I didn't realize that Wisconsin has such a strong, strong history of cooperatives. And we still do. It's a really powerful tool to get people together. It's not a huge hurdle or a high bar to get them set up. But just forming that group, you know, it's hard when you just are in a loose group. You know, to try to get things moving.

[00:23:41] But when you form, you know, a cooperative, it's much more legal. You have the manpower. Your part in your framework really got me thinking about the 25,000 to 500,000. And I was kind of disappointed by the 500,000, but I totally understand 500,000. I guess my mindset was like, let's get as many people as possible together to kind of fight this gorilla. You're 100 percent right when you, you know, get so large, you really can't control it. And it's not about like controlling it like that.

[00:24:10] It's just, you know, keeping everyone going in the same direction because you don't want to have break off in different factions because then you really lose your power that you have. Yeah, no. And I think that, again, it may be more than that, but I do think that you lose that sort of accountability and connection. And the nice thing is like if you look at whether it's a rural electric cooperatives or credit unions, there's lots of things they share, even though they're independent from each other.

[00:24:37] It's not like they all have to develop their own financial, you know, ATM infrastructure for banks or you name it. And so they kind of get the best of both worlds, right? They have the economies, but they still have that local connection. And then we know that, you know, 90 percent of the dollars that we spend in health go to sick care, even though only 10 to 20 percent of health outcomes go there.

[00:25:00] And so that ability certainly, you know, we use a very broad definition of ownership where, you know, there's literally entities like a cooperative and even beyond what you're even doing today. But just taking ownership and not having that renter mindset to me is a big step in that process. And you find in other areas when people have a little bit of democracy in their workplace, they actually become more civically engaged.

[00:25:26] They go to city council meetings, school board meetings, this sort of nice, you know, gateway into something broader. And I think more and more you see that people are like, OK, we need to take care of our own problems where the people closest to the problem are usually closest to the solution. And a bit of a non sequitur, but I even remember back when I was at Microsoft and this was after the EU formed and, you know, was hearing the president of Microsoft Europe.

[00:25:52] And he said, you know, used to be when you drive into Germany, it would be, you know, welcome to Deutschland or whatever, you know. But now it's like, welcome to Bavaria. And it was like this kind of interesting pendulum that goes back and forth. And so I think it's kind of that best of both worlds, ideally. But, of course, there's limits to what you can do. And there's things, you know, in your current environment.

[00:26:15] And if you think about what would be some of the things that would make it a little easier to go further, you know, maybe take on some of those, you know, GLP-1s. Yeah, you can probably cover the cost of that. But when you think about, you know, rare cancers or hemophilia or things like that, there are things from a risk standpoint.

[00:26:33] But are there other things that, you know, if there was some move afoot to expand cooperatives into this area that would be nice to get some help from the states, the state capital or federal? Anything jumped out at you? You know, I really think about like mental health and things. And I know this is going off a little bit from where you are, Dave. But, you know, there's such a shortage.

[00:26:58] And, you know, really from what I'm seeing, too, like it seems to be the race to the bottom to really pay these therapists the least amount possible. And I don't know how that's helping our mental health kind of call it a crisis, you know, in this nation. You know, everyone needs to be paid a fair amount. You know, and I think that's where these cooperatives, too, could kind of get into kind of owning or, you know, almost employing mental health therapists. I mean, I am fascinating when you start to talk about rural America because, you know, that there's such a drought with health care in there.

[00:27:27] And then you start to look at Alaska, you know, where it's just so spacious. And then they have NUCA up there, which is a fascinating model that could work for all over the country, you know, especially in rural America. There's just so many possibilities, but we need those cooperatives to work. Or if you wanted to form it up a little tighter, you could do a captive and share some risk. Like, you know, you don't have to share 100% of the risk. It feels like captives are more understanding for brokers and agents.

[00:27:55] You know, they're really looking for that pretty package that, you know, they can just, here's the package and sell it. And I understand you guys are looking at that, but we've seen that in some other areas where it's a nice step towards taking on not necessarily the highest, highest risk, right? Still have stop loss for that at a third party level. But that kind of, you know, essentially cooperatizing a layer of risk as you get more and more handle. And, you know, with the primary care getting more expansive, including mental health.

[00:28:25] And I think, like you mentioned, the folks in Alaska have really done an amazing job there where, you know, the trained psychiatrists, psychologists, they're essentially like the specialist. Where there's primary care itself, there's behaviorists, there's social workers, the totality of mental health issues don't always require the highest level where there is quite the shortage.

[00:28:47] On the other hand, some of the telehealth can work there because, you know, with mental health, you don't have to lay hands on people like you do in some other areas. So I just think when you have that critical mass of employee lives like you have, I can start saying, OK, how do we tackle that? You know, the NUCCA folks have an event at the end of June, you know, during summer break. There's a trip to be had up there because I'm planning on doing that myself. I've spoken to them, but I haven't actually been up there because it is quite remarkable.

[00:29:17] What they've done, you know, just like you. I mean, I think it's really remarkable what you all have done and to have done that without any, you know, like salesperson or broker out there pushing it from 70, 750 to 22,000 is pretty remarkable and shows the need that's out there. And so continue to really encourage you that way.

[00:29:37] And so, you know, as we wind down, again, we think about how the employer health care cooperative of Wisconsin started with just three employers about five years ago, you know, about 750 people. And, you know, they just ask the question, you know, what if we own this together? And five years later, having over 20,000 people and, you know, their families really have that answer. You know, it's in even one of the most expensive hospital markets in the country. They've been able to control it.

[00:30:07] And, you know, Brian, his counterpart, Patrick Blackholler at Rice Lake, they didn't wait for permission, a new law or a better carrier. He and his peers built it with the tools that every public employer already has. And so, you know, if you're a school business official, if you can pull your claims data before that next renewal, if you can't, I think it says a lot.

[00:30:30] You know, the fact that in my career, every time a business is doing a great job, they bury you in data and show you all the great things they're doing. And so if they're not doing that, it speaks volumes. You know, really ask what you're buying. So, you know, whether you're a superintendent or a city manager, call a peer that's done it. You know, across Health Rosetta, we have many, many public sector employers. Of course, there's tons of private sector employers who've done this.

[00:30:56] And ask, you know, what that year one was like, what they've learned. And, you know, if you're a benefit advisor, offer to help your client own that plan instead of renting it. And if you're a legislator, you know, invite the employers who saw this to testify. How do they do it? The state is a big employer themselves. They'll show up, you know, and the longer version of this story is in my recent book, Relocalizing Health.

[00:31:22] And so also, if you missed it, go back and hear Patrick Blackholler tell the Rice Lake story. Go back and hear about April Kyle is the CEO of the South Central Foundation, which has the NUCA model in Alaska. So, Brian, I want to thank you for joining me today. And this is Relocalizing Health. Thank you. Thank you.