The underestimation of state employee health insurance for the second year in a row could jeopardize the South Dakota Board of Regents’ push for a freeze in tuition and fees, university officials said.
A shortfall was announced at the South Dakota Board of Regents Presidents Council Sept. 24, alerting University of South Dakota President James Abbott and the five other regental heads to the possibility of additional costs to be placed upon the universities to help cover the state’s health insurance plan.
But there is little certainty, said BOR Executive Director Jack Warner, as to how much extra money will be required for the current 2014 fiscal year. Warner said within the next several weeks, he anticipates a more solid figure of the cost, but is hopeful the administration will assist in offsetting the amount.
“There is a willingness to keep tuition affordable, and I am optimistic that this administration will identify funds over and above the $5 million we are needing to freeze tuition to pay for the additional cost of insurance,” Warner said.
The burden of an additional cost placed on USD, especially when the BOR set a freeze in tuition and fees as its number one priority for the 2015 fiscal year, has some university officials wondering as to its effect on campus.
“It is fair to say that we are very concerned, yet it is very early to know what the impact will ultimately be on the universities or the students,” Provost Chuck Staben said in an email to The Volante.
Staben said the potential of a tuition increase because of the additional cost, which had been discussed by Abbott after the shortfall was announced, reflects the possible impact — more of a calculation, not a decision — that the university can make at this point about a tuition increase. But such a decision, Staben said, would ultimately be approved by the BOR.
This is not the first time USD has faced a costly insurance scenario. The state had a similar problem last year, as USD faced paying $561,200 in mid-year employee health insurance for the 2013 fiscal year.
At the time, the S.D. Legislature assisted the BOR and the six public universities meet this obligation by paying $2 million of the $3.5 million needed to cover the cost, Warner said.
If it comes to a similar situation as last year, Warner said he sees both the administration and BOR working “very hard to find an agreement in covering the costs as to least affect the students.”
Going to the root of the potential amount, estimating the total cost of employee health insurance is not the responsibility of DAKOTACARE, the university’s health insurance provider. Dusty Johnson, Gov. Dennis Daugaard’s chief of staff, said the state’s Bureau of Finance and Management contracts with actuaries from the United States and abroad to determine the estimated amount.
Johnson said the complexity of dealing with the state’s $110 million budget means actuaries will never “get it down to the penny” when estimating costs like insurance where medical inflation plays a hand.
By mid-November, Johnson said the BFM will have a “good handle” on how much is needed to pay for the total cost of insurance in the state, and Daugaard is set to deliver his Fiscal Year 2015 budget proposal the first Tuesday of December.
Student Government Association President Erik Muckey said if the increased insurance cost is dealing with oversight by the legislature, he is concerned that their actions will have repercussions on students throughout the state.
“If it is going to threaten tuition from going down — if this is the issue — (students) need to take control,” Muckey said.