The Challenge Facing Public Schools: Part I

At Watchdog Advisory, we understand the frustration and uncertainty educators and school leaders are facing. We want you to know you are not alone. Our goal is to provide actionable ways to reduce costs without sacrificing the quality of education for students or the support for teachers. More importantly, we want to encourage innovative thinking—examining long-standing problems from fresh perspectives. 

Public schools have long struggled with funding challenges from state and local governments. Many funding models remain outdated and disproportionately impact small and rural communities, while more families are choosing homeschooling or alternative education options.

Adding to these difficulties, the current administration’s push to eliminate the Department of Education has intensified tensions among school boards, administrators, and parents. This already-heated climate can create volatile situations—ones that, if mismanaged, could have lasting consequences for certain districts.

Fresh Ideas to Old Problems for Public Schools

At Watchdog Advisory, we understand the frustration and uncertainty educators and school leaders are facing. We want you to know you are not alone. While we wish we had a simple solution to resolve every challenge, our commitment is to help you lead a public education system that nurtures free thinkers, fosters entrepreneurship, and equips students with both academic and practical skills to succeed in the modern world.

Our goal is to provide actionable ways to reduce costs without sacrificing the quality of education for students or the support for teachers. More importantly, we want to encourage innovative thinking—examining long-standing problems from fresh perspectives. Just as students learn best through different teaching methods, school districts require unique solutions tailored to their distinct circumstances. Geographic location, funding structures, community needs, and political landscapes all play a role in shaping how best to address these challenges.

We’re here to help you navigate these complexities and explore strategies that fit your district’s specific needs. In the following discussions, we’ll dive deeper into cost-saving approaches, alternative funding ideas, and new methods for ensuring schools continue to thrive despite the uncertainties ahead.

Maximizing Savings on Supplemental Health Insurance & Workers' Compensation

We believe in helping school districts make the most of their resources. Managing a district budget is no small task—balancing funding across roughly ten budget categories while navigating two primary classifications: capital expenditures and operational or general fund expenditures.

Let’s start with operational expenditures, which likely include your largest expense—salaries and benefits. These often account for nearly 80% of a district’s direct operating budget. While we are business consultants, not licensed insurance agents, we want to share valuable insights that may help you optimize spending in these key areas.

A New Approach to Employee Benefits

As of last March, the IRS approved a new method for structuring supplemental health benefit plans. This innovative approach could save your district approximately $698 per employee per year on FICA contributions, while also putting extra money into your staff’s pockets each month. Additionally, this strategy has the potential to lower workers’ compensation premiums, offering yet another avenue for cost savings.

While all insurance brokers should be aware of this ruling, not everyone may be proactive in sharing the details—particularly if it affects their commissions or premium structures. We have a copy of the IRS ruling available and would be happy to provide it so you can review it with your legal counsel. Additionally, we can connect you with two insurance groups who specialize in implementing these updated plans for school districts.

Our goal is to ensure you have the information and resources needed to maximize efficiency while keeping your district financially strong. Let’s navigate these opportunities together.

Major Medical & Smart Ways for Schools to Save

When it comes to major medical coverage, navigating the best funding approach can feel overwhelming. Businesses and organizations typically rely on one of two primary structures: fully insured or self-funded health plans. While the fully insured model has dominated for decades, recent changes in medical billing practices have made it worth re-evaluating both options.

If you search online for the difference between these two models, you'll likely find definitions such as:

• Fully insured health plans require employers to pay a fixed premium to a health insurance carrier, providing financial predictability but often at a higher cost.
  
  
• Self-funded health plans allow employers to take on financial responsibility for employee benefits, offering more flexibility and potential savings but also carrying greater financial risk and administrative complexity.

While both descriptions have some truth, they don’t tell the full story. In today’s healthcare landscape, fully insured plans don’t just have the potential for higher costs—they almost always result in higher expenses. Likewise, self-funded plans may require larger financial commitments upfront, but they don’t necessarily mean shouldering all the risk.

Understanding Reinsurance & Managing Risk

One of the biggest misconceptions about self-funded health plans is the idea that employers bear the full financial burden alone. In reality, the insurance industry operates with reinsurers—companies that insure the insurance providers themselves. This system spreads risk across multiple entities, offering safeguards that prevent any single company from facing catastrophic losses.

For organizations considering a self-funded approach, partnering with a third-party administrator (TPA) can significantly reduce the administrative burden while keeping costs lower than a traditional insurance provider. Additionally, underwriting your stop-loss policy with a reinsurer further mitigates financial risk, ensuring stability even in unpredictable circumstances.

If you’ve heard negative stories about self-funded plans, chances are they stem from an organization that either had an ineffective stop-loss policy or tried to manage the plan without a professional TPA. With the right support in place, self-funding can be a cost-effective and financially sustainable option.

Finding a reputable third-party administrator in your area is easier than you might think. If you'd like, we can connect you with trusted industry contacts who specialize in optimizing self-funded health plans for businesses and organizations like yours.

Whether you go with a fully insured play, a self-funded plan, or a hybrid of the two you should look at having a maximum monthly deductible versus maximum annual deductibles. Minimizing the monthly out-of-pocket costs can limit the financial risk you face as well as provide more protection to your employees if a catastrophe occurs.  

The Law of Large Numbers: How Small School Districts Can Find Better Insurance Options

Insurance operates on the principle of the law of large numbers, which means that risk is spread across a large group to keep costs manageable. Unfortunately, smaller school districts—especially those with fewer than 50 employees—often struggle to secure affordable health insurance rates simply because their employee pool isn’t large enough to distribute the risk effectively. So, what can be done?

Leveraging Professional Organizations for Better Coverage

One potential solution is to explore the professional groups your school is already affiliated with and examine their legal structures. Some organizations can support the formation of a Multiple Employer Welfare Arrangement (MEWA)—a collaborative approach to providing health benefits across multiple employers.

It’s important to note that a MEWA cannot be created solely to offer health insurance; it must be part of a preexisting organization that already provides benefits, partnerships, or training to school districts or businesses. If your district is part of such an organization, a MEWA could be a game-changer in securing better insurance rates while maintaining strong employee coverage.

MEWAs in Action

MEWAs can be highly effective. A few years ago, when we participated in the Missouri Teachers Association’s annual health benefits survey, we discovered something unexpected—some smaller rural school districts had lower effective insurance costs compared to their larger urban and suburban counterparts. This was especially interesting when factoring in how much districts contributed to individual premiums.

How to Find MEWA Opportunities

If you’re interested in joining a MEWA, start by contacting the associations you’re already a member of like your local chamber of commerce and ask whether they offer a MEWA plan or are considering one. If none of your existing associations have a plan, reach out to a third-party administrator (TPA) in your area. TPAs often have lists of associations that offer MEWAs, and they can also provide guidance on how to start one within a qualifying organization.

And of course, if you need recommendations, we’re happy to share contacts who specialize in helping school districts navigate MEWA opportunities. Just let us know how we can support you.

The Fight for Fair Drug Prices: A Smarter Approach to Prescription Costs

It’s no secret that traditional pharmacy programs in the U.S. charge significantly higher prices—sometimes up to 200 times more than what the rest of the world pays for the exact same prescription drugs. This is especially frustrating when you consider that American tax dollars help subsidize pharmaceutical research, yet we continue to face soaring medication costs.

Changing the Game on Prescription Drug Plans

Fortunately, forward-thinking companies are challenging the status quo and transforming the way we access prescription drugs. Amazon and other providers now offer subscription-based services where, for a flat monthly fee, members gain access to a list of generic medications—with no additional cost per prescription. Other programs provide 80% savings on generics and up to 40% off brand-name drugs, making it easier for individuals and employers to cut down on healthcare expenses.

Advocating for Better Pharmacy Pricing

Regardless of how your supplemental and major medical plans are structured, we strongly encourage you to evaluate your pharmacy benefit program and demand better pricing. Ask your provider for discounts off their rate sheet or let them know you're prepared to switch to a competitor offering more cost-effective solutions. Negotiation is key, and standing firm could lead to meaningful savings for your organization and employees.

Outside-the-Box Thinking: How Direct Primary Care Could Transform Rural School Districts

For those unfamiliar with Direct Primary Care(DPC), it’s an innovative healthcare model where patients purchase a membership, granting them unlimited access to certain primary care services. Instead of paying per visit, patients pay a flat monthly fee directly to their medical provider, allowing for more predictable healthcare costs and eliminating the headaches associated with traditional insurance billing.

Many doctors frustrated with complex medical billing systems and insurance restrictions have chosen to opt out of conventional insurance-based care altogether—embracing the DPC model instead. Today, there are approximately 20,000 DPC physicians across the U.S., each caring for an average of 400 patients/members.

Addressing Healthcare Gaps in Rural Communities

If you’ve traveled through rural America, you’ve likely noticed the growing number of closed hospitals and medical centers, forcing residents to drive 30 minutes or more just to visit a doctor. In response, companies like Walgreens and CVS are expanding walk-in clinics, offering alternative medical care options to bridge the gap.

But here’s where we see an out-of-the-box opportunity for rural school districts.

The Future of Healthcare in Education

We predict that in the near future, rural school districts will begin sponsoring and housing DPC practices—not just for their staff, but also for their surrounding communities. By offering space within school district buildings, schools could provide:

• On-site primary care for students and staff, ensuring faster access to medical attention when needed.
• A strong patient base for the DPC, helping sustain its operations and expand healthcare access while lowering the cost of entry into the rural market.
• Lower overall healthcare costs for both the district and participating community members.
• Additionally, many DPC membership plans can be expanded to include emergency coverage and prescription benefits, making them a comprehensive and cost-effective healthcare solution.

And before you dismiss the idea—think about all the non-educational services school districts already provide like food programs, clothing assistance, mental health resources, and more. Education today is more than just academics—it’s about supporting the whole student and their broader community.

This kind of collaboration between school districts and DPC providers could be the key to reshaping rural healthcare while keeping costs manageable for schools and families alike.

Wrapping It Up

If you've made it this far, thank you—we hope this article has sparked new ideas on how to challenge the status quo when it comes to employee benefits. We're committed to exploring cost-saving solutions across different expense categories, and we’ll be sharing more insights in future articles.

If you have questions or topics, you’d like us to cover, let us know—we’d love to hear from you!