The Herald, Sharon, PA Published Sunday, Dec. 2, 2001

HERMITAGE

Smalley goes back to school
§   §   §
Ex-Sharon Steel exec runs trust
§   §   §
EFFORT CAN CUT INSURANCE COSTS, EASE NEGOTIATIONS

By Michael Roknick
Herald Business Editor

In his days as a steel executive Phil Smalley was known for managing a blast furnace, iron ore and health care issues.

Now as managing director of the Pennsylvania Public School Health Care Trust his duties have been scaled back to just health care. But in this case his job has grown.

Managing the non-profit trust out of his Hermitage field office, Smalley is charged with offering a top-notch health insurance package to Pennsylvania's 501 school districts, intermediate units, community colleges and vocational technical schools while keeping control of costs.

With an estimated $800 million being spent on health care in the state this year that's going to be a big nut to crack. But school districts and its employees can have the best of both worlds, he insists.

"We're not going to manage costs, we're going to manage care,'' Smalley said. "We believe if we get a person to the best place and get the best care it will save money in the long run.''

Smalley's eyes have seen the world from two very different perspectives, a former senior vice president with the defunct Sharon Steel Corp., he also is a former school director with the Hermitage School District.

By bringing together the key educational players in the state -- the Pennsylvania School Board Association and the two largest unions, the Pennsylvania State Education Association and the Pennsylvania Federation of Teachers -- the trust was formed in March 1999.

It was labor and management of the state's school system working together that made it a reality, Smalley said.

"They have been the pioneers of making things happen,'' he said. "It shows you the possibilities of what collaberation will do on complex issues like health insurance.''

School boards and the unions have equal voting representation on the trusts' board. It takes a 75 percent board majority to make major changes in the health plan.

The Heinz Family Philanthropies, a non-profit Pittsburgh foundation created by the Heinz family, kicked in $1.3 million to help the trust get started. While health care is the meal ticket, labor-management cooperation is the heart.

"One of the key things is once the union and administration takes health care off the bargaining table ... that's where most strikes arise,'' Smalley said. "Resolving health care creates more harmonious labor relations in the future.''

Hired on in July 2000, Smalley is often on the road selling the concept to school administrators and teachers' unions. There are now 15 school districts in the trust, representing 4,000 employees and their families for a total of about 10,000 people.

Mercer County school districts in the trust are Hermitage, Farrell, Jamestown, Reynolds, West Middlesex and Commadore Perry.

Under the trusts' bylaws no school district in the state can be rejected for membership. However, if their track record shows they rack up big medical bills the district can be subject to a premium surcharge for a couple of years.

But if the trust can trim the state's educational health bill by even 5 percent that amounts to $40 million a year, Smalley notes.

"It's no longer an option for people to go with the status quo -- it's too expensive,'' he said.

In one case a district near Philadelphia saved money from its current health insurance carrier when it found out the district was thinking about joining the trust.

"The carrier gave them a $3 million rebate,'' Smalley said. "Just us being in business has saved money.''

Currently, the trust has created four geographic risk pools in the state with the Philadelphia area having the highest cost and central Pennsylvania having the lowest. The ultimate goal is to create one risk pool for the entire state.

Most districts find over a five-year period they have one good year for health care expenses, one bad year and three so-so years, Smalley said. By joining a larger group there's strength in numbers.

"The more you add to the risk pool the more you flatten out the risk level,'' Smalley said.

A strategy used by the trust is that by managing care the treatment process can be speeded up while still cutting costs. One example is if a patient complains about having a sore leg the common practice is to have a X-ray then a MRI.

"Our strategy is to have the MRI first because it shows if there's any soft tissue damage,'' Smalley said.

Also, the trust will try to locate the best location for care based on data created by the Pennsylvania Cost Containment Council. The state agency compiles information on patient care and mortality rates.

Another approach is getting proper prenatal care for pregnant women. Something as simple as telling women what their proper water intake should be during their pregnancy can reduce prenatal costs by 60 percent.

As a lure to its members the trust offers a 10 percent reward with a $1,000 cap if they report a over-billing mistake in their medical bill. Also, the insurance will pay one trip a year for a spouse if their loved one is being treated at a site 100 miles away from their home.

In addition to offering a drug program the insurance goes a further step by covering alternative medicine such as acupuncture.

Jeff Amon, a Reynolds School District gifted elementary teacher, is co-chairman of the Western Pennsylvania Schools Health Care Consortium were the district also is a member. The dozen school districts belonging to the consortium will start using the trust's third-party administrator on Jan. 1. Currently using Highmark Blue Cross/Blue Shield, Amon said he believes the consortium will be able to shed costs by using the trust.

He complained that Highmark didn't provide the consortium with detailed health-care spending information.

"We don't know what areas our health care are being spent,'' Amon said. "All we know is a total dollar figure. By having this third-party administrator it will alert us if a lot of our people are being treated for heart disease or certain kinds of cancer and we can respond by advising our teachers to have preventative checkups to catch anything in its early stages.''

That means a healthier person and reduced medical costs, he added. It's just what the trust had in mind, Smalley said.

Looking out of his window, the salty-haired Smalley ponders his new venture and says he's ready to take on the assignment.

"I think it's the challenge of a lifetime,'' he said.



Back to TOP // Herald Local news // Local this day's headlines // Herald Home page



Questions/comments: online@sharon-herald.com
For info about advertising on our site or Web-site creation: advertising@sharon-herald.com
Copyright ©2001 The Sharon Herald Co. All rights reserved.
Reproduction or retransmission in any form is prohibited without our permission.

'10615