What Happened to the Idaho School Benefit Trust?
In late August, the Idaho Department of Insurance (DOI) filed to take over the troubled Idaho School Benefit Trust (ISBT), alleging that it had become insolvent and was unable to cover claims made by employees of member school districts. A court approved the takeover in late September, and now school districts are being asked to cover approximately $13 million in obligations or risk having their employees’ pending claims go unpaid.
What was the Idaho School Benefit Trust? Created in 2014 as an alternative to conventional insurance, sponsored by the Idaho School District Council, and governed by a five-member board of trustees, ISBT essentially coordinated self-insurance among member districts. Participating districts and their employees paid contributions into a common pool, and ISBT used that money to cover medical claims. Blue Cross of Idaho served as the plan administrator, processing claims and providing access to its network, but the districts themselves ultimately bore the financial risk.
This model was meant to spread risk, reduce costs, and avoid some of the overhead associated with traditional insurance coverage. ISBT advertised itself to Idaho school districts as a safe and stable alternative to conventional insurance, touting relatively low rate increases. By August 2021, ISBT had about $22.5 million in reserves. Yet by August 2025, that cushion had fallen to just $2.1 million, well below the statutory requirement. Today, the Trust is completely insolvent. What happened?
DOI is currently investigating ISBT’s collapse, so hopefully we will have some answers in the near future. But there are certain red flags in hindsight. ISBT carried stop-loss protection through Blue Cross for exceptionally high claims, but that coverage only kicked in above certain thresholds. The Trust itself remained responsible for claims below those thresholds, and DOI now says that contributions and reserves proved insufficient to cover those costs. Meanwhile, medical claims rose substantially while ISBT continued to advertise itself to local districts as a stable and relatively inexpensive alternative to conventional insurance.
House Bill 443 in 2022 changed the insurance landscape for Idaho school districts by providing significantly more state funding for employee health insurance and making the state insurance plan a more attractive option. Twenty-four districts and charter schools subsequently left ISBT between 2022 and 2023, which could also have played a role in the Trust’s financial deterioration. However, without knowing more about the claims experience of the organizations that left compared with those that remained, it is difficult to know what effect that exodus actually had.
There’s also an open question about the school districts that remained with ISBT following the passage of H443. Every public school district had access to additional state funding for health insurance, whether they joined the state plan or not, and there were no strict statutory requirements regarding how that extra money was used. It’s plausible, though difficult to know for sure, that some might have stayed with the low-cost ISBT system and redirected the balance elsewhere. Yet now ISBT’s insolvency has brought the chickens home to roost.
ISBT’s quarterly filing for May 31, 2025, showed a surplus of approximately $13.5 million and reported a $2.4 million gain through the first nine months of the fiscal year. But an independent audit completed the following February painted a dramatically different picture: ISBT ended the fiscal year 2025 with a fund balance of just $2.1 million and a $9 million annual loss. The Trust needed approximately $13.4 million in surplus to meet statutory requirements.
A year later, even that small cushion was gone, and ISBT was officially insolvent. DOI says it became aware on June 23 of this year that the Trust could no longer pay its claims, just over a week before school districts faced a July 1 renewal deadline. However, districts claim they were not told of the insolvency at the time, and many renewed their contracts before ISBT notified members on July 14 of the gravity of the situation. Even that notice did not fully disclose the amount of the shortfall.
ISBT’s insolvency meant that school employees and their dependents potentially faced large medical bills for services received under the assumption that the Trust would cover their claims. ISBT arranged an $11.9 million loan from Blue Cross, then issued a contribution call to member districts designed to cover approximately $13 million in principal and interest. School districts were given a choice of paying $714.71 per covered employee and dependent up front, or $21.74 per covered member per month on a payment schedule that could extend for three years.
According to DOI, September 10 was the deadline for districts to choose a payment option. Its website says districts already agreed to make additional contributions when necessary when they signed their participation agreements with ISBT. From DOI’s perspective, then, districts are not deciding whether they owe the money—they do no matter what—only whether to pay their share up front or over time.
As you can surely imagine, that put member districts in a financial bind. The Coeur d’Alene School Board instructed Superintendent Shon Hocker to negotiate a modified payment arrangement with ISBT that would preserve the district’s legal rights. The district offered to make monthly payments under protest without signing the proposed contract addendum, but that was not sufficient for Blue Cross, which began denying some claims for services provided during July and August, before the old self-funded plan ended on August 31.
As of today, ISBT is fully under the stewardship of DOI Director Dean Cameron, who was appointed rehabilitator by the Fourth District Court. Cameron is now responsible for overseeing the Trust, collecting remaining contributions, paying outstanding claims, repaying the Blue Cross loan, and winding down the old self-funded plan. DOI is separately investigating exactly what happened and attempting to answer the questions that remain unresolved:
Why did a Trust with more than $22 million in reserves lose nearly all of them in only a few years?
Were premiums kept too low for too long?
What role, if any, did districts leaving for the state plan play?
Why was the Trust’s financial deterioration not communicated more clearly to member districts?
Why were districts allowed to renew for 2026-27 before being told that the old Trust was insolvent?
Did the trustees, actuaries, and DOI respond quickly enough as the reserves disappeared?
What did DOI know, and when did it know it?
As conservatives, we believe that competition inherent in the free market nearly always provides better solutions than government systems. What, then, do we make of this situation? There is a temptation to look at the collapse of the Idaho School Benefit Trust and conclude that the private sector failed where government succeeded. After all, the Trust ran out of money while the state employee health plan remains solvent.
But the Trust was never really a private-sector enterprise in the traditional sense. It pooled taxpayer-funded school districts, provided benefits to public employees, operated under state regulation, and relied on private companies to administer claims and insure against catastrophic losses. The districts themselves ultimately bore the risk.
Perhaps the better lesson is that health insurance has become such a complicated hybrid of public and private institutions that the traditional distinction between the two is increasingly difficult to make. ISBT attempted to capture some of the advantages of private self-insurance while operating entirely within the world of public employment and regulated health care. It seemed to work—until it didn’t.
The important question now is not whether government or the private sector deserves the blame, but whether there were sufficient incentives and accountability built into the system. When a pool funded by taxpayers can lose more than $20 million in reserves before its members fully understand what has happened, something in that system failed—whether we choose to call it public, private, or something in between.
Idaho Ed News was very helpful in breaking down this story. Click here for its full coverage.
Dorothy Moon and Idaho Republicans unite against Prop 1
With just over a month to go until Election Day, Idahoans are getting fired up to vote. Absentee ballots are already in the mail, early voting starts in just two weeks, and voters are preparing to decide the most important questions of the day.
Chief among those questions is whether or not Idaho will turn back the clock on abortion and once again allow the destruction of unborn babies. Proposition 1 would slash Idaho’s laws that protect the unborn as well as women and girls. It’s too extreme for Idaho, and I hope you will vote no!
You don’t have to take my word for it. Idaho Republicans are coming together on this issue like never before:
U.S. Senator Jim Risch:
“The most basic right we have is the right to life. I am strongly pro-life and always have been.”
Attorney General Raúl Labrador:
“I oppose Proposition 1 because it is too extreme. Idaho’s current law protects unborn life while recognizing reasonable exceptions for rape, incest, and circumstances in which an abortion is necessary to prevent the death of the mother.”
Press releases
Congressman Simpson joins effort to keep Sharia Law out of America
Gov. Little comments on expanded state and federal partnership for forest management
Video of the day
My friend Caleb Pirc, director of Idaho Family Policy Center’s Legal Center, recently spoke with Lennox Kalifungwa for the New Saint Andrews College Kings & Statesmen program. I’m thankful to NSA for sponsoring the Gem State Chronicle, and suggest you subscribe to the podcast now in case more familiar faces appear in the future!
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Brian, great work on the ISBT.
Market competition does indeed bring out the best outcomes, generally. But market competition also imposes certain realities. As my old friend, Larry Lindsey, once expressed it, "we have a profit and loss" economy. Competitive, efficient, and sometimes lucky firms thrive. Incompetent, inefficient, and unlucky firms fail. You can't have thrive without fail. Sometimes, though painful for those directly involved, failure is often a good thing. From what you wrote, incompetency at best seems to have brough ISBT down.