Less than a year after Davis school employees began paying higher insurance premiums to bail out the district's insurance fund, they must again choose between health insurance benefits and how large their paychecks will be.

Educators Mutual, the district's Murray-based health insurer, has said it will raise premiums by 22 percent for 1989-90. That means the district will spend $10.4 million or $3,364 per employee in 1989-90.Still, the Davis district's hike is among the lowest in the state. Some districts have been told they will be charged 40 percent more for insurance, according to Davis Superintendent Richard Kendell.

The increase means Davis district has to come up with $1.8 million - $500,000 less than was appropriated to the district by the Legislature for rising insurance costs, said Roger C. Glines, district business administrator.

"We want to do what the employees would like to do with the money that we have," Glines said.

If the district remains with Educators Mutual, $500,000 would have to come from salaries or employees would have to take cuts in benefits. For the average employee, maintaining the same coverage would cost between $65 and $75 more per year.

For an employee with a spouse and three children it will cost $110 more a year. Employees with families currently pay $502 in annual premiums.

District hikes mirror a national trend. Since 1986, the district's health care costs have jumped from $4.8 million to $8.5 million this year.

News of an insurance increase, equal to a 1.5 percent pay raise, has been frustrating to teachers. Some fear that rising health care costs will dilute a pay raise recently approved by the Legislature, said Steve Sirkin, Davis Education Association executive director.

"Four years they have gone without pay increases and now they realize that changing health care is taking something else away. It is just another nail in the coffin. It is one more frustration on whole line of frustrations that teachers have experienced in the last four or five years. They understand it is something we have to deal with," Sirkin said.

An increase in insurance premiums would follow a negotiated agreement last year between employees and the district that upped employee participation in health care coverage from 10 percent to 15 percent. The district continues to pay 90 percent with the extra 5 percent helping to retire a $1.2 million debt. DEA, leaders of the Classified Employees Association and district officials have formed a committee and paid to have a Seattle-based health care consultant, Larry Chapman, visit in March. Besides offering advice, Chapman prepared a questionaire asking employees about health habits and whether they would like to maintain the present health benefit coverage or have less of a salary or wage increase.

The committee will ask the school board to allow them to hire an insurance broker, Fred A. Morton, to assist in redesigning the district's health insurance program and seeking bids from carriers. The broker could help retool the entire program, which could take as long as nine months, or make only small adjustments before the current insurance contract expires this fall, Kendell said.

Cost-cutting changes that the DEA has discussed with its members include contracting with a group of health care providers - usually hospitals and physicians - to provide district employees health services at a discount.

Another option would be to offer a health maintenance organization plan or adding a deductible of $100 per individual and $300 per family. The cost of the insurance plan could also be based on actual claims employees have.