District 51, county choose to self-insure
Not-for-profit system designed to slow increasing cost of health care
When School District 51 officials got a note from their health insurance provider saying employee insurance premiums were going up $1 million the next year, then-Superintendent
Tim Mills decided it was time to try something new.
The district switched to a self-insured system a few years ago. The district covers employees for no cost to them, and staff can get coverage for their families if they pay the full premium for adding members. The district pays a branch of Rocky Mountain Health Plans to process medical claims and pays a stop-loss carrier for coverage of high-cost claims.
The system is not for profit and is designed to help employees and the district save money.
Melissa Callahan DeVita, executive director of support services for District 51, said a company can tailor a program to fit the employee population and save money by encouraging employees to stay healthy. The school district, for example, offers free flu shots and a discount for voluntary blood screenings to detect early signs of cancer, diabetes and high blood pressure.
“We try and do various things to help claims costs and keep premiums down,” Callahan DeVita said.
The system doesn’t make companies or organizations that insure themselves totally immune from cost increases. Premiums will go up 10 percent this year, Callahan DeVita said. But that will be a savings compared to the million-dollar increase expected a few years ago.
Mesa County has adopted a similar system. The county had double-digit premium increases regularly until taking on a self-insurance program. This year, it had just a 5 percent increase in insurance costs.
Avoiding overhead costs has contributed to keeping costs relatively steady, Assistant County Administrator Stefani Conley said. It also helps to cover a limited population living in one of the healthiest states in the country, rather than having resources pooled in a group with employees of companies that don’t encourage preventative care or wellness. The county pays a company to keep track of claims and report trends so the county can cover preventative and continuing care in areas that particularly impact employees. And it can ease back on coverage of care that only few employees would need.
“We can model costs better, and we don’t have to pay someone else’s overhead,” Conley said.
“Instead of paying $10,000 for hip surgery, we can pay $500 for hip rehabilitation.”
The system works best for larger companies, Conley said.
“If you have 50 employees or less, self-insurance doesn’t work for you. We’re able to spread risk across a lot of employees,” she said.
Not having a self-insurance company can cost quite a bit. Mesa Developmental Services is “looking at about a 13 percent increase starting with our next plan year,” said Jerry Miller, human resources director.
“The claims we get, get more expensive,” Miller said.
As hospital and doctor visits get more expensive, insurance claims cost more, and the cost spreads into charges for premiums.
“Over the years we’ve had employees that figured ‘I won’t take it (coverage), and I’ll go to Marillac (Medical Clinic) and have no deductible,’ ” Miller said.
The cost of health insurance a person buys through the workplace has gone up 5.5 percent in the past year, according to a recent report released by the White House. The report did not separate self-insured companies from companies that buy group coverage for employees.
Community Hospital charges employees just $575 a year for insurance, a cost kept low, according to benefits coordinator Cynthia Simister, by employees being more self-aware than most people about health issues and when it’s necessary to seek treatment. The hospital’s self-insurance program allows employees to visit doctors and hospitals nationwide that are on a particular list, and the hospital itself avoids paying too much for claims by purchasing insurance for claims costing more than $100,000.
Having employer-run insurance can be tricky, but it’s a gamble that can cost much less in the end, Leitner-Poma of America controller Susan Keesler said. Leitner-Poma’s self-insurance program “had a good year last year” for claims, saving the company from spending more than anticipated on health care.
With a group insurance program, benefits are paid regardless of whether a person seeks a little or a lot of health care. With self-insurance, “It’s usually cheaper,” Keesler said, because the company doesn’t look to profit from providing insurance, and a good year for claims is a good year for premiums.
The payoff is obvious for employers and employees, Conley said.
“With a fully insured medical program, you pay a premium, and if you ended up not using your premium, they still have the money,” she said. “With a self-insured plan, you get an accurate depiction of what you’re getting out of the plan.”