Lindbergh school board adopts self-insurance program for employee medical benefits

By MIKE ANTHONY

Executive Editor

The Lindbergh Board of Education recently agreed to adopt a self-insurance program for employee medical benefits that is effective Jan. 1.

Over time, the self-insurance program will save the district money and result in lower premiums for employees, who pay for spouse and family benefits, according to Chief Financial Officer Pat Lanane, who recommended the board adopt the self-insurance program for medical insurance.

For employees, the change from the fully insured program currently in place to the self-insurance program will be “seamless,” he said.

“There will be no outward change whatsoever in the medical insurance plan for employees except the insurance card will look different. It will have Lindbergh’s name on it,” Lanane said. “We will use the UnitedHealthcare network, which means you can keep your same doctor. You keep your same hospital. You keep the same pharmacy. All those things stay the same.

“So from an employee standpoint — and I’ve presented this to the Insurance Committee — it looks exactly the same. So there was really very little concern. One concern that was mentioned that had to do with self-insurance and how does this affect confidentiality of medical insurance, and it doesn’t affect it in any way …,” he added.

The chief financial officer noted the board later would consider approving premiums for medical insurance.

“… The reason we bring this up, the insurance premiums on medical that are presented tonight are for a self-funded plan. So that’s why we wanted to have this discussion prior to the presentation of those quotes later on. Basically, what we’re trying to do is take the middle man out of the insurance picture,” Lanane said at the board’s September meeting. “We’re all more than aware of what insurance costs have done over a period of time. In the fully insured model, the district pays a monthly premium to a carrier who pays all the bills, processes all the claims and keeps all the records.

“That carrier assumes a risk and the risk that they assume is they want the claims to come in at a number that allows them to pay for all their services and make a profit.

“(Under) the self-insured model, basically they stay in place because we still need their network — their heavily discounted network, by the way. We still need their claims processing, and we’ll pay for that. It’s about $75 per person, per month. And then we assume the risk that the premiums that we’re paying will cover all of the claims and still have money left over. So we build our insurance pool and over time, we’re able to spend less on monthly premiums.”

The district will not be taking on the full risk involved with a self-funded insurance program, Lanane said, noting stop-loss insurance would be purchased to mitigate the risk of moderate to high-cost claims.

“Now you don’t want to take that full risk because that is a risk, and so we mitigate that risk by doing two things. We buy stop-loss insurance for individual claims. At $125,000, the stop-loss kicks in and pays the rest of that claim, whatever it is, even if it’s a million dollars,” he said. “Also, when the average claim gets to be a certain point — in our case, it’d be $585.11 per month — when the average gets above that, again the stop-loss comes in and pays all the claims above that.

“So we have mitigated, we have set a safety net, if you will, on our risk. And that’s essential when you look at these programs.”

Lanane noted he has been monitoring self-insurance programs in the Kirkwood and Mehlville school districts, and while the savings to Lindbergh will not be immediate, they will be reaped in the long run.

“… It’s a long game you’re playing here. It’s not what happened this year or this month or this quarter. It’s how do we do over a 10-year period? And we firmly believe that over a 10-year period, the district will absolutely save money and employees because they pay for the spouse and the family coverages they have out of their own pockets … that it will be win-win that both groups will benefit over time,” he said. “… We wanted to see how that worked for them because they’re very similar in demographics — Mehlville’s larger, Kirkwood’s almost identical — and it’s paid off dividends there for them in lower premiums. So again, that’s something and particularly in this economic time … we’re looking for any kind of savings that we might be able to get.”

Another benefit to having a self-insurance program is the district will be in charge of it, Lanane said.

“… We can set a design that meets our needs,” he said. “Basically when you’re buying from the insurance carriers, you’re buying their cookie-cutter type ‘this is the program, this is the platform that you must sign onto.’ And when they change that platform, you must also sign onto that.”

After reviewing the district’s medical insurance experience over the past seven years, Lanane told board members he is convinced the district will save money with a self-insurance program.

“… Over that seven-year period, we would have saved some significant money,” he said. “And, in fact, we took a half step toward this model a couple of years ago where if our claims are so low — they’re below 80 percent — we share every other dollar with the insurance company.

“Well, we’re going to quit sharing … We’ll be the ones to retain that money and lower our costs.”

The self-insurance program also will allow the district to establish wellness programs for employees, Lanane said.

“… We feel that this will give us an opportunity to have control (and) implement some wellness activities, which are good for our employees and good for our insurance budget over time …,” he said. “We think that probably for this year alone we can keep our premium at 4.5 percent. That’s what you’ll see in the insurance bid, which is a very low increase. And, in fact, that will allow us to start to build a reserve in our insurance fund. We’d like to get two months’ reserve in there and then over a period of time, we will save significant dollars …”

The board later voted unanimously to select carriers for medical, dental, vision, life and disability insurance as recommended by Lanane.

“… Many places are looking at some huge increases, but our medical insurance premium, based on the plan we’re talking about tonight, would be 4.5 percent. Our dental insurance is a 2-percent decrease. Our vision insurance is a no-premium increase because that was a multiyear pact. The life insurance is a 19-percent decrease, which was surprising, and the disability coverage is a 17-percent increase. So we’re very happy with the results of our insurance process for this year …,” he said.