This seems like the most appropriate folder to post this in…..
My wife is on the local school board. It’s not a small district….yearly budget is in the multiple millions.
She is generally very busy at work, so I often end up reading the board meeting agendas -hand delivered every week to our doorstep…no wonder my taxes are so high!-so I can give her a quick read before she gobbles a sandwich & rushes off to the meeting.
Our district is planing on switching to a self-funded health insurance program. They apparently have the unions buy-in, which amazes me, since in general they are unwilling to change ANYTHING.
Reading the agenda materials -prepared by an outside consultant; did I mention my taxes?-I can’t really see how the change saves money. Still have the same provider, still have the provider doing most of the administration, and have to buy additional stop loss insurance per both individual claim and total yearly claims. The only thing I’ve notice, in doing a bit of Web search, is the following…
“ERISA has evolved into a shield that insulates HMOs from liability for even the most egregious acts of dereliction committed against plan beneficiaries.”
And as I read the Google page, self insured plans become the HMO’s, and are then much more protected against claims for punative damages.
Now, the unions aren’t lacking in smart lawyers, and I can’t see how this would get past them, so I’m wondering if I’m reading the situation correctly, and if anyone here knows anything on the subject I’d be glad of their expertise…..
Replies
Dunno about the particulars -- the whys and wherefores -- but lots of large companies do this. I'm sure there's smoke and mirrors somewhere, but it's "normal" smoke and mirrors.
around here it seems to be popular, can't tell you why, but I figure it must cost less.
There may be tax angles or some such for companies, though that wouldn't apply to a school district.
Conscience is the still, small voice which tells a candidate that what he is doing is likely to lose him votes. --Anonymous
I think that this might be more common for WC than health ins., but I know we have co. that specialize in doing either for school districts around here.
Insurance is all about risk. If you're paying insurance premiums, you're paying someone else to take a risk, and in theory, they average it out over lots of groups. If you're self insured, you're taking on the risk. And good luck with that - insurance companies are experts at determining and managing risk, because that's what they do. My advice is: if the school board thinks they can do better, well, wish them luck, and then move.
When you have a large organization, the payout for something like medical insurance occurs at a fairly steady rate -- fairly easy to budget for. So one can "self-insure" (though using an ins co to handle the paperwork) and then buy "reinsurance" to cover major losses. Somehow it works out for many companies, though I don't know quite why. Possibly because it relieves the ins co from having to hold reserves.
Conscience is the still, small voice which tells a candidate that what he is doing is likely to lose him votes. --Anonymous
That works well if you have enough people in the pool, and if everything goes well. It's a gamble. Even insurance companies buy reinsurance policies to insure their insurance.
Risk management isn't for amateurs, unless it's someone else's money. Which, in the case of a school board, is, I guess, the case. Hey, what's the worst that can happen? The taxpayers foot the bill. So, the members of the school board have zero downside risk - if it works out, they're heroes; if it doesn't work out, they don't have to pay.
you could put what i know in a thimble,but heres what happened at my wifes job.
company self insures, about 40-50 employees. in the first year the bosses daughter has a baby,premature,tons of problem,lots of money. then another employee gets a brain tumor,the company plan is beyond broke and can't pay for about 25% of the brain tumor. he has to take bankrupcy and none of the other employees have any insurance, and alot of them had little stuff that they never got paid. it was a disaster.larry
if a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
Yeah, I'd think that about 1000 employees would be the minimum for a self-insurance plan. Either that or real good reinsurance. Even with 1000 employees you need reinsurance for organ transplants, etc, or a plant explosion or some such.
Conscience is the still, small voice which tells a candidate that what he is doing is likely to lose him votes. --Anonymous
(The state insurance commissioner wasn't on the ball, it sounds like.)
Conscience is the still, small voice which tells a candidate that what he is doing is likely to lose him votes. --Anonymous
See mforbes reply.....
On the ERISA piece, yes, an insurance company that sells you (or your company or whatever) full insurance coverage is covered by state laws. But if your organization is "self-insured" -- you can turn around and contract with the same insurance company to process claims, print ID cards, etc. so that it is transparent, only difference is the organization holds the claim risk, not the insurer -- the plan is now govered by federal law (ERISA), and it is much harder to sue. Large multi-state companies like it because it allows them to offer one benefit package to all employees instead of addressing each individual state-specific coverage mandate. Cost-wise it's not that different, instead of paying a risk premium to the insurer (factored into the premium rates) you have to pay for re-insurance. Claims-wise there should be any difference if you are fully-insured or self-insured, that is driven by what's in the benefit package and how you structure copays.
Thanks.....