Self-funded insurance plans offer alternative

BOULDER — Long the preference of large companies, self-funded insurance programs are getting more attention from smaller-business owners looking for ways to counteract rising health-insurance costs.

A wide variety of area employers are offering some form of self-funded insurance plans in the Boulder Valley, from Boulder’s McGuckin Hardware and Longmont’s Circle Graphics to IBM Corp. in Boulder and the Boulder Valley School District.

McGuckin’s chief financial officer Paul Gomez said it’s “the McGuckin Way” for the company to offer the best benefits it can, including a self-funded insurance program for the company’s 140 or so full-time employees.

Being self-funded with a “stop-loss” plan for health-insurance bills of more than $50,000 per year per person has saved the company money, Gomez said. But employees also like it because they pay premiums of about $200 per month for a single person, or $600 or so per month for a family and get wellness benefits such as a partially funded membership to a local health club, he said.

“Boulder is probably more conducive to this because people are relatively healthy around here,” Gomez said. “Our employees like the idea, too.”

Companies say that going the self-funded insurance route usually means hiring a third-party administrator to pay claims. In McGuckin’s case, CIGNA, the national health-insurance company, does the work. Most companies that offer self-funded insurance plans also offer some sort of health-maintenance organization, or HMO, plan, too, although McGuckin does not.

In return, McGuckin had an estimated 25 percent savings in expenses in 2010 from going the self-insured route versus offering a full coverage plan from a national health insurance company, Gomez said. On average, the company saves 10 percent to 15 percent in health-insurance expenses per year, he said. But in 2009, the numbers were “dead even,” Gomez said, making the owners look at whether other health-insurance plans were less expensive.

“It has worked out very well. On average, we’ve saved money being self-insured,” Gomez said. “But at some point in the numbers, it’s better to have the insurance company take on that liability.”

In general, any business with more than 35 employees may benefit from using some variation of a self-funded insurance plan, area insurance brokers said. The biggest plus of such plans can be that they give employers a chance to be more creative in what they offer in terms of health benefits, brokers said.

“If the employer wants to offer $5 office co-pays or have vision exams covered at 100 percent, they can tailor their medical plans to suit their needs,” said Bryan Robins, director of sales at CBIZ MeyersDining in Boulder.

At IBM Corp. many of the 2,800 or so employees worldwide, get full health coverage through the company’s preferred provider organization, a self-insurance plan, said Laurie Friedman, an IBM spokeswoman in New York. IBM employees also have other choices, including an HMO plan, Friedman said.

Nationwide, about 75 percent of all companies with 500 employees or more are self-funded, said Brad Cornish, an actuary at the Denver office of Mercer, a national consulting firm.

In a related move, the federal government plans to role out health exchanges in 2014, which are to give employers with fewer than 50 workers a chance to band together with other small employers to get the benefits bigger companies do in health insurance. It’s a key piece of the federal Patient Protection and Affordable Care Act signed into law in March 2010.

As another benefit, administrators hope their workers get more healthy at the Boulder Valley School District and the University of Colorado system.

“Lower costs are a bonus,” said Bob Jamieson, benefits director for 3,000 or so district employees, about 60 percent of whom went on a self-funded plan in 2010. “Ultimately, we want to improve health, and hopefully this will make our costs more affordable and sustainable.”

So far, the school district’s number of health-insurance claims went down slightly in 2010, Jamieson said, although they still totaled $25 million for the year.

“Our trend is stable to negative, but it’s still extremely high,” Jamieson said.

The University of Colorado is emphasizing weight management and other wellness programs after switching back to a self-insurance plan, said Jill Pollock, senior associate vice president and chief human resources officer for the university. CU administrators decided to move to self-funded insurance in 2010 after seeing double-digit health plan rate increases in the industry in recent years for its $108 million or so annual program, Pollock said.

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