Agency Moving to Self-Funded Health Insurance

If you attended one of last month’s benefit meetings, you heard about the following change in the Agency’s medical insurance. If you didn’t attend a meeting, but have heard about this change from other staff, here is more information about this topic. 

At the Agency’s March 2013 Board of Directors meeting, the Board approved the Agency’s move from fully-insured to self-insured medical insurance effective July 1, 2013. There are several reasons for the change: 
1. The Wellmark Blue Cross/Blue Shield renewal quote made the economics of having a self-insured plan attractive 
2. Heartland AEA’s claims and trends have been more favorable in the past few years which didn’t seem to be reflected in the fully-insured renewal quotes 
3. The new federal “Affordable Care Act” imposes new costs, and we believe that these new costs can be reduced in a self-insured plan 
4. Fully-insured plans pay a state premium tax that self-insured plans don't pay 
5. Self-insured plans provide more flexibility 
6. Any excess (reserve) funds are retained by the Agency instead of being retained by Wellmark. 

A self-insured plan is owned by the Agency, whereas a fully-insured plan is owned by the insurance company and is essentially “rented” by the employer. An analogy is owning vs. leasing a car. Ownership implies taking on more responsibility, but it also provides more flexibility to the owner compared to someone who has limitations from a car leasing company. 

Is the Agency accepting more risk? Yes, although we have structured the self-insured program to minimize these additional risks. The Agency will purchase re-insurance from Wellmark to assume the risks associated with large claims and risks associated with a year that has an unusually high level of claims greater than expected. 

Will self-insuring our plan impact wellness initiatives in the Agency? Yes! Over time, the fund should build up a reserve, and a minor portion of these funds will be used to sponsor wellness initiatives and incentives. An emphasis on wellness is good for our employees, our early retirees and their families. Assuming personal responsibility for wellness and making healthy choices will have long-term benefits for our insurance plan. 

If you have further questions about this information, contact Kurt Subra, Chief Financial Officer, at ksubra@aea11.k12.ia.us or ext. 14613.