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Cost Control

January 2016

By Nancy Mann Jackson

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Institutions that have joined to form health-care consortia are benefiting from cost savings, while being able to comply with complex and changing ACA regulations.

Against the backdrop of mounting criticism over rising higher education costs, college and university business officers are looking for creative ways to cut those costs. For many, the area of escalating employee health-care prices is an ideal place to start. Across the country, several groups of higher education institutions have joined to form health insurance consortia, working together to provide benefits to their employees at a fraction of the cost they once paid individually. 

“With the rising costs of higher education, anything we can do to lower that cost is important,” says Tracy Hassett, CEO and president of EdHealth, a health insurance collaborative launched in 2013 by 11 colleges and universities in the Boston area. “And working together to provide health insurance for employees is significantly lowering costs for the institutions participating in the program.”

Through EdHealth and other similar health insurance consortia, institutions are weathering the current challenges of providing health-care benefits and yielding positive bottom-line results. For instance, in its first two years of existence, EdHealth has saved its participating institutions more than $10 million compared to the health insurance costs they were incurring before.

Accommodating the ACA

Since the Affordable Care Act (ACA), also known as ObamaCare, was signed into law in 2010, the business of health care and health insurance has changed significantly. For higher education consortia, the new regulations have presented both disadvantages and advantages. 

On the negative side, the regulations bring more cost and changing rules.

At the Collegiate Association Resource of the Southwest (CARES), a health insurance consortium of three colleges and universities in Texas, ACA compliance—and the time and costs associated with it—is one of the greatest challenges the organization faces. “Like everyone else, CARES is spending more and more time on its compliance efforts and more money on taxes and fees,” says Scott Kiedaisch, executive director of CARES. “We are trying to educate not only ourselves but also our participants, and strategizing for future solutions, for example, to mitigate the effects of the Cadillac tax.”

On the other hand, the consortia have been able to mitigate some of the regulatory burden. 

Because EdHealth was formed after the passage of the ACA, organizers of that consortium were able to prepare for the new regulations from the outset, avoiding significant impact. “Many of the rules of the ACA don’t apply to self-insured plans,” says Stephen P. Hannabury, executive vice president at Olin College of Engineering, Needham, Mass., and an early organizer of the group. “But we’re paying attention to the law and starting to offer new plan options to help participants avoid the Cadillac tax.” 

Employee Wellness and Engagement 

One of the hot topics in health care right now is patient engagement, Weinstein says, as consumers who are more involved in their own health care are likely to make informed decisions and healthier choices, limiting their needs for health services. “Everybody needs to be engaged, but we are working to provide employees and their families with tools for engagement,” he says.

In 2017, ICUBA will roll out a telemedicine benefit, allowing employees to contact physicians remotely for a co-pay of $5. And to encourage every employee to utilize preventive care and wellness benefits, ICUBA will be introducing a new plan design known as a 0/5/10/20/30/300 plan, which represents different levels of co-pays for different types of services, Weinstein says.

“These services are so important to contributing to health that they should cost nothing. So the co-pay is zero for wellness benefits such as allergy injections, well visits, preventive tests, and six visits to the Employee Assistance Plan [mental and emotional health clinic],” Weinstein says. Other types of visits require progressively higher co-pays, such as telemedicine, retail clinic visits, urgent care, emergency transportation, and emergency room visits. 

EdHealth actually got its start as a wellness and disease management effort, focused on helping participating institutions reduce the severity and number of health insurance claims by helping employees pay more attention to their health, Hannabury says. In 2010, the Boston Consortium for Higher Education launched “Healthy You,” a wellness program with a disease management component, aiming to get higher education employees more engaged in their health in order to reduce health-care costs for the universities. Eventually, the Boston Consortium handed over this program to EdHealth, which now provides both the insurance collaborative and the wellness program to its members. 

And focusing on wellness does save money, Hassett says. Her former employer and one of the EdHealth member universities, Worcester Polytechnic Institute (WPI), Worcester, Mass., implemented a diabetes disease management program as a result of the consortium’s efforts. Because diabetes was among the most expensive conditions in the university’s health-care costs, WPI paid a specialist to come in and work with self-selected employees who had diabetes. Twelve people signed up to participate in the eight-week educational program, and by the end of the eight weeks, nearly half of them were able to stop taking insulin medication. 

“People lost weight, created lasting new habits, and built a network with each other,” says Hassett, who worked at WPI before joining EdHealth. “Our work is not just about insurance; it’s about how to reduce the increasing cost of insurance, and an important way to do that is by changing behaviors.” 

Harnessing Cost Savings

Health insurance consortia are reaping savings for their members by containing health-care costs and by simplifying administrative burdens. Following are some tactics and results.

Each month, members make a contribution to their claims fund. As the institutions’ employees have health insurance claims, the administrators withdraw funds from the pool to cover those claims. In addition to the self-insurance pool, EdHealth members also purchase stop-loss insurance from an EdHealth-run captive insurer to cover potential claims that could go above their self-insurance limits. “If a college has a specific claim that exceeds its stop-loss attachment point, the captive will reimburse the college for the amount over the limit,” Hannabury says. 

And while the EdHealth institutions that previously worked with insurance brokers still have relationships with them, those relationships are on a fee-for-services basis directly with the broker/consultants. “Results in the captive organization have been so good that we’re already considering distributing surpluses back to participants,” Hannabury says.  

ICUBA’s greatest cost savings have come from helping its member institutions manage health-care costs. For instance, the organization has negotiated with pharmacy benefit managers to keep the average cost of drugs at a guaranteed level. If the agreed-upon cost level is not achieved, the pharmacy benefit manager must provide reimbursement to ICUBA, which distributes the savings back to its members. 

The group has negotiated similar discount guarantees for hospital bills for its participating institutions. “If the discount guarantee is not met, Florida Blue will pay a benefit,” Weinstein says. “Because we’ve been able to build up a capital surplus, we’ve been able to assume more of the risk for stop-loss insurance, and we reinsure for those claims.”  

Another cost-saving benefit of ICUBA has been operating an active EAP (Employee Assistance Plan), Weinstein says. The organization offers six EAP visits for no cost, and, at any time of the year, at least 10 percent of the plan participants are accessing the EAP. “The emotional well-being of an individual impacts his overall health,” Weinstein says. “Financial stress, legal stress, and family stress all affect physical health. Because our EAP is bundled into premium costs and made available to all [participants], we are confident that employees and their families are finding stress relievers through their use of the EAP, which is helping them to use the plan more effectively. We’ve found that having an active EAP helps cut costs on other health-care services.” 

For all the health insurance consortia, the key to success is cooperation. “In higher education, this isn’t anything new; schools have been collaborating forever,” Hassett says. “Individuals who work in higher education are smart people. The more brainpower we use together, the better off we’ll be.” 

NANCY MANN JACKSON, Madison, Ala., covers higher education business issues for Business Officer. 

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