School District Self-Funding Health Care, Saving Money
MINNEAPOLIS (WCCO) - A newly adopted insurance program in Prior Lake-Savage area schools is saving them more than $1 million this year. They've switched to a self-insured program. Natalie Nyhus spoke with the district about how the model works.
The health insurance world can be a complicated and confusing one.
"It certainly can be difficult to understand," said Al Hofstede, Vice President of Sales and Consulting at Corporate Health Systems. "But most people will spend more on insurance and healthcare in their lifetime than any other thing in their life, with the exception of maybe their mortgage."
The Prior Lake-Savage school district recently tried a different way to insure themselves.
They've gone from "fully insured" to what's called "self-insured or self-funded health care."
The district has reportedly saved more than $1 million this year alone.
"In the first year, we saved over $1.15 million," said Matt Mons, Director of Human Resources in the Prior Lake-Savage School District. "We saved $800,000 in fixed costs and $350,000 that we would have paid additionally in claims."
Instead of paying a premium on a monthly basis, the district pays the claims as they come in. Basically, you only pay for what you use. Hofstede helped set up the program.
"We still hire a third-party administrator or insurance company, so they can still see the same providers," Hofstede said. "They can still have access to the same prescription drugs. We just fund the claims out of the district's bank account."
It's not a new concept.
"Self-insurance is not new," Hofstede said. "Many employers are going to it. Many employers have already been doing it for years."
It's a model typical of large, private companies. School districts are seeing it as a way to control administrative costs.
"I think the staff, the teachers, all of the members of our insurance committee have felt really good about the change," Mons said. "We are able to manage our costs much more effectively in this model."
Corporate Health Systems has provided this type of insurance for more than 15 other school districts, large and small. They say so far, it's been a successful program.
