Self-funding health care program cuts costs for Palm Beach County school districtReprints
While prevention and detection through a sweeping wellness program are at the core of the School District of Palm Beach County's efforts to keep health care costs under control, a variety of other actions also has been pivotal, says Dianne L. Howard, the West Palm Beach, Florida-based school district's director of risk and benefits management.
One of the first cost-saving steps Ms. Howard took was to move the school district to a self-funded health care benefits program in 2007.
Two big reasons — both financial — drove the decision to self-fund.
“We decided to self-fund when we realized the profits the insurer was making every year,” Ms. Howard said. “Insurers build in a risk corridor, since they are taking the risk if our claims exceed what they expect. It's probably at least 5% of the premium.”
In addition, by self-funding, the school district does not have to pay the premium tax the state of Florida imposes on health insurers, a cost insurers typically pass on to policyholders in the form of higher premiums.
Ms. Howard estimates that by self-funding — reaping the risk corridor profits and an exemption from insurance premium taxes — the school district saves about $10 million a year. In addition, the school district gets “more detailed reporting, since the data is ours,” she said.
Networking led to another way for Ms. Howard to reap millions of dollars a year in savings for the school district's prescription drug benefits program.
Through her membership in the Orlando, Florida-based Florida Health Care Coalition, an organization whose employer members have about 2 million enrollees in their health care plans, Ms. Howard became aware of prescription drug rebates.
Under such arrangements, prescription drug manufacturers give rebates to insurers in exchange for positioning their drugs on lower copayment coverage tiers that cost less for plan enrollees, resulting in the sale of more of that drugmaker's prescriptions.
After learning of the rebates, Ms. Howard approached UnitedHealthcare, the administrator of the school district's prescription drug program, and asked it to forward the rebates to the school district. UnitedHealthcare made a counteroffer: It would discount the administrative fees it charged the school district for running the prescription drug benefits program.
The offer was significant: UnitedHealthcare said it would cut its administrative fee by $5 per employee per month, for a total savings of $1.2 million.
But Ms. Howard declined. “I said I don't want the $5 discount because I wouldn't get the data or even know what the rebates actually were. I said we would take 80% of the rebates.”
UnitedHealthcare advised there was a “cash-flow concern” involving the rebates. The insurer told Ms. Howard that the drug manufacturers didn't immediately distribute rebates and, as a result, the school district could have to wait as long as nine months after a plan year began before the rebates would start to roll in if it wanted a share of them.
Ms. Howard didn't find that argument persuasive: “Cash flow was not a problem for us. So receiving rebates would work for us.”
Ultimately, UnitedHealth agreed to pass on 80% of the rebates it received from the drug manufacturers, later increasing it to 100%, saving the school district about $5 million per year.
“They valued our business,” Ms. Howard said. “Our challenge is to stay ahead of where the money is hidden” in the health care system.
In other cases, digging through claims data resulted in significant cost savings. For example, in 2012, the school district began to impose deductibles and coinsurance requirements for diagnostic treatment and magnetic resonance imaging.
Digging through claims data, Ms. Howard saw that deductible and coinsurance had not been applied to the MRI claims. “That didn't make sense,” she recalled.
A months-long investigation by UnitedHealthcare revealed that claims had not been properly adjudicated. “We were self-funded, so it was our dollars” that were incorrectly being spent, Ms. Howard said.
In the end, the appropriate cost-sharing requirements were administered, and the school district recouped $4 million in claims that plan participants, not the school district, were responsible for paying.
Other sources of savings have been periodic audits of health care coverage eligibility. At one time, about 1,000 people who were no longer eligible — such as employees' adult children who, because of their age, were not eligible to remain on their parents' coverage or employees who had terminated employment — still had claims being paid.
“We started chipping away at the problem,” Ms. Howard said. Ultimately, enrollment audits saved the school district $4.4 million by detecting those no longer eligible for coverage, she said.