Worcester Business Journal

10 Worcester Business Journal • October 12, 2015 www.wbjournal.com sible, said Jeff Solomon, WPI's executive vice president and chief financial officer. "(Self-insuring) would take some pressure off the revenue side," Solomon said. "We can keep tuition lower if we can manage our costs." While declining to provide specifics, Solomon said he was very pleased with the savings self-insuring provided WPI in its first year. Going it alone, together The difficulty in setting up self- insurance as well as administrating it has long been the province of only the largest institutions. As many as 58.5 percent of all workers with health cov- erage receive it from organizations that are self-insuring – according to the most recent 2011 data from the Employee Benefits Research Institute – but those are mostly employees of com- panies with 1,000 or more people. Only 12 percent of employees of companies with 50 or fewer workers receive their health coverage through self-insurance plans. EdHealth gives access to schools which previously would have been too small to self-insure, said Tracy Hassett, the president and CEO of EdHealth. The sheer number of employees allows for the negotiation of better rates all around. Pooling buying power is nothing new, said Solomon. WPI uses similar techniques to purchase workers' com- pensation insurance and overall uni- versity commercial insurance. In joining EdHealth in 2014, the organization relinquished its fully- insured status and took on the respon- sibility of covering its employees' claims. While this is seamless for employees, it required behind-the- scenes work with actuaries to calculate cost and coordination with an insur- ance company that takes on the daily administration of claims and allows the organization access to their coverage network. Harvard Pilgrim Health Care – EdHealth's third-party administrator – processes claims and bills the schools. It also serves as an important barrier between the employer and individual employee data. "For the employees it was seamless. They still get their Harvard Pilgrim card and get to see their doctor," said Hassett, WPI's former vice president of human resources. "That was critical to us because we didn't want any of our employees to see a change in coverage or change their doctors." Healthy employees For WPI, that risk has been success- ful in lowering insurance costs. Key to this, said Solomon, was the institution taking a more proactive approach to employee health. This is essential in any self-insuring situation, as healthy employees file fewer health claims, said Delia Vetter, the senior director of health care inno- vation for EMC. Having employees' general claim information enables EMC and other self-insurers to cater their employee wellness programs to cut down on the most expensive claims. "We know exactly what types of pro- grams are needed," Vetter said. "It's really through consumer engagement and (healthy living) programs that we contained costs." This doesn't mean that self-insurance is the right decision for all, said Vanessa Costa, a Worcester employee benefits manager and principal at Advantage Benefits Group Inc. The move from a fully-insured plan with a defined pre- mium to a strategy requiring more specific data increases employer risk. An unanticipated $3 million claim could devastate a small company, and all companies need to decide how much risk it can handle, Vetter said. Stop-loss insurance can guard against this, covering either individual claims over a set amount or an overall amount of claims for the entire company. However, this and higher administra- tive costs can add up, requiring each company to work with actuaries to evaluate not only the risk but whether there is actual potential for savings. With companies of a certain size, these costs can be absorbed. Additionally, once there is long-term data and a company is more comfort- able with self-insurance, stop-loss insurance can be dropped by the busi- ness, which is what EMC did. Small business applications While the collaborative model has opened up self-insuring to schools of various sizes, Solomon questioned whether the collaborative model would work among for-profit companies. "In higher education, people love to get together and identify a problem and figure out how to solve it. I don't know that in the corporate world it is quite the same," he said. An easier first step for the private industry may be focusing more on employee wellness, Costa said. While fully-insured companies will not see the financial benefit immediately, even- tually their rates will come down with a healthier employee population. "The only way to control cost is to get our workforce healthier," Costa said. "Regardless of the size of the company, I think promoting wellness can only help us all in the long run." n College collaboration leads to self-insurance savings >> Continued from Page 1 WPI Executive Vice President and CFO Jeff Solomon and EdHealth CEO and President Tracy Hassett stand above a basketball court on WPI's campus. Among the many benefits of going self-insured for health insurance is being able to encourage healthy lifestyles among employees and target health needs. P H O T O / C O U R T E S Y "(Self-insurance) would take some pressure off the revenue side. We can keep tuition lower if we can manage our costs." Jeff Solomon, WPI executive vice president and CFO Percent of private-sector firms that self insure at least one of their plans, 2013 By Firm size 83.9% 500 or more employees 25.3% 100-499 employees 13.3% Fewer than 100 employees By Industry Percentage of private-sector firms that self-insure at least one of their plans, by industry, 2013. Financial services and real estate ............................... 46.8% Retail trade ..................................... 55.6% Wholesale trade ............................. 32.4% Utilities and transportation ........... 45.8% Professional services ...................... 29.9% Construction ................................... 20.1% Mining and manufacturing ........... 27.9% Agriculture, fishing, and forestry .................................... 20.5% Other services ................................ 37.6% TOTAL ......................................... 34.3 SOURCE: Employee Benefits Research Institute (EBRI) and Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends. 2013 Medical Expenditure Panel Survey- Insurance Component.

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