BERNARDS TWP., NJ - The Board of Education is considering a self-insurance plan for health benefits in which coverage and costs to the employee would be unaffected, but would make the school district the administrative handler and payer of most claims.
The change could save the school district, which has about 720 employees under the health plan, up to $1.2 to $1.4 million a year, insurance consultants say.
The plan would continue health coverage under Horizon Blue Cross Blue Shield, but the district would handle the claims and make the payments, as described by representatives of the Arthur J. Gallagher benefit services firm, based in Princeton.
Under the concept, the school would keep coverages, premium costs, deductibles and other features of its health benefits system.
While saving money is a huge attraction, the change in its most extreme could put the school at risk in the event of many large claims at one time, or even expensive litigation. The district would probably buy re-insurance to cover circumstances where any one individual, or the entire system, reaches pre-determined “stop loss” levels.
Gallagher actuary Christopher Diorio said the Bernards Township school district has a relatively stable claims experience that makes it a good candidate for self-insurance.
He said self-insuring could bring the district’s health premium costs to an estimated $13.3 million, down from a projected renewal of $14.7 million.
The school would save because it would avoid paying state tax, federal Affordable Care Act costs and a profit margin for the carrier.
The school would have to expect fluctuations in cash flow, Diorio said, with a cash reserve building in the first months and then leveling off as claims are submitted, items like prescription drug rebates are received and regular administrative payments to Horizon are processed.
Diorio said the school would “probably need five to 10 large claimants to not get the bang for its buck.”
He said health care premiums would likely rise year to year, but probably not as much as the eight to 10 percent increases now being seen.
Business Administrator Rod McLaughlin said after the meeting that self-insurance could provide the benefit at a more stable cost for the district, without changing the scope and coverage of its health plan.
The reduction would also help the school district in its annual attempt to stay under the maximum two percent increase in tax increases in the annual school budget. Employee benefits account for $14.4 million in a $93 million general current expense in the 2017-18 year.
The board is aiming at a decision by the end of the year, in order to help in compiling the 2018-19 school budget.