In the process of exploring health insurance options for 2018, the Killeen Independent School District board heard a lengthy presentation about self-funded insurance earlier this week.
The need to evaluate the options has arisen because the current health insurance carrier, Aetna, proposed a sizable rate increase if KISD renews its policy for 2018.
At Tuesday night’s school board meeting, Gary Looney, with Alamo Insurance Group in San Antonio, provided information on costs and various concerns organizations have about self-funded insurance versus fully funded insurance.
A key factor in considering a self-funded plan, according to Looney, involves data from the U.S. Department of Health and Human Services indicating 82 percent of employers with more than 500 employees are self-funded for their health insurance.
KISD has about 6,000 employees, with over 3,300 enrolled in the district-offered health insurance plan.
For budgeting purposes, Looney said fully insured plans offer more control, since the premiums are due, in advance, on a monthly basis.
“The state of Texas has the largest number of mandates for fully insured plans of any state in the United States,” he said.
Over 75 such state mandates must be incorporated into any fully insured health plan, and can deal with anything from hair replacement to mental and nervous disorders or substance abuse.
Fully insured plans are also subjected to state taxes on the premiums being paid.
Self-funded plans do not have to include the state mandates, and the premium payments do not include any taxes.
Another difference between fully funded and self-funded plans involves administration expenses. Fully funded plans incorporate administrative costs into the premium. A self-funded option would have a fixed administrative cost.
Board member Carlyle Walton, whose background is in accounting and health care, summarized the presentation for the other board members.
“A self-funded plan can allow us to be a lot more creative in tailoring unique and beneficial things to our employees,” said Walton. “That’s one of the added benefits. We can think a little more outside of the box.”
Managing costs is an important part of any decision regarding health insurance, and while initial expenses might be higher, working with a self-funded plan would potentially save KISD money over a period of years, Looney said.
Employees enrolled in a self-funded plan would be encouraged to participate in wellness programs, which would further reduce costs. Looney recommended that employee premiums remain the same, however.
Premium costs are determined using a fully insured equivalent rate, Looney said. “There’s no difference, as far as premiums are concerned, unless the district wants to make a difference. Typically, we don’t recommend it.”
Alamo Insurance Group is currently reviewing 16 health insurance proposals for KISD, five of which are self-funded plans. While the evaluation may not be finished by the Aug. 22 board meeting, Looney will be available at that time to offer more information as the process continues.