health insurance educationalThe Challenge:

Every organization struggles with the high cost of insurance, especially healthcare.  The challenges of funding employee healthcare have increased significantly over the past few years for many American businesses due to the implementation of the Affordable Care Act.

Universities, colleges and other institutions of higher education are under even more intense scrutiny as the cost of education continues to climb.  This has left administrators scrambling to find more creative and efficient ways to fund their employee benefits.

edHEALTH is the result of a number of Massachusetts institutes of higher education saying, “enough is enough” and deciding to take control of their healthcare destiny.

The Goal:

To design an efficient and effective healthcare funding strategy for a group of colleges and universities already in collaboration for other joint purchasing and educational initiatives.

See Also: Solutions for Educational Institutions

The Process:

edHEALTH began as a group of higher education institutions that set out to pinpoint opportunities for greater healthcare program efficiency and savings.  Early on, they determined that in order to gain control over plan design, data and ultimately, cost, they would need to create their own self-funding mechanism. Through an extensive feasibility study conducted by their consulting and actuarial firm, Spring Consulting Group, they were able to identify the appropriate funding structure(s) that would meet the goals set by the consortium. The best course of action was to implement a Vermont-based captive insurance entity for sharing medical risks. In tandem, the consortium developed common plan designs and established a health management process working with two local health plan administrators. Each entity (college/university) within the consortium provides a self-insured health plan for its employees with pooled risk sharing above a specified threshold for each member.

The Solution:

A new member-owned parent organization, edHEALTH, as well as a Vermont-based captive was formed with guidance and assistance from Spring. The captive launched on July 1, 2013 with a core of six colleges and universities participating on day one.

edHEALTH was established as a group of specifically underwritten, self-insured plans with individually set self-insured retention attachment points, along with a pooled stop-loss insurance program administered by a licensed Vermont Reciprocal Captive. The group jointly purchases administration claims management and other services.

Through this unique collaboration, the members of edHEALTH realize lower costs than a fully insured plan or a go-alone self-insured plan. A few benefits of a group captive solution are:

  • Negotiation of lower fees with third party administrators
  • No hidden broker payments
  • Larger group = better pricing, less volatility
  • Non-payment of “profits” and carrier taxes on base level of claims
  • Ownership of a large portion of any plan savings
  • Potential for dividend payment from captive surpluses
  • Population health management
  • Reduced pharmacy costs

The new organization was developed based on the belief that collaboration among best-in-class institutions would create a mechanism for leveraging economies of scale. This would significantly improve healthcare buying power and provide efficiency in program design, administration and funding. Thus, a platform for true population health management was created based on the needs of its members; it has accomplished all of this and more!

The Results:

edHEALTH gives academic institutions a voice and the power to control, in part, the rising costs of health insurance and tuition. This simple, self-insured solution provides members’ employees a seamless conversion to quality healthcare at lower costs, resulting in employee satisfaction, competitive benefits packages and valuable institutional savings that can be passed along to students and families.

As of July 1, 2017, the three-year average annual rate increase was 3.5% – well below the market average of 7-9% increases. The captive has delivered strong financial results, paying back a full $1.2 million to all of their initial investors and retaining $4.5 million in savings that would have otherwise gone to commercial carriers. Additionally, owners/members saved an estimated $25.6 million, or 10%, since inception, vs. being fully insured with one member realizing 20% savings in the first year. Conservative management and great results have increased edHEALTH’s capital to almost 3 times the target, positioning the organization for future growth and cost reductions!

At its start, the consortium had six member schools. The number of entities has since doubled to twelve schools in just four years – a group that represents more than 20,000 members. During the course of those four years of operation, members did not rest with medical stop loss. The group has since taken on other areas of health and wellness where they see areas for improvement as a joint force, such as deep dives into disease management, wellness and prescription costs in order to facilitate a healthier, more productive workforce.

As edHEALTH continues to grow, they are extending their group purchasing power and common sense to other benefits. In January 2017, edHEALTH joined the Preferred University Rx Purchasing Coalition (PURPC) in carving out pharmacy benefit management with a pharmacy benefits management organization. Future considerations include a focus on health management programs to reduce high cost claims while keeping faculty, staff and their families healthy.

So as the organization enters its fifth year, it remains strong and ambitious. The member institutions are focused on furthering their strategy to provide quality care with more participant involvement. They have branched out beyond Massachusetts and now have schools participating from other states, with the ultimate goal of a nationwide organization. There are truly no limits to the potential edHEALTH is able to realize and the number of educational establishments it can help.

As Spring has seen with other clients, this group approach is a truly groundbreaking solution in an industry where each member is unique, with very specific human resources expectations. In a time when healthcare costs are skyrocketing and student debt is at an all-time high, the members of edHEALTH have been able to address both critical issues by re-thinking the conventional and showing that disruption in the world of employee benefits can be a winning approach for administrators, educators and students.

While edHEALTH has seen great success within its higher education sphere, such innovation is not specific to any one industry; it is possible for other like organizations to join forces in a captive structure based on their commonalities and unique risks to achieve similar, outstanding results.

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