By Ray Birch
MUSKEGO, Wis.–Expect many more credit unions to self-insure for employee healthcare over the next few years, according to one CUSO.
A shift toward self-funded health plans is underway, albeit it’s moving slowly, according to Jesse Kohl, president of InterLutions, which offers healthcare and employee benefit solutions to CUs.
What’s holding the numbers back today, he said, is hesitancy on the part of credit unions to move away from the fully-funded healthcare insurance model.
“There is the perception, and a lot of misinformation, about self-funding being riskier than a fully-insured plan,” said Kohl, noting that InterLutions, through its I-Care arm, offers a unique layer of additional stop-loss insurance. “Yes, there can be more risk, but not a great deal. And in the long-term, the benefits will usually outweigh the risk, because in the fully-insured world the credit union will always lose to the insurance carriers. Their annual costs will always rise. But by self-funding, the credit union has a chance to win when they have a year in which their claims are lower than expected.”
Kohl acknowledged that CUs can be “shy” about moving over to self-funded insurance.
“We have heard from several credit unions that they are looking at a three-year plan to move to a self-funded model,” said Kohl.
Steps to Cut Costs
Kohl stressed taking several steps can reduce costs.
“Through I-Care we are offering a group self-funded model that allows participating credit unions to purchase an additional layer of stop-loss insurance,” he explained. “That really is where credit unions can save money, by pooling some of their resources and paying less for their insurance with a group buy.”
But the key benefit with self-funding, emphasized Kohl, is that credit unions can better control their healthcare costs.
“In a fully-insured environment, credit unions are buying insurance for every single claim their employees make” he explained. “Therefore, they are paying higher insurance rates for claims. So, in a year in which a credit union’s employees have lower-than-expected claims, the credit union does not win, the insurance carriers just make more money and profit heavily off the CU.
“OK, great. The CU had a great year for claims,” continued Kohl. “But what does that really mean in dollars and cents for the credit union? It means they probably won’t see a really high renewal cost. But they will still see a 5% to 8% increase in premium costs for the next year.”
Getting the Surplus Back
Where a good claims year helps a credit union, Kohl explained, is in avoiding even higher renewals, and possible 20% to 40% increases that can follow a year in which the number and dollar amount of employee claims are high.
Jesse Kohl
But with I-Care’s model with group self-funding, Kohl said that if credit unions have a better-than-expected year for claims, there’s potential to get a surplus back on the insurance they purchased.
Moreover, in the self-funding model, the credit union “pays as it goes” throughout the year, as claims are made. Kohl acknowledged a legitimate concern for smaller credit unions can be not having the assurance of consistent payments spread out over the year.
“Self-funding can present a budgeting issue for small credit unions,” said Kohl.
What is small? He said self-funding is typically not a good option for credit unions with fewer than 50 staff.
Another Option
“We are developing a feasibility study on smaller credit unions and how they may work with I-Care with a new offering,” said Kohl, noting that regulatory changes are now making it easier to develop an “association health plan.”
“This is where smaller companies can pool employees together and join a collaborative healthcare solution,” he said. “We are still evaluating this, as the Department of Labor just released their revisions to association health plan rules. But we think this will be a better healthcare solution for small and mid-sized credit unions.”
Kohl said, too, that I-Care is evaluating a level-funded self-insurance model that spreads costs out evenly over the year, and addresses the “pay-as-you-go” concerns that affect small shops the most. In this model CUs still can receive a surplus back if claims are lower than expected.