According to this article in SunThisweek, the Burnsville/Eagan/Savage school district plans to move to self-insurance to help limit rapidly rising premiums. While this may seem like a good idea on the face of things, depending on the age and health status of the district’s employees this could be a real disaster for both the district and especially employees who have health problems.
From the article:
Officials hope that self-insurance – in which the district, not an insurer, collects premiums, pays claims and maintains its own reserve – will help them get a handle on ever-spiraling health care costs.
Under Medica, the district’s premium was capped at a 12 percent increase next school year, but was projected to skyrocket by 50 percent the following year, Schmid said.
Over the last decade, premium hikes have averaged 11 to 14 percent a year, Board Member Ron Hill said.
The school district believes it will be able to better control the associated costs by managing its own health insurance; however, a recent New York Times article notes how these sorts of plans are attractive to employers because it limits premium hikes but these sorts of arrangements could really drive up the costs associated with the healthcare system setup by the federal government:
When companies are self-insured, they assume most of the financial risk of providing health benefits to employees. Instead of paying premiums to insurers, they pay claims filed by employees and health care providers. To avoid huge losses, they often sign up for a special kind of “stop loss” insurance that protects them against very large or unexpected claims, say $50,000 or $100,000 a person.
Such insurance serves as a financial backstop for the employer if, for example, an employee is found to have cancer, needs an organ transplant or has a premature baby requiring intensive care.
Stop-loss insurers can and do limit the coverage they provide to employers for selected employees with medical problems. As a result, companies with less healthy work forces may find self-insuring more difficult.
Insurance regulators worry that commercial insurers — and the insurance exchanges being set up in every state to offer a range of plan options to consumers — will be left with disproportionate numbers of older, sicker people who are more expensive to insure.
That, in turn, could drive up premiums for uninsured people seeking coverage in the exchanges. Since the federal government will subsidize that coverage, it, too, could face higher costs, as would some employees and employers in the traditional insurance market.
So while this could help with limiting local taxes and associated levies, if more districts (and other businesses) opt for self-insurance, our federal tax rates could begin to soar in order to cover healthcare for more people.
What do you think about this one? Are you concerned this plan may backfire on the district or do you see it as an excellent opportunity to save tax dollars? If lots of companies begin to offer self-insurance do you see the federal government working to limit their availability if it begins to seriously rise associated costs with the government plan? Whatever you have to say about this one go ahead and comment on as I’d love to hear what you have to say.