School district to switch insurance
April 9, 2010
For the first time since 1988, the Moffat County School District is switching health insurance providers in an effort to save money.
Facing a 10-percent budget reduction for fiscal year 2010-11, the district decided to look at other options instead of renewing its contract with Denver-based Colorado Employee Benefits Trust.
Five companies, including Centennial Benefits Group of Craig, responded to a request for proposal.
At a special meeting Thursday, the board approved, 7-0, a recommendation by the district's insurance committee to switch to Denver-based M3, a change that increases the district's control over its plans and premiums.
However, the amount of money the new system could save still is unknown.
The new insurance plan is a partially-funded system, meaning the district designs its own plans and sets the premium it will pay to the broker.
The district is ultimately responsible for the total cost of health insurance claims in a year. If that cost of claims is less than the premiums paid, the surplus belongs to the school district.
Currently, any surplus goes into a pool managed by CEBT, a system called a partially-funded pool.
District finance director Mark Rydberg said the decision to bid out the health insurance contract was not a reflection on the past 22 years working with CEBT.
"We are not unhappy with the service we're getting from CEBT," Rydberg said. "But we think there's a financial opportunity here."
With the current plan, the district has seen a rate increase every year ranging from 5 to 20 percent.
With the new plan, if a surplus is saved up over the years in a reserve fund, the district can use that reserve to keep its premiums down and spend less money.
To minimize the effect on employees, Rydberg said the district plans to create a plan similar to the current one.
However, there will be some major changes with the new contract.
CEBT mandated 100 percent participation and the purchase of life insurance.
With M3, Rydberg said there will be no requirement for employees to use the district's insurance.
If an employee's spouse has a better plan, they can opt out of the M3 plan.
That could help reduce the claims cost, Rydberg said.
Also, the district will not provide life insurance, which Rydberg said was used only once the past two decades.
Rydberg said the new plan, which will enroll employees in May, could "absolutely" provide cost savings in fiscal year 2010-11.
In his presentation to the school board, he outlined a possible outcome based on historical data and proposed premiums.
If the cost of claims stayed at historical rates of about $1.75 million per year, and insurance premiums are increased by less than 10 percent, the district will end up with a surplus of $435,000 in April 2011.
"It could definitely save money," Rydberg said. "That's the whole reason to do it."