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Moving from fully insured to self-insured lets schools retain carrier profits, gain claims transparency, and minimize administrative margins. While not without risk, stop-loss coverage provides security. Nick Frongillo, Senior Consulting Actuary with Spring Consulting Group and edHEALTH team lead, explains, “By moving from a fully insured to a self-insured arrangement, you retain carrier profits for yourself. Plus, the added control and transparency you gain into your claim experience gives you the insight to make decisions that help bend your cost curve.”
Nick adds: “With edHEALTH, member-owners select their own stop-loss self-insured retention level based on several factors, including size, number of employees, risk tolerance/philosophy, financial status, and experience. The member schools own the captive (stop-loss insurance company), enjoying pooled rates while owning all of the profits (100% school-owned) that are shared amongst the member schools.”
Nick also points to four savings opportunities through edHEALTH:
Spring’s actuarial team works with current and prospective member schools and their brokers to model a variety of options and make sure everyone is comfortable with the corresponding financial projections.
“We work together with member schools – current and future – and their brokers to develop rates for various options and plan designs, and explain these projections,” said Nick. “We also explain cash flow logistics and the structure of the captive. Sometimes, a fully insured carrier will return with an attractive rate for a prospective member school to compete with the low quote they’ve received from edHEALTH. edHEALTH is a long-term solution, and we offer advice to prospective educational institutions on how they will save money over time. We collaborate with the broker to give them the information they need while providing a seamless and positive experience for the current or prospective member school,” adds Nick.
In addition to conducting pricing analyses, the Spring team generates financial projections, actuarial reserve certifications, and actuarial and reporting analytics. They also make sure claims are paid correctly with funds available to make those payments and assure reserves and other actuarial financial statement items are adequate. The team ensures that the member-owners and their brokers are comfortable with all the financial pieces.
At edHEALTH, transparency is one of our core principles. Nick notes how the Spring team supports this principle: “Transparency is key, and we open up the black box to show where every single dollar goes. edHEALTH truly is a 100% transparent program for member-owners.”
“I can’t say enough about The Spring team’s responsiveness, accuracy, and collaboration with our board, member-owners, and their advisors,” said A. Tracy Hassett, edHEALTH’s president and CEO. “I liken their financial accuracy to landing a 747 on a postage stamp.”
Nick Frongillo has worked with edHEALTH since he joined Spring Consulting in 2014. He oversees the development of working rates, annual IBNR calculations, quarterly reporting, and projections for schools, as well as captive pricing/underwriting and reserving. He is the lead actuarial point of contact for current and prospective member-owners and their benefit advisors.
You may hear the word “captive” and get nervous. What is it and what’s the risk? Not only are captives not scary, they also provide added value to a go-it-alone self-insured healthcare program according to John Burke, Boston College’s Financial Vice President and Treasurer. A captive is an insurance company that is owned and controlled by its members to insure the risks of its member-owners. “As a captive owner, you have input in the direction of the captive including plan design, which is critically important during these challenging times,” says John Burke.
Boston College implemented a self-insured employee health insurance program in June 2009. “Making the transition to a self-insured program can be nerve-wracking for any large or small entity,” said John. “However, the benefits of moving to a self-insured program more than outweigh an entity’s concern.” Although the school was happy with its self-insurance program and that they were no longer paying profits to administrators on top of claims, it wasn’t satisfied with the stop-loss rates it was receiving from carriers.
In the early years of its self-insurance program, because of actuarially determined potential insurance claims, Boston College experienced double-digit increases in its stop-loss insurance rates. If BC experienced a better-than-predicted claim trend, it didn’t receive rebates on its stop-loss outlay. If the claims experience was worse, stop-loss rates would rise. “The inequities in the commercial stop-loss insurance market were the driving force for Boston College to become a founding member of edHEALTH,” said John.
Since joining edHEALTH in 2013, Boston College has experienced lower healthcare premium increases than it had under its own self-insured (and before that insured) program. “Our improved cost trends are mainly due to the purchasing power of the coalition,” said John. Lyndsay King, Boston College Controller, who has overseen forecasting and accounting for the school since the switch to self-insured in 2009 and then to edHEALTH in 2013, says, “While our claims experience has fluctuated over time, the move to edHEALTH has yielded clear savings in stop-loss premiums, administrative fees, and prescription drug costs."
Under a self-insured program, a school pays actual claims for the institution’s faculty, staff, and covered family members. In good years, the school pays less, and in not-so-good years, the school pays more. The captive structure, including external stop-loss, pooled risk, and individual member funding (self-insured retention) provides customized risk protection. Members choose their own self-insured retention rate based on their risk tolerance, philosophy, financial status, and experience. edHEALTH works with member institutions to determine their risk tolerance and provides protection to minimize it.
“Due to our large size, Boston College picked a risk retention amount of $450K, meaning we are responsible for the first $450,000 of each individual claim,” said John. Smaller schools generally pick lower thresholds. edHEALTH and its excess stop-loss carrier cover any costs that exceed the retention amount. “As an educational institution assumes more risk through its retention amount, they have a lower stop-loss premium,” said John. “Conversely, if a school lowers its retention amount, it will pay higher stop-loss premiums. I sleep better with the stop-loss limit we selected.”
Boston College’s John Burke said the school can build up its subscriber surplus dollars in good years due to the ownership structure of the captive. Alternatively, in more challenging years, the school can use those funds to offset losses due to less than favorable results, although they haven’t had to do so. When you own your own insurance company, you’re able to smooth your claims experience over time, according to edHEALTH’s president and CEO, Tracy Hassett. “In our ten years in business, only three of our members have ever experienced a year with a loss, and they were able to use their own edHEALTH funds instead of dipping into institutional funds to cover those losses,” she said.
Captive member-owners may have the opportunity to share in any surplus the captive earns. To date, edHEALTH has awarded dividends of over $6.7 million to its member schools. “I am happy to talk to any colleges, universities, or secondary schools that have questions about joining edHEALTH,” said Boston College’s John Burke. Send us an email for his contact details.
edHEALTH’s Tracy Hassett explains how the edHEALTH captive provides a healthcare solution that benefits higher education and secondary school institutions, their faculty and staff, and tuition-paying students and families in this Vermont Captive Insurance-produced video.
Twenty-seven colleges, universities, and secondary educational institutions own Educators Health, LLC (edHEALTH), a healthcare collaborative formed to address rising healthcare costs that were straining school budgets. By bypassing commercial insurers and pooling resources, edHEALTH leverages the combined schools’ purchasing power, thereby saving on healthcare costs for faculty, staff, and family members. But, did you know that edHEALTH’s wholly-owned subsidiary, Educators Health Insurance Exchange, is a group captive insurer?
The captive insurance company’s main purpose is to insure its own risk. By joining colleges and universities together as a single purchaser, the schools gain market leverage. The captive manages its own risk through claims management, innovative programs aimed at loss control, and collaboration with strong business partners.
Here are the ABCs on how the Educators Health Insurance Exchange captive works:
A – Advantages Include Variety of Savings Opportunities and Flexible Plan Designs
B – Business Partners add Strength to the Organization
edHEALTH and its captive couldn’t operate without the benefit of its relationship with strong business partners. Each business partner provides unique expertise that benefits member schools, the edHEALTH organization and its captive:
C – Collaboration among Member Schools
One of the most beneficial aspects of being part of the edHEALTH Captive is collaboration. Member schools meet frequently as part of the Plan Design and Finance groups. They compare cost utilization, trends, and best practices. That rapport leads to sharing ideas at meetings and outside of scheduled events.
The icing on the cake is that the annual edHEALTH Walking Challenge gets the competitive spirit in high gear. Saint Joseph's College of Maine took home the prize in both 2024 and 2023, with Boston College winning the challenge in 2022.