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How does the Educators Health Exchange captive work?
Twenty-three 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 Exchange captive works:
A – Advantages Include Variety of Savings Opportunities and Flexible Plan Designs
- Potential short and long-term cost savings – the larger group means better pricing and less volatility. The group purchasing power provides low negotiated Third Party Administrator (TPA) fees, transparent broker payments, and reduced Affordable Care Act (ACA) taxes.
- Risk financing options – member schools pick their own self-insured retention level based on their risk tolerance, philosophy, financial status, and experience.
- Improved cash flow – every year, each member school gets to keep the amount in their claims account if the school’s claims are less than the amount paid into the account. Unlike fully insured plans, schools aren’t paying profits on top of claims; it’s their money to use for future claims. Additionally, if the captive has a surplus at the end of the year, each member school receives an allocation based on the school’s and captive as a whole’s experience.
- Customized employee benefit designs – unlike other group funding options, our captive arrangement offers flexible plan design options. This allows edHEALTH to offer a variety of plan design options to meet the needs of our members.
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:
- Third Party Administrators – negotiate contracts with providers, process claims in compliance with edHEALTH plan designs, and offer top-notch customer service to member school employees and their family members.
- Captive Manager – manages the day-to-day functions of Educators Health Exchange, serves as the primary contact with regulators, ensures compliance with regulations, provides insurance and risk management know-how, and produces financial statements and reports.
- Actuary and Underwriting Consultant – through analytics, the actuaries manage the financial security of the captive. Underwriters evaluate each member school’s risk profile, plan designs, and risk tolerance to develop the working rates.
- Auditor – monitors loss reserves, reserves adequacy, and reviews the actuary’s assumptions and calculations.
- Attorney – makes sure that the captive satisfies all IRS requirements, and advises edHEALTH on how to respond to any audits and enforcement actions.
- Investment Advisor – provides expertise on investment strategies and timing of investments that align with claims cash needs.
- Re-insurer – limits the potential loss to edHEALTH and our member schools from high-claimants
C – Collaboration among Member Schools
One of the most popular aspects of being part of the edHEALTH Captive is collaboration. Member schools meet frequently as part of the Plan Design and Comptroller 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 the annual edHEALTH Walking Challenge gets the competitive spirit in high gear. Clark University took home the prize in 2021. Who will win the 2022 edHEALTH Walking Challenge Trophy? Stay tuned.
How do edHEALTH's captive risk financing options work?
Under edHEALTH’s captive, member organizations pick their own self-insured retention level based on their risk tolerance, philosophy, financial status, and experience. In addition to the stop-loss coverage schools automatically receive, they can purchase aggregate stop-loss coverage to further protect their risk. Here’s how the risk financing works:
If a school picks a Self-Insured Retention (SIR) of $100,000 per claim:
- The college will pay any single claim up to $100,000.
- The Educators Health Insurance Exchange captive will pay the next $1-$650,000 for each individual claim from this school.
- edHEALTH purchases excess protection from a stop-loss insurer. This insurer reimburses edHEALTH for any part of a particular claim that exceeds $750,000.
Members work with the actuaries to pick a Self-Insured Retention amount that balances their claims experience with the risk of paying claims and stop-loss insurance. Final rates reflect the level of risk a school wants to take and its claims experience.
Do you have an educational institution case study on how the edHEALTH program has worked?
With compensation and benefits comprising 60% of Salve Regina University’s budget, Vice President for Administration and Chief Financial Officer, William Hall is always evaluating ways to keep costs in check while continuing to attract and retain top-notch faculty and staff. In the late 1990s he moved the health insurance benefits from an insured to a self-insured program where the university takes the responsibility for paying medical claims plus stop-loss to protect against high-cost claims. This approach creates the lowest possible administrative costs and means that the employer isn’t paying profits on top of claims. This was a bold move, especially at the time, as some small colleges and universities worry about the higher risk of a self-insured arrangement.
“We were already self-insured and had been pleased with that decision,” said Mr. Hall. “However, healthcare costs were still having a negative impact on Salve Regina’s bottom line, so we were seeking a solution to the rising cost conundrum.” Salve Regina University became aware of edHEALTH through the Boston Consortium, which fosters collaboration between higher education institutions. The school had a positive experience with the organization’s Risk Management Group, and began to explore how banding together with other higher education institutions might make sense for their healthcare program.
A disruption analysis found that by moving to edHEALTH, Salve Regina would:
- Save money on faculty and staff healthcare costs;
- Pose minimal benefit design disruptions; and
- Maintain employees’ access to their doctors and hospitals.
Salve Regina University joined edHEALTH effective January 1, 2016. The corresponding results have been outstanding.
- 18% reduction in administrative rates
- 5% decrease in stop-loss rates
- Savings enabled university to provide one month of free employee healthcare premiums
- Four-year cumulative healthcare rate increase of 10.8%, markedly better than the industry average of 31.1%
“The money Salve Regina has saved on healthcare costs through edHEALTH has been greatly beneficial to our bottom line,” said Mr. Hall. “Through the edHEALTH model, we work directly with plan administrators to offer attractive benefits, a broad provider network, and comprehensive coverage to our faculty and staff.”
Employee Satisfaction and Valuable HR Support
Employees have been satisfied with their benefits, and the HR staff has welcomed the collaboration benefits of edHEALTH. “Overall, our employees are happy with their healthcare plan design options,” Claudia Cavallaro, Associate Director for HR and Benefits. “It’s a pleasure to work with the entire edHEALTH staff who are knowledgeable, friendly and responsive!” Upon the onset of the COVID-19 crisis, edHEALTH implemented frequent virtual meetings to help schools share ideas and learn from one another. “Sharing information and best practices to navigate during these uncertain times has been especially valuable,” said Nancy Escher, Director of Human Resources.
Why is edHEALTH's captive domiciled in Vermont?
Inquiring minds want to know: Why is edHEALTH’s stop-loss subsidiary, Educators Health Insurance Exchange, based in Vermont? David White, Vice President for American International Group’s (AIG’s) U.S. Captive Management Services, filled us in. “Vermont was one of the first states in the nation to establish captive-enabling legislation, and as a result, the regulators have deep expertise in the industry,” he said. “Vermont state employees are helpful to the captive industry, offering support, guidance, and a quick turnaround.”
Vermont’s responsive and business-friendly philosophy helps promote a captive insurer’s agility. “When a captive wants to make a material change to its business plan, state regulators and captive managers work together to get it done,” said David. New lines of business, changes in investment policy, increased stop-loss limits, and service provider changes all require regulatory approval. edHEALTH’s Captive Subscribers Advisory Committee decided to assume more risk a couple of years ago, and AIG, edHEALTH’s Captive Manager, worked with the Vermont regulators to facilitate that change. “The Vermont Captive Insurance Association (VCIA) recently appointed Tracy Hassett (edHEALTH’s president) to its Board, and that’s beneficial to edHEALTH’s business needs as her active involvement increases edHEALTH’s visibility to the Vermont regulators,” said David.
David White is a Certified Public Accountant and an Associate in Captive Insurance. He joined AIG in 2001, having become familiar with the captive industry when he audited captive insurers at his previous KPMG position. The AIG staff of over 20 professionals provides day to day management services to over 100 captive clients, including edHEALTH.
“I am proud of the day to day accounting and reporting services that my fellow AIG employees, Joe Percy and Abigail Donze, provide to the edHEALTH organizations,” said David. “Their reporting has been accurate and on time which helps keep us compliant and running smoothly.” In 2017, AIG also assumed financial accounting services for our parent company, edHEALTH LLC. For both entities AIG prepares quarterly financial statements and annually coordinates with outside independent auditors to make sure the financials are correct. Their staff also participate in board meetings, issue monthly invoicing, and because the captive is regulated, completes compliance reporting for the state of Vermont.
“David White has been an important asset to our school members/owners and the Board,” said edHEALTH president, Tracy Hassett. “He and his team helped us launch the captive, and have been true partners in helping us manage the organization.”
“edHEALTH is one of my favorite clients because it is a nonprofit that helps higher education institutions reduce their faculty and staff health insurance costs, improves schools’ bottom lines, and promotes employee health,” said David. “edHEALTH approaches challenges creatively, such as their frequent all-member virtual meetings during the pandemic; population health initiative for high-risk patients; and popular Walking Challenge. Its smart and strategic approach to bending the healthcare cost curve and promoting member school collaboration provides a real service to the higher education industry.”
How does a self-insurance arrangement save money?
Educational institutions with fully insured health insurance arrangements for their employees are leaving money on the table, according to Steven Keshner, Senior Vice President and Chief Actuary with Spring Consulting Group. Moving from a fully insured to a self-insured model creates the lowest possible margin for health plan administration. “By moving from a fully insured to self-insured arrangement, you retain any profits and gain claims transparency so you can bend the cost curve,” said Steven, who leads edHEALTH’s actuarial consulting team.
The pandemic has shined a light on the importance of shifting to self-insured arrangements as insurers report record profits due to dramatic drops in healthcare utilization while self-insured purchasers realize lower healthcare spending. A recent Employee Benefit News article authored by the President of MagnaCare concurs: “Self-insured plan arrangements are the best way to plan strategically for the long term, and the current environment is underscoring the need to transition.”
Self-insured arrangements are not without risk and stop-loss provides security. “edHEALTH schools pick their own stop-loss self-insured retention level based on their risk tolerance, philosophy, financial status, and experience,” said Steven. “The member schools own the health insurance stop-loss program, enjoy pooled rates, and share in any profit margins when the results are favorable.”
Nick Frongillo, Associate Actuary with Spring Consulting Group, points to three savings opportunities through edHEALTH:
- Retaining stop-loss profits
- Collaborating with other member schools on plan design and finding data-driven solutions that save money, such as carving out prescription drugs
- Negotiating low administrative fees through the purchasing power of 23 colleges, universities, and other schools
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 a variety of 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 come back 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,” said Nick. “We collaborate with the broker so we can give them the information they need while providing a seamless and positive experience for the current or prospective member school.”
In addition to conducting pricing analyses, Steven’s team generates financial projections, actuarial reserve certifications, actuarial and reporting analytics, makes sure claims are paid correctly with funds available to make those payments, and assures reserves and other actuarial financial statement items are adequate. “We strive to make sure that the member owners and their brokers are comfortable with all the financial pieces,” said Steven. “Transparency is key, and we open up the black box to show every detail on premium spending.”
“I can’t say enough about Steven and his team’s responsiveness, accuracy, and collaboration with our board, member owners and their brokers,” said A. Tracy Hassett, edHEALTH’s president and CEO. “I liken their financial accuracy to landing a 747 on a postage stamp.”
Steven Keshner began working with what became edHEALTH in 2009, when the Boston Consortium for Higher Education, which brings together Boston area colleges and universities to develop and implement cost saving and quality improvement ideas, gathered a group of chief financial and chief HR officers to find out how to slow health insurance cost increases. He and other members of the Spring Consulting team recommended the captive solution to the advisory committee, helping to launch edHEALTH in 2013 and grow it since then. He has over 25 years of actuarial, financial, underwriting, and strategic insurance experience with a group life, health, and pension focus, and has worked for Spring for over 11 years. Prior to joining Spring, Steven was the Senior Vice President, CFO and Chief Actuary of Nippon Life Benefits in New York, a subsidiary of Nippon Life Insurance Company, a global mutual life insurer.
Nick Frongillo has worked with edHEALTH since he joined Spring Consulting six years ago. He develops working rates for medical claims, stop-loss premiums, and third-party administrator administrative fees. In his position, he provides a variety of actuarial functions including pricing, reserving, valuations, business development, financial projections, underwriting and financial analysis. He is the primary actuarial point of contact for current and prospective member owners and their brokers.
How does HR's role change when an educational institution joins edHEALTH?
Time – it often seems like there’s not enough of it to get everything we want to do completed. College and university Human Resources departments are especially stretched thin with pandemic-related responsibilities and crises. One area where they don’t have additional worries and tasks is their edHEALTH employee healthcare program. “The amount of work HR departments do when enrolling in – or once they’ve joined – edHEALTH doesn’t increase,” said Cindy Bartelson, edHEALTH’s Operations Manager. “Instead, it’s just different as we assume administrative and troubleshooting tasks and they take on a more strategic role.”
edHEALTH helps employees troubleshoot any issues they may have with a plan administrator, which frees HR staff to take on more interesting work. HR staff can also take part in edHEALTH procurements and wellness initiatives. Each school’s HR team decides their level of involvement and how proactive a role they’d like to take.
Plan Design Involvement
Monthly Plan Design Committee meetings include claim trend projections, industry and program updates, and plan design discussions. “edHEALTH coordinates plan design meetings where we collaborate with our advisor and other member institutions on policy and program initiatives,” said Sharon Woodward, Director of Human Resources for Olin College of Engineering. “These meetings keep us up-to-date on the changing healthcare benefit landscape.”
Thought Leadership Opportunities
Our quarterly Thought Leadership Seminars keep HR staff updated on the latest issues, trends, and best practices in employee healthcare benefits. “edHEALTH provides several forums to keep us updated on what's going on in the industry,” said Jessica Szymczak Roy, Benefits Manager for Regis College “These updates help us get the information we need so we can plan strategically with our advisor.”
Ease of Implementation
When a school joins edHEALTH, we do the heavy lifting to make it easy on HR departments. edHEALTH staff works with the educational institution staff, their advisor, and the plan administrators to help ensure a seamless transition.
“We run disruption reports to identify any employees who could be impacted by the switch to edHEALTH,” said Cindy Bartelson. “In general, we don’t see provider disruptions and there sometimes are prescription drug tier changes. We send customized communications to any affected employees and open enrollment communications templates to the HR staff to make it easy to communicate with their employees about the change.”
Collaboration and Team Spirit Advantages
Member institution HR staff report high satisfaction with the multiple collaboration opportunities and becoming a more valuable resource for their institution. “The multiple edHEALTH strategic venues have allowed us to learn about best practices at other institutions and to share our approach during this unprecedented time,” said Marymichele Delaney, Former Assistant Vice President for Human Resources at Lasell University.
"One of our favorite events of the year is the edHEALTH Walking Challenge where our faculty and staff compete against other member schools,” said Olin College’s Sharon Woodward. “edHEALTH takes care of the administrative aspects of putting this together and our college only needs to encourage employees to participate." Stay tuned for information on the fourth edHEALTH Walk This Way Walking Challenge.
Do edHEALTH PPO members have access to in-network providers?
Did you know that all member school faculty and staff have access to in-network healthcare providers regardless of where they live? Employees enrolled in any of edHEALTH’s PPO options can visit network doctors, hospitals, and other healthcare providers throughout the United States. This benefit is particularly helpful as higher education institutions modify their work-from-home and residency policies.
Increase in Out-of-Area Employees
The burst in work-from-home arrangements during the pandemic has changed where and how people work – perhaps permanently. PwC’s March 2021 Pulse Survey found that almost a quarter of employees are considering or planning to move more than 50 miles away from the office; this is on top of the 12% of employees who have already made such a move since the start of the pandemic. Additionally, remote work arrangements allow schools to hire staff from further away.
Schools with New England Health Plan Administrators
Outside of New England, Harvard Pilgrim Health Care uses UnitedHealthcare’s national provider network. Outside of Massachusetts, Rhode Island, and New Hampshire, Tufts Health Plan uses Cigna’s national provider network. Employees are enrolled in either the Cigna Out-of-Area PPO plan or the CareLink plan. This information is on the employee’s ID card. To find a participating provider, employees can:
- Call the plan’s customer service department
- Log into their account online or via the plan’s app and use the provider search feature
- Check the “PPO” box on Harvard Pilgrim Health Care’s website or the “Carelink Plan” or “Cigna PPO Plan” on the Tufts Health Plan website and then search for a provider.
Schools with National Health Plan Administrators
Outside of New England, edHEALTH has access to over 60 carrier-owned and provider-sponsored networks. All of these include national network options, including Aetna, Cigna, and several Blue Cross Blue Shield networks. Using a customized approach, we determine which network best meets the needs of a new member institution. We evaluate various options for network panel scope, how the network and types of care align with the institution’s utilization patterns, and for financial value. These findings are provided to the new member school and their advisor for final network determination. Employees can find participating providers through the plan’s customer service department, website, or by logging into their account.
Employees Show Their Plan Administrator ID Card
When visiting a doctor or hospital, the employee shows their edHEALTH health carrier ID card, which gives the provider the information they need for billing the plan administrator.