Medford board hires M3 as new health insurance advisors

A change in health insurance brokers will open the door for the district to move toward self-insurance as a way to limit spiraling employee healthcare costs.

At Monday night’s school board meeting, board members voted to accept the recommendation from the finance committee and switch to M Insurance out of Wausau to serve as the district’s insurance broker. Previously the district worked with Spectrum Insurance with an office in Medford. The decision for making a change was based in large part on the district wanting to further explore selfinsurance options. While the change is effective on May 1, there are legal rules that have a 15 day transition period. Effectively M3 will fully take over as agent of record by June 1.

The district’s insurance committee had met previously with representatives from four different brokers to review options. The district spends about $9 million a year in health insurance premiums.

Prior to the school board meeting, the board’s finance committee met for a second time with representatives from M3 and with Waukesha-based R& R Insurance. Both firms have extensive experience in helping employers set up and manage self-insurance programs.

In traditional health insurance plans, the employer and employees pay into premiums to an insurance company. The company typically offers established plans at various cost and benefit levels and sets the rates based on the amount of usage. The insurance company handles reviewing and paying out the claims, often having negotiated pricing with certain providers.

In self-insurance models, the premiums are paid into a pool which is kept by the employer, in this case the school district, who would then hire a third party company to handle reviewing and paying out claims as well as working with care providers.

The risk for self-insurance is that claims could exceed what is collected in premiums, however, this risk can be minimized through stop-lose plans which set a maximum payout from the insurance pool with larger claims going to a secondary insurance. The benefit of a selfinsurance plan is that when claims are less than premiums paid in, that money is kept by the school which can, over time, help level out insurance costs.

Michelle Froehlke of R& R Insurance compared it to the difference between renting and buying a home. Traditional insurance models are like renting where the renter pays in a set amount that is adjusted each year. Self insurance has a few more risks, but it is like buying a home where equity is built up over time.

She said the district should not be afraid of the potential for larger claims, noting that with a pool the size of Medford’s and its demographics, their projection is that 6.9 member’s claims would go over $180,000 in any given year. This is the existing pooling point for reinsurance used by the district’s insurance providers. She noted the district has been at six people over that amount in recent years.

“We can’t be afraid of a few high claims,” she said.

She cautioned that self insurance would not necessarily reduce costs, but would be able to help keep costs level while maintaining a quality health insurance benefit plan.

Four representatives from M3 presented to the committee. They were more optimistic in some areas about the potential for savings in areas of the health insurance plan offerings and noted where the district would be paying additional fees for vendors to manage different parts of a plan. They also showed the amount spent on prescriptions compared to what is spent on health services and fees.

They noted that there are currently 1,148 individuals covered by the district’s insurance plans. Medford school district covers not only teachers and staff in the traditional brick and mortar school buildings, but also the RVA staff, with the RVA reimbursing the district for those costs.

As far as the viability of self insurance models, M3 representatives said that the district’s size with between $8 and $10 million in insurance costs, there is enough size to smooth things out, compared to employers who have pools of 125 lives where a large claim would be devastating.

M3 representatives said they would work with providers such as Alliance which works throughout the state and also with other providers to fill in gaps depending on need.

Committee chairman Brian Hallgren asked about direct primary care, through providers such as Taylored Family Care. M3 representatives said there has been a growing use of direct primary care providers in private industry and that they work with these types of providers frequently.

“We want to make it as simple as possible for you guys,” said Penny Bub of M3.

In the committee discussion following the presentations from the two insurance brokers, Hallgren cautioned about being too quick to go with self-insurance saying he had tried to stand by not impacting the employees. “I am not saying we should or shouldn’t do one or the other,” he said. He emphasized that he wanted to ensure the employees retained quality coverage.

Committee member John Zuleger said the benefit of self insurance is that it gives the district control to make decisions as to what levers to pull to reduce costs, rather than being given pre-set options.

Committee member Steve Deml, said that it is important to give the employees and members being covered control of those levers also. He used the example of going to Taylored Family Care as giving the option for employees to be covered to go there, versus telling employees they have to go there first.

“I look at those levers as ‘can’t,’” Hallgren said.

Zuleger said the only levers they have with full-insurance models are network, out of pocket and deductible. He said that he felt both firms would achieve what the district wants. “I think M3 will serve our people the best,” he said.

District finance director Audra Brooks also supported going with M3 with the comfort level of working with them and their relative close proximity in Wausau if there were training opportunities or questions.

Finance committee members voted unanimously to recommend hiring M3 and at the board meeting later Monday night, the full board also voted unanimously to switch to M3.

The change is being made now, in order for the district to have options to either transition to self insurance or continue with full insurance depending on costs when the current contract with Security Health Plan is up at the end of the year.