HELENA, Mont.-To gain greater control over rising healthcare costs, the Montana CU Network has formed a trust to self-fund a health insurance program for CUs in this state.

"Healthcare costs are just getting way, way out of control," reminded Tabitha Garvin, executive director for the league's Group Benefit Trust, and COO of business development for MCUL. "Not long ago Blue Cross and Blue Shield of Montana came to us with a 20% cost increase, which I am sure is not that uncommon anymore. What we are trying to do is protect credit unions down the road from these types of extreme cost increases."

Since 2007, the league has been helping credit unions--many with 10 and fewer employees-get lower rates through Blue Cross and Blue Shield of Montana by participating in a larger risk pool coordinated through the league. The self-insured program began this year in January. Of the 57 CUs statewide, 27 participate.

The league projects savings from the self-insured program will come mainly from two areas, the ability to better control the risk pool premiums, since CU employee claims will no longer be combined with claims results from other employee groups, and by lowering administrative expenses. Garvin contends insurers pass significant administrative costs on through premiums. "By administering the program through the league, we have cut 2% to 3% off premiums immediately," she said.


Controlled Risk Pool

Being able to control risk pool performance is critical to the program's savings and success, said Garvin (see related story on premium costs savings below).

Getting employees to make healthy decisions is important, as is making sure employees understand how to wisely use their benefits, making the health services choices they need that are also cost effective. "If we have a low claims year, we give that savings back to the credit unions," said Garvin. "Maybe we give them a premium holiday, where one month we waive the premium. If you are paying an insurance company, and you have a low claims year, they pocket your good fortune."

The effort to self-fund actually began in 2007, when the trust was formed and MCUN began building reserves, adding a few percentage points to monthly premiums. In order to self-fund, the State of Montana Commissioner of Securities & Insurance had to approve the trust's reserves. "We also hired an actuarial to determine if our reserves were adequate," added Garvin. "There is not a specific dollar amount needed. However, we had about two months of premiums in reserves to start our self-funding. These are industry standards."

To protect reserves from catastrophic claims the league purchased individual and aggregate stop-loss insurance for the trust. Individual stop-loss insurance comes into effect when an individual's claims exceed $100,000, and anything over that amount is covered by the insurance. Aggregate stop-loss insurance covers the trust if claims exceed the premiums collected during any given month.

"With these two coverages our reserves are 99% protected," said Garvin. "Under the model we are using, there is very little chance of our ever needing to use the reserves to cover losses. We anticipate that our reserves will be used to help offset premium increases following a bad year. Again, in this model, the credit union's pay a little more now, so they don't have to pay a huge amount down the road."

If the trust is dissolved, the remaining reserves are given back to participating CUs.

The MCUN has contracted with Blue Cross and Blue Shield of Montana to pay claims while underwriting is handled through local Mountain West Benefits. Garvin manages the trust, governing documentation, provider contracting, reserve monitoring, operations, and expenses-something added to her existing league duties. League President Tracie Kenyon is trust chairman, and six trustees have been named from the member CUs.

"Running a healthcare program is certainly a different world for the league," said Garvin. "However we are fortunate to be working with a company like Mountain West, which has helped us develop our own expertise."

Garvin said she is not certain how long the MCUN will be offering the self-funded healthcare program, but said it will likely be around as long as it is saving member CUs money. "We'll see what happens in 2014 when healthcare reform begins. Will the state healthcare exchange offer better pricing? Maybe. Meanwhile we will continue to serve our membership by providing healthcare cost control and premium stability."

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