The self-insured option
Credit unions must consider the potential impact on employee attraction and retention when they make benefit decisions, even in a soft economy when unemployment is high.
“The cost of turnover will far exceed any savings you have by shifting costs to employees. You’re going to pay for it,” says Lisa Pesta, vice president of HR at the $1.1 billion asset Meriwest Credit Union in San Jose, Calif. “We’re in Silicon Valley. When I look at our competitors, I don’t look at other financial institutions. There are sexier opportunities in Silicon Valley. I have to create a culture where employees want to stay.”
But double-digit increases in health insurance premiums are making it difficult for credit unions to hold the line on employees’ cost of health insurance.
Meriwest managed to keep employees’ 15% share of premiums steady despite increasing costs. But when the base premium rose, so did the employee contribution. The credit union also raised co-pays from $15 to $20 a few years ago.
Reluctant to shift more cost and unable to achieve great savings through negotiations, Pesta enrolled Meriwest in the Credit Union Health Benefits of America (CUHB) plan offered by the insurance broker Risk Strategies Company. CUHB is a partial self-insurance plan targeting credit unions.
Under the plan, Meriwest covers its own small claims. It pools resources with other credit unions for large claim coverage, and the plan caps maximum annual liabilities.
A third-party provider handles the credit union’s claims, and Pesta says the CUHB plan looks like a traditional health plan to employees. The benefit, though, is that Pesta could reduce health insurance costs by 6.4%.
Patelco Credit Union joined the modified self-insurance program in 2009 for the same reason.
“The rate increases were going to be so high that if we didn’t do anything, we were going to revamp our group medical plan or substantially increase the employee contribution. We didn’t want to do either,” explains Ed Cassady, vice president of HR at the $3.6 billion asset credit union in Pleasanton, Calif.
The credit union has saved approximately 15% annually, but Cassady adds there are other benefits to CUHB. For reinsurance purposes, each credit union stands alone.
For example, that means a bad claims year in 2012 at Patelco won’t affect Meriwest’s required contribution in 2013.
Cassady also adds that the self-funded plan allows Patelco to access health usage data, which enables the credit union to tailor wellness programs and services to the needs of its employees.
Cassady expects this targeted investment to yield even further savings as its wellness efforts mature.
People might think there’s quite a bit of risk involved in a self-insured option, Cassady says, but there really isn’t. If you want to explore all avenues, attempt to control expenses, and produce a good package, learn about partial self-insurance, he recommends.
Many credit unions might have previously been unwilling to assume the risk involved with any full or partial self-insurance plan, Soltis adds. But she expects more credit unions to explore it and other out-of-box alternatives in an effort to maintain high-quality benefits.
“It’s so important for recruitment and retention,” she says, “and more employers are recognizing the health of their employees is important to their productivity and directly tied to the workplace culture.