City Switching To Self-Insured Health Care Model
Pittsburgh officials are cutting out the middle man in its employee health care coverage, opting instead to pay for claims directly instead of contracting external insurance carriers.
The city was self-insured until 2007. Sam Ashbaugh, the city’s director of the office of management and budget, said switching back comes with some risk, so Pittsburgh will purchase stop-loss coverage for high-cost claims.
It's like taking insurance out on yourself, he said.
“If you have a number of claims that are million-dollar claims," he said, where multiple people get in serious accidents that leave them "in the hospital for days, months and hike up a lot of bills," the stop-loss coverage would take on those costs rather than pulling from city coffers.
Stephanie Haugan, employee benefits manager, said the dollars saved by being self-insured would add coverage such as telemedicine care – phone calls with a health provider as an alternative to urgent care and emergency room visits. She said added coverage is an attempt to reduce the instances of chronic conditions including behavioral health.
“People are so stressed out they don’t take care of themselves physically, they do not take care of themselves emotionally and spiritually," Haugan said. "When you put that all together, they are very non-productive. So we want to change all of that.”
The city’s wellness initiatives will also be expanded to include more activities and give a second round of financial incentives, including a $240 award for submitting to health care screening. About 40 percent of the city's 3,700 municipal employees participate in the program.
The self-insured model is the city’s attempt to save money under the Act 47 five-year recovery plan. The city has been deemed "financially distressed” for 12 years. The oversight program requires the city to restructure its debt in a number of ways, including increasing employee health care contributions from the current 15 percent to 20.
Ashbaugh said the city spent $53 million on health care this year. He projects it would rise to $64 million in 2016, but by adopting the “pay as you go” model, projections drop to $57 million.
The self-insured model is part of the budget that Mayor Bill Peduto submitted several weeks ago to the Intergovernmental Cooperation Authority, a financial oversight panel created by the Pennsylvania legislature.
The city will continue to use Highmark and Aetna providers if the proposed budget is approved, Ashbaugh said. The switch, which would take effect Jan. 1, will not affect employees’ coverage, he said.
“We are going to be not only mitigating the cost for employee premium increases but also maintaining the current choice and selection of benefit programs that is already offered," he said. "So there’s no change in the actual employee benefits that are offered to city employees, which is important.”