Vandalia saving over $1.5M with health program [Dayton Daily News, Ohio]

June 10--VANDALIA -- Next month, if City Council approves a few changes as expected, Vandalia will renew its self-insured health program that officials estimate has saved the city at least $1.5 million over the past 10 years.

Vandalia is one of at least four area cities -- including Dayton, Kettering and Moraine -- as well as Montgomery County, that self-insures.

"It's been amazingly successful for Vandalia," said Julie Trick, assistant to the city manager. "Around 2006, we had some significant changes, and we shop our coverage every year. We've been self-insured since at least 1990, and maybe a couple of years before that."

Some of those changes included employee contributions.

At one time, Vandalia paid all the insurance premiums. Now, employees share, with bi-weekly premiums this last year of $24.73 to $69,27 per pay period.

Trick cautioned against thinking one size fits all and that other communities could save money if they self-insured.

In Vandalia's situation, the city estimates it has saved $1.5 million to $2 million over the last 10 years.

The city spent $1,712,280 on insurance in the last year. It insures 150 employees.

"They've averaged using 75 percent of their funds over 10 years," said Bill Demoray of Demoray Benefit Administrators, the broker Vandalia uses for its insurance needs. "They have done exactly what the collegiate textbook would want them to do.

"A 10-year study is a pretty substantial period."

Trick said the city pays all of its employee claims up to $30,000 per year, then a private insurance company -- Houston Casualty Corporation (HCC) takes it from there.

This past year, Vandalia's funding went over budget to 103 percent, but Demoray said that's not bad.

"Self funding is a commitment," Demoray said. "It is a commitment to manage the risk. You will have a couple of bad years. If you do it the way they have, you're going to win. Out of a 10-year period, you'll have three years where you're going to hiccup, maybe four."

Kettering and Dayton switched to self-insurance in January in an effort to save on health care costs, although officials said they would have to live through a year to find out how much they will save, if anything.

Kettering has nearly 400 employees with some kind of health care coverage from the city.

"We shopped both ways (self and carrier)," said Sara Mills, Kettering's human resources director. "It's difficult to say (what you'll save). In our first year being self-funded, we could have low or high utilization."

In its research, Kettering thought it could save $100,000 or more a year, although first-year results don't tell the full story.

"It is not a short-term decision," Mills said. "Every three-four years, an employer is due to have a bad year."

One of the side benefits Mills and Brent McKenzie of Dayton's human resources department mentioned is owning all their data. Insurance companies tell employers how much they spent, not necessarily what they spent it on. Being self-insured, if a company or city finds it is spending too much on medications and not as much on hospitalization, it can more easily change its coverage.

"You can also go back and find out how much (insurance company) profit is built into it," Mills said.

Dayton has about 1,800 employees under the plan, which widens into about 4,000 family members. It also started its new self-funding program in January.

"I think governments are naturally risk-adverse," McKenzie said. "But today, everyone is trying to control costs where they can."

Contact this reporter at (937) 225-2157 or [email protected].

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