Crestwood School District claims savings of $690,000 by self-insuring

July 06--WRIGHT TWP. -- Crestwood School District didn't simply change insurance brokers when it switched to OneSource Benefit Solutions at its June 30 board meeting; it switched from buying insurance to being self-insured, at a savings of about $690,000, Solicitor Jack Dean said.

The district had been using Creative Benefits as its insurance broker, and asked for a quote from that company and others for 2016-17, Dean said.

"We went out shopping around with these guys and Creative Benefits came back with a rate increase which amounted to about $124,000 more," Dean said. "So then we went to talk to other brokers, including OneSource, and they were able to come up with a plan that saves us about $690,000 by their estimate. The difference is being fully-insured vs. self-insured."

Large organizations often have that option. They can buy insurance coverage from a company such as Blue Cross, or they can "self-insure," meaning they are responsible for paying claims, though they typically contract a company to manage the claims.

While they are different beasts, the Northeast Pennsylvania School District Health Trust and the Diocese of Scranton are both self-insured. The trust, a consortium of 10 area districts and education entities, contracts with Blue Cross to manage claims.

To minimize risk, self-insured entities routinely purchase "stop-loss insurance" to cover any extraordinary claims that exceed a certain threshold. Dean said Crestwood's threshold is $250,000.

The district pays the insurance broker nothing directly, Dean said. The broker makes money by negotiating a deal with insurance providers, then gets a percentage of what the district pays the provider. "Our cost is built into that price."

Under the old system, Dean added, the insurance coverage included a $5,000 deductible, but the district was responsible for all but $250 of that paid by the employee. "We were paying the deductible plus the premium."

Under the new system, the employee sees no change, but the district no longer deals with a deductible; it simply pays the claim.

Being self-insured or insured through an outside company means little when it comes to budgeting, Dean said. The district sets a certain amount each year for insurance costs, and either pays it out as premiums to a company or as benefits to an employee.

"We had roughly $3.3 million budgeted for insurance back in the preliminary budget," Dean said. "Now, we will have a total cost of about $2.6 million."

Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish

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