Healthy employees help keep health care premiums steady

Iowa State employees enrolled in the ISU Plan for medical, prescription and dental insurance have enjoyed level premiums with no reduction in benefits for the past five years. That's no small feat these days as health care costs continue to shoot up. What sets Iowa State apart?

It's a mixed bag of reasons, according to Mark Power, chair of the university benefits committee (UBC) and University Professor of finance, but it starts with being self-funded.

Advantages of self-funding

Prior to 1996, Iowa State's benefits were managed through a guaranteed-cost contract. The university paid an outside insurance company to cover any health care claims that exceeded premiums. There were additional costs for administrative expenses and network access.

"It's actually a rent on capital," Power said.

A self-funded program, like Iowa State's current plan, operates by accurately calculating health care premiums without having to make a profit.

"Because we're not renting capital, we don't have to make a profit on that capital," Power said.

Self-funding means Iowa State is responsible for any health care claims that exceed premiums from employees. In a sense, Iowa State acts like its own insurance company by setting premiums and managing its reserves to meet claim obligations.

"Being a self-funded plan has saved us a lot of money over time," Power said, which has allowed Iowa State to hold down costs for the university and employees.

Wise management

A primary reason ISU Plan premiums remain level, Power said, is astute program management.

"We've been ahead of the curve with regard to implementing strategic changes to our plan," he said.

Iowa State's benefits program is managed jointly by the division of finance and university human resources (UHR). Finance handles all monetary aspects of benefits, compliance, analysis and vendor contracts. UHR works with health care vendors and communicates with employees.  

The UBC has representatives from across the university who meet monthly to continually develop cost-saving strategies for the benefits program. A subcommittee also meets monthly to research details that support the larger committee's efforts.  

Power said two strategies help the benefits management team control health care costs: maintaining the same medical and dental plan designs and partnering with Wellmark/Blue Cross Blue Shield as Iowa State's third-party administrator. Because Wellmark is Iowa's largest health insurance company, it offers a broad network of hospitals and physicians from which ISU employees may choose. The more in-network providers employees use, the less it costs the university.

On the pharmaceutical side, Iowa State was one of the early members of the Willis Towers Watson pharmaceutical management program, now a consortium of more than 300 organizations. The consortium creates transparency among those groups, which helps control costs.

"The transparency results in us being able to capture all of the pharmaceutical rebates that are generated by the [prescriptions] that we use," Power said. "Instead of a third-party payer keeping them, they flow back to us. It's in excess of a million dollars annually."

In addition, Power said the consortium allows Iowa State to purchase prescription drugs at deeply discounted prices and implements pricing protocols through the university's pharmaceutical benefits manager, Express Scripts.

"If Express Scripts sees what it considers to be overutilization of a pharmaceutical, they make us aware of these issues and we can determine why it's happening," Power said.

Healthy, happy employees

Iowa State employees play a big role in keeping health care premiums steady. According to a 2013 employee benefits survey, most ISU employees are healthy, happy, like their university jobs and appreciate the benefits they receive. Healthy habits, such as not smoking (less than 3 percent of ISU Plan members smoke) and regular physical exams and dental check-ups contribute to lower health care costs.

"Healthy, happy employees are going to consume less health care and not use as many pharmaceuticals," Power said. "If they do have a problem, they do a good job of following their physicians' directions. We have an educated population that tries to do a good job of controlling chronic disease."

Other factors

McFarland Clinic and Mary Greeley Medical Center, where the majority of Iowa State employees receive their health care, play a role in controlling costs as well.

Power also attributes stable premiums to lean, hardworking finance and human resource teams and support from university administration.

"If you don't have that support at the top, it's obviously going to be difficult," he said.

The future?

The most recent trend calculated by Wellmark showed typical plan increases of 5 to 7 percent annually nationwide, which has yet to impact Iowa State, Power said.

"The future is very hard to predict. We'll keep looking at things we can do to increase plan efficiencies without reducing the quality of benefits," he said. "But from the standpoint of health care, it's really driven by trend. Unless we continue to innovate, we'll be at the mercy of what the trend is."