The necessary knowledge of healthcare and benefit plans can be overwhelming, even for the best administrations. Each year I receive calls from treasurers and HR teams who are either considering leaving their healthcare consortium or from others who are interested in joining one. I’ve spent much of the last 20 years in the detailed evaluation of healthcare consortiums for school districts. Here's a few things I’ve learned along the way….you’re welcome all you animal lovers:
- Don’t be a Big Fish – Size Matters - Large districts don’t always belong in a consortium. There isn’t an exact science, but let’s say 500 employees or more can typically thrive outside of a consortium. They have more predictable healthcare risks and more leverage when negotiating with insurance companies. Often, smaller districts will find benefit in a consortium where the purchasing of healthcare consolidates multiple districts into appearing and behaving like one larger one. Find a consortium with districts of similar size to avoid dramatically subsidizing the bill. If you are the big fish, ensure your bylaws give consideration to your size by possibly allowing additional votes on things that would be important to your district, such as spousal exclusions or plan design changes.
- Birds of Feather Flock Together - Plan Design/Rates – Some consortiums operate as “one for all, all for one.” Every district offers the same plan design and the same rates. In the “all for one” category, there is very little incentive for an individual district to control costs. It must be all. Let’s say one district wants a robust wellness program and another doesn’t. When the rates and plans are all the same, the one that wants the wellness program usually gives up quickly. Why should we make this effort if everyone else isn’t? Other consortiums allow individual plan designs and renewals based on the individual districts’ loss ratio performance. This allows for a skin-in-the-game mentality where individual effort can be rewarded.
- What does an Owl Say? – Data Availability – WHO, WHO cares about the data? Many consortiums do not share data regarding the performance or risk of an individual district. Often this is designed to keep cohesiveness between the member districts. This is typically where I get phone calls from districts. They think they might be overpaying but don’t have enough data to support it. On the other hand, maybe your district is underpaying? Either way, I am often asked to perform an independent due diligence review for peace of mind. Look back three years and project forward two, it should be obvious if the deal is fair.
- Sponge Brain Square Pants –Simplicity- Did you know the sponge doesn’t have a brain? A wise treasurer taught me a valuable lesson early in my career. He was fed up with how much time he was spending evaluating healthcare, trying to meet budget needs all while keeping unions and insurance committees happy. He was determined to find a consortium where their district gave up control and let the consortium make all benefit decisions to purposely simplify his life. If evaluated well, it could be a simple, brilliant move.
- Watch out for the Wolf Pack - Colleague Support- Having like-minded colleagues supporting and focusing on the wellbeing of your employee population can be powerful. Often the member districts become friendly and share best practices or common challenges. Knowing you can phone a friend in a similar situation can be worthwhile. It’s helpful when colleagues are aligned.
- Pop goes the Weasel – Entry and Exit to the Consortium - When do districts typically want to enter a consortium? When it’s too late. Or when they are running poorly and need help. When do consortiums want to let new districts join? When they are running great and don’t need help!
Pro Tip! Evaluate the pros and cons of a consortium BEFORE you need it. What if you want out? Knowing the bylaws of how to get in and out of the consortium is critical. Many consortiums require a six-month advance notice of termination. Many have exclusion clauses that say, once you’re out, you can’t get back in for 2 or 3 years. Almost all have a time period where at a minimum, administrative fees must be paid to the consortium.
According to Google, the smartest animal on Earth is the chimpanzee. We know your “real job” is not to be consortium Chimp. Find a good partner for your monkey business!
Cheryl Mueller, CEBS, CBC, is the President and Managing Principal at HORAN, an OASBO Platinum Sponsor.