Hillsborough schools aim to cut costs with self-funded health insurance plan

WUSF | By Nancy Guan | October 31, 2024

To save money long-term, the district is looking to switch to a self-insured health insurance plan — one that takes on more risk, but allows for more flexibility — which is in line with other large school districts in the state.

Hillsborough County Public Schools are looking to switch to a self-insured or self-funded insurance plan in 2026 that they say will cut costs in the long-term.

The school board discussed the issue on Tuesday and will revisit it in June.

What prompted the discussion is rising health insurance premiums that the district pays to their current carrier, Aetna.

Under the current fully-insured plan, the cost for insurance premiums are projected to rise from $186.1 million in 2024 to $266.7 million in 2026.

“So each time your employees go to the doctor, they’ll see an increase in their costs, as well as likely an increase in their premium,” said Lorrie Penley, a representative with the district’s health insurance consultant, Aon.

With the self-funded plan, the district takes on more of the potential risk that comes with high-cost claims, but there’s more flexibility to keep costs down elsewhere, explained Penley.

Essentially, in a self-funded plan, the employer — in this case, the district — is directly responsible for paying their employees’ claims such as medical services and prescription drugs.

That’s in lieu of paying an insurance carrier a fixed premium, which is getting more expensive.

According to projections, the district will ultimately save money that way. On the self-funded plan, costs for 2026 are estimated to be around $247.6 million, about $20 million less than on the fully-insured plan.

“My wish is to move forward towards self-funded insurance for 2026,” said Superintendent Van Ayres.

Other counties use self-funded insurance

In a workshop presentation, Aon pointed out that other large school districts in the state, such as Miami-Dade, Palm Beach and Pinellas, operate on a self-funded insurance program.

Penley laid out that, ultimately, self-insured can give employees more tailored benefits.

“When you’re fully insured, you’re limited in what you can bring to your employees in addition to what the carrier offers,” said Penley.

Being self-funded grants the district more flexibility in the programs and services it offers to employees, according to Penley.

The district will take on more administrative responsibilities though as a result. However, Penley says, in the long-run, they would save on administrative costs.

Under a self-funded plan, the district will also no longer have to pay a state tax on fully-insured premiums and retains rebates under their drug prescription program.

“That would help to mitigate the rising costs of your plans. At the same time, you’re trying to make your employees healthy,” said Penley. “And so you’re giving them better options to try to improve on their health.”

Hillsborough Schools board member Patti Rendon said that if the district continued on the fully-insured plan, they would be “taking money out of teachers’ pockets.”

Board member Stacy Hahn was among the majority that expressed wanting to move forward with the self-funded plan.

“We’re going to see premiums continuing to rise drastically every year,” said Hahn, “And I think the only way to control that cost for employees is having some type of flexibility to do that.”

Hahn also expressed some concern about a requirement that calls for the district to hold 60 days in reserve funds. It’s a state requirement to show that the district can pay for claims.

“I would like to see some type of financial savings plan,” said Hahn.

Handling high-cost claims

Board member Lynn Gray questioned the district’s ability to absorb potential high-cost claims.

“We try to think we’re all healthy, but our clientele, our staff, are not in the most physically fit situation. We had COVID, which dramatically increased serious high cost claims,” said Gray.

“I know we have a fund balance of 14-19%, but that will erode that fund balance,” Gray continued. “We’re hearing from experts, but we have to temper it with our absolute fiscal reality.”

Aon said the district does have the option to purchase stop-loss insurance to protect against catastrophic losses, or when claims exceed a certain amount.

Superintendent Ayres also countered on the reserves issue, saying that the district does have a financial plan in place.

“We’ve worked over the last number of years to have that reserve where it’s at now, to be able to move in this direction,” said Ayres.

District 4 representative Patti Rendon spoke in favor of the self-funded plan but also emphasized that the district needs to take a wholistic approach by considering different insurance carriers and even consultants.

Still, Rendon said if the district didn’t switch, they’d be “taking money out of teachers’ pockets.”

“We’re going to have to pay those additional premiums one way or another, the rent is going up,” said Rendon.

Several board members expressed they wanted to continue discussing the financial impacts before the next meeting on the issue in June.