Analysis finds staying self‑funded likely cheaper; fully insured Premera bid would cost about $4.2M more

The Anchorage School District on April 8 reviewed a market analysis of its employee health plan and heard that, based on the data presented, remaining self‑funded is likely less expensive than switching to a fully insured contract. The analysis, prepared by consultants from the Alara Group and presented to the board, estimated a move to a Premera fully insured plan would raise district costs by about $4,200,000 (roughly 10.2%) for a July 1 effective date, while the district would face roughly $3,097,000 in “runout” liability if it terminated the current self‑funded arrangement.

Why it matters: Health insurance is one of the district’s largest operating costs, covering roughly 1,400–1,500 lives under the ASD health plan. A multi‑million dollar change in structure or a major carrier change would affect district budgets, bargaining talks and employee out‑of‑pocket exposure.

The presentation and board discussion Marty Lang, chief of human resources, framed the review as a checkpoint after more than 15 years as a self‑funded plan: “The question has come up… whether or not the district should remain as a self funded plan for the ASD health plan,” Lang said, noting the district switched to self‑funding in February 2009 and that the topic was also recommended in a recent Council of Great City Schools audit. Lang said the ASD plan is managed day‑to‑day by the benefits office and serves about 1,500 employees across eight employee groups.

Consultants Sheree Hendricks (lead consultant, national accounts) and Tyler Kathhammer (executive director, underwriting analytics) of the Alara Group summarized their claims analysis, benchmarking and a marketing comparison between the district’s Aetna‑administered self‑funded plan and a fully insured proposal from Premera Blue Cross Blue Shield of Alaska. Hendricks explained that Qualified High Deductible Health Plans are governed by federal HSA/HDHP rules and that the district’s current plan mix includes a PPO (closed to new enrollment), an HSA‑qualified high‑deductible option and an HRA option.

Key findings presented - Enrollment and history: The ASD health plan covers roughly 1,443–1,500 lives on average; the district converted to self‑funding in 02/2009. - Current vendors: Aetna administers claims; Voya provides individual stop‑loss coverage; the district operates a near‑site clinic (originally VeriWhole Health, now managed by APRI) and uses a benefits task force with bargaining group representatives to advise plan changes. - Claims experience: The district reported net loss ratios better than budget (about 92–93% in recent years) and several large claimants accounting for a high share of spend. The analysis found a year‑over‑year increase in paid claims of about 4% between the 2022–23 and 2023–24 plan years, below typical market trend ranges cited by the consultants. - Projections and assumptions: Alara trended two full calendar years of paid claims (2023 and 2024), applied trend assumptions (7.9% medical, 11.4% pharmacy), assumed pharmacy rebates at 25% of pharmacy spend and increased stop‑loss premium assumptions (12% rise). Their baseline projection for a self‑funded July 1 renewal was about a 5.2% increase versus the current budget. - Fully insured comparison: A Premera fully insured proposal used a pooling (stop‑loss equivalent) level of $425,000, included a 2% premium tax and a 0.5% high‑risk pool charge, and — using Alara’s assumptions — would raise district costs by about $4.2 million (10.2%) versus the projected self‑funded baseline. Alara cited network differences (Premera’s in‑network discounts and provider mix) as a major driver of Premera’s lower claim unit costs, offset in part by fixed costs and taxes under a fully insured contract. - Runout and terminal liability: Consultants projected runout (incurred‑but‑not‑reported) exposure at roughly $3,097,000. They noted the district’s current stop‑loss contract does not include terminal liability; that means claims incurred before termination but paid afterward could remain a district liability unless separately covered.

Board questions and administration response Board members pressed several operational and procurement points. Member Linda Higgins questioned the $500,000 specific stop‑loss level on the district’s current contract and asked whether the consultant had performed a stop‑loss level “win/loss” analysis. Hendricks replied that benchmarking by employer size generally supported the $500,000 level but that stop‑loss choice depends on risk tolerance and historical large‑claim experience.

Members asked about the number of carriers in Alaska that could offer fully insured contracts; consultants and staff said the primary fully insured market in Anchorage is Premera and Moda, with Aetna operating as the district’s current administrator. Questions were raised about whether national carriers such as Cigna or UnitedHealthcare would bid for a fully insured contract in Anchorage; the consultants said Cigna and United do have self‑funded business but were not among the local fully insured bidders in this marketing exercise.

Member concerns also covered claims administration practices and timing of procurement. Board members said frequent requests for proposals (RFPs) can be disruptive, and consultants recommended different cadences for different components (suggesting 3–5 years depending on the product: stop‑loss, pharmacy, or third‑party administrator). Lang said administration staff plan to pursue a broker RFP this summer or fall and then consider an RFP for a third‑party administrator, but that the district is currently “poised to renew with our current option” unless the board directs otherwise.

Employee experience and other options Lang and benefits staff said employees provide mixed feedback but that the district’s near‑site clinic is a widely cited positive. Ty Walti and Lang noted the benefits task force (two representatives from each bargaining group) collects employee feedback between open enrollments.

Board members asked whether joining other state or union health trusts (for example, the Alaska Education Association/AESEA trust or other public employee trusts) was analyzed. Staff said the current Alara analysis did not evaluate joining state trusts; Lang said he had begun inquiries but that participation conditions and affiliation rules vary and would require further exploration.

Next steps District staff told the board they will: (1) proceed with the current July 1 renewal timeline unless directed otherwise, (2) issue an RFP for a new broker in summer/fall and later pursue an RFP for third‑party administration, and (3) follow up on questions raised by board members, including further benchmarking for Alaska‑specific comparators and exploration of public trust options.

Ending Board members thanked presenters and asked staff to return with additional detail on Alaska‑specific benchmarks, the full universe of potential bidders, and a written analysis of options for terminal/runout liability before the board considers any structural change.