Consultant outlines self-insurance and level-funded options; commissioners press for solutions to VEBA/cash-in-lieu costs

FRANKLIN COUNTY, Wash.

At the March 12 workshop the county heard an extended presentation on employee health-benefit options from Matt Henderson, a benefits consultant with Marsh McLennan Agency. The presentation surveyed a range of approaches and flagged self-insurance and non-carrier level-funded models as the most promising long-term approaches to contain rising health-care costs.

Henderson explained pros and cons of several options commonly discussed by local governments: joining a large pool such as the Public Employees Benefits (PEB) board or a county insurance fund; adopting an individual coverage HRA (ICHRA) or other defined-contribution approach; continuing on a fully insured group plan; moving to a level-funded plan; or adopting traditional self-insurance with stop-loss protection. He emphasized that the largest long-term opportunities to restrain cost are program design, active risk-management initiatives, direct contracting or negotiated arrangements with local providers, and pharmacy-cost controls including international sourcing strategies and better rebate capture.

Key points from the briefing included: - ICHRA: offers employee choice and defined-contribution cost control for employers, but exposes employees to individual-market price volatility and potentially limited provider networks outside the region. Henderson warned that the individual market in Washington can be volatile and may act effectively as a high-risk pool, with higher long-term costs for employers who subsidize individual plans. - Fully insured: administratively simple but renewals are experience-rated and carriers control prices; repeated year-to-year carrier shopping can be counterproductive. - Level-funded and self-insurance: give employers more control, allow creative plan designs (including steering to preferred high-value local providers), capture pharmacy rebates, and accrue claim reserves to smooth future increases. Henderson said his firm has clients that transitioned from high trend lines to single-digit or flat trends using risk-management programs and alternate contracting approaches.

Commissioners asked practical questions. A commissioner said the county currently pays substantial cash-in-lieu or VEBA distributions to employees and estimated the cost to the county at about $2.5 million per year; the board asked how a new strategy could address that legacy cost. Henderson said the transition path can be staged (tweaking plan design, adding an HRA, moving to level-funded, then to traditional self-insurance) and that recovering control of rising costs usually requires a combination of plan design, provider contracting and pharmacy strategies. He outlined network and stop-loss options to ensure access to specialty care and said local hospitals and providers can be asked to offer deeper discounts in exchange for preferred referrals.

Henderson recommended a multi-year approach to sustainability rather than a one-year renewal focus. Commissioners asked for follow-up information about how VEBA or cash-in-lieu balances can be used administratively to offset higher contribution needs and asked staff to bring more detailed proposals and vendor comparisons to a future meeting.