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School officials defend self-insurance plan and stop-loss structure as council probes ISF risks
Summary
BOE officials described the district's self-insured internal services fund (ISF), including a $300,000 individual stop-loss, a 20% aggregate stop-loss, and a reserve target of roughly 8% of anticipated claims. Council members asked about Sigma, audits and whether a broker/RFP might yield savings.
During the budget review, Board of Education staff spent substantial time on the ISF that funds employee health benefits, explaining how the district manages medical claims and mitigates catastrophic risk.
"We are a self-insured district," Superintendent Dr. Brian Lexi told the council, describing the ISF model and the BOE's rationale for managing claims internally rather than buying fully insured coverage. He said the district's individual stop-loss attachment point is $300,000, with 100% reimbursement above that level, and that the aggregate stop-loss is set at 20% above anticipated claims.
Director of Finance Sean O'Keefe and the BOE's insurance consultant, Joe Spurgeon, described the projection methodology: a 12-year claims history trended forward, with monthly trend adjustments as older high-cost months roll off the lookback. The BOE said its reserve target is about 8% of anticipated claims (sometimes described as roughly 40% of the corridor between expected claims and aggregate stop-loss) and that, after the COVID period, it had returned several million dollars to the town when claims were unusually low.
Council members probed the district's reliance on its third-party administrator, Sigma, and asked whether an RFP or broker-led review might find better pricing or networks. "We are paying them about $500,000," one councilor noted; BOE staff replied that prescription-rebate revenue and other negotiated back-end returns have historically exceeded the flat administrative fee and that BOE leadership had asked Sigma to produce an independent claims audit.
Dr. Lexi acknowledged the trade-offs of a self-insured model: it can produce savings if well-managed, but it requires planning for downside risk. "We do come out ahead as long as you manage it carefully and well and think in long term," he said. The BOE committed to conducting the promised claims audit and to continue communicating monthly financial statements and plan performance to the council and finance committee.
The council asked for additional transparency about the ISF projections before final budget adoption, and some members asked BOE staff to solicit comparative pricing or broker feedback in a way that would not immediately disrupt employees or require unnecessarily broad bargaining changes.
Next steps: BOE said it would complete the claims audit, provide updated projections ahead of the April vote, and consider non-disruptive ways to validate the third-party-administrator arrangement.
