THE NEWS SERVICE OF FLORIDA: University of Florida Mulls Self-Insurance

The following article was publlished by the News Service of Florida on July 4, 2011:

The University of Florida mulls self-insurance

By Lilly Rockwell

In a first for the state, University of Florida President Bernie Machen wants to establish a health insurance program just for university employees to cut costs.

Machen wants to launch a lobbying effort to convince the Legislature next year to let the school opt out of the state’s health insurance programs.

For employees of the University of Florida and the university-operated Shands hospital system, it could mean saving money and lower premiums.

But by removing a portion of the total 376,324 employees and dependents currently enrolled in the state’s health insurance plan, it could have an impact on how much other state workers pay for health insurance.

The University of Florida would need legislative approval to go forward with the plan.

“We would cut costs and increase health coverage for our employees,” Machen told the State University System board of governors.

“We have been given encouragement from our governor and the House and Senate and we hope to do that in the next year,” he said.

The state has cut funding for state universities by more than 30 percent over the past four years, leaving each university president scrambling to devise ways to offset those losses, from increasing online classes, and enrolling more out-of-state students, to boosting fundraising and leaning more heavily on tuition increases.

The university’s idea of carving out its own health insurance program, essentially “self-insuring,” doesn’t necessarily mean the school would invent its own health insurance plan, but rather the institution would take on the risk that normally an outside insurer would assume.

“We do believe we are in a better position than the state to offer a cost-effective health care program that can be flexible to meet the needs of our employees, particularly considering that we have a full (medical center) here on campus,” said Janine Sikes, a spokeswoman for the University of Florida.

The state is also moving toward self-insurance for its Health Management Organization participants and the state already self-insures for its Paid Provider Organization participants. It wasn’t immediately clear whether the state’s shift toward self-insurance would have any impact on UF’s lobbying for its own self-insurance.

“When you pay an insurance company to take the risk, you are paying for the administration and some profit, as well as a little extra for taking the risk,” said Patty Born, a professor and expert in insurance risk management at Florida State University

“When you self-insure you don’t have to pay that profit,” she said.

Born said some of UF’s savings will be tied to the health of its work force.

“(UF is) anticipating quite a few changes in the future and rising costs,” said Sikes. “We potentially have the ability to create our own system because we have the resources here on campus.”

Those resources include Shands hospital, and colleges of medicine, pharmacy, nursing and public health.

Born said moving University of Florida and Shands employees out of the state system could impact what type of premiums the remaining participants pay.

“It’s an empirical question about how many you could pull out before premiums go up really dramatically,” said Born. “If you are only pulling out 10 percent or less from the pool, you probably won’t see much of an effect.” It also depends how healthy the people who are removed are, she said.

Born said one benefit to self-insuring is being more selective about coverage.

“The state mandates what has to be in a health plan,” said Born. Some of those requirements can be skirted by self-insuring, she said.

“So if they wanted to offer specific benefits to those employees, they would have control over that,” she said.

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