Fall 2012 issue of Horizons

PUBLIC SECTOR

In addition, costs can be managed, because the organization has access to specific claims data, which assists the employer in designing a plan that best meets the needs of employees. Risks As with any group covered by an insurance plan, the greatest risk to the insurer is the risk of a catastrophic claim that exceeds the capacity of the insurer’s ability to pay. To reduce this risk, the organization should purchase stop-loss insurance through an insurance company, which would cover these types of claims. Another risk to employers who self-insure is the cost of treating chronic ailments. As documented in a 2005 study by the Congressional Budget Office, 25% of Medicare beneficiaries accounted for 85% of the Medicare spending. Of this 25%, more than 75% were diagnosed with at least one major chronic condition, such as heart disease, lung disease or diabetes. Although this data relates to Medicare participants, the CBO indicated that the general population shows a similar

concentration of costs because of chronic ailments.

In a 2012 article in the New England Journal of Medicine, Harvey V. Fineburg, M.D. and Ph.D. argues that the costs resulting from treating chronic conditions “…could be mitigated through a more widespread effort to limit risk factors, including measures to help patients reduce excess body weight, increase physical activity, quit smoking, control hypertension, and lower cholesterol levels.” Many employers who self-insure have begun to implement innovative programs to limit the risk factors of chronic disease and improve employee health, and thus reduce healthcare costs. City of Lenexa, Kansas The City of Lenexa, Kansas is an example of a local government that self insures and is on the cutting edge of providing internal programs that reduce healthcare costs. In a presentation to the Lenexa City Council in March 2012, it was reported that the city’s wellness program has resulted in savings of over $1 million last year alone. How have they done it? Jill Grube, Assistant Finance Director and a member of the city’s Health Task Force, it has been a combination of efficiently administering a self-insurance program and the fact that health and wellness have become a part of the culture of the city employees. “Wellness has become ingrained in the culture at the city over the years and the implementation of the city’s “LiveWell” program was the next step in the process,” said Grube. The city’s “LiveWell” program is a comprehensive health and wellness program for members of the city’s health plan. According to Kristin Crow, Assistant Human Resources Director of the City of Lenexa and

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