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The cost of employee benefits is likely each NJ
municipality’s second largest expense, growing at
alarming rates each year. While there are no “silver
bullet” solutions to the healthcare issues facing all
NJ employers and municipalities, there are several
options and solutions that are often overlooked. One
such option is using “Health Insurance Funds” (HIFs)
to procure cost effective benefits delivery.
Using the “shared services” concept for healthcare and
employee benefits delivery, HIFs provide an organized
framework for schools to band together with other
local schools, and even area municipalities, to
procure more affordable employee benefits. HIFs have
been in place in NJ since the early 1990’s and have
helped close to 100 municipalities across NJ to
provide cost effective benefit solutions. More
recently, new enabling legislation now allows other
public entities, like school districts, to join with
municipalities and other governmental entities to band
together and create HIFs. Using the HIF model,
municipalities, local school districts and other
government entities can band together and use their
collective size and the economies of scale to
negotiate more favorable financial arrangements with
insurance carriers and administrators. Plus, under a
HIF each participating entity can also maintain their
own separate plan of benefits as not to create any
collective bargaining issues.
For municipalities the possibilities are considerable
for great success. For example, all of the
municipalities in a particular county can set up a
county-wide HIF allowing the various entities to band
together for more effectively managed and less costly
benefits. The development of a county-wide HIF is
consistent with the principles of shared services
being suggested across the state. Unlike the State
Health Benefits Plan (SHBP), HIFs are managed and
operated by the participating entities who maintain
greater control over the operations of the risk. Plus,
HIFs operate using the same successful risk and
business model as property and casualty Joint
Insurance Funds (JIFs) which have been very successful
in helping municipalities effectively control
insurance costs for decades. In addition, like the JIF
model, participating entities are less reliant on a
single insurance carrier solution and can use more
effective financing techniques to deliver discounted
provider networks, member services, health and
wellness features and improved claims management.
The development of more regional and locally based
purchasing coalitions affords municipalities the
ability to:
1) Use the collective purchasing power of many
municipalities in a given area to jointly purchase
health benefits insurance at more stable, predictable
and ultimately lower costs;
2) Maintain their own separate benefit plan as not to
compromise collective bargaining obligations;
3) Use a proven model (like the JIF) to have more
ownership interest in managing health benefit risk and
claims;
4) Applying successful shared services concepts to the
second largest line item.
By: Joseph M. DiBella
Senior
Vice President, Employee Benefits Consulting Practice
Commerce Insurance Services
Contact Joe to learn more about HIFs at:
joseph.dibella@yesinsure.com |
