Insurance co-op aids agencies
Beaver Falls City Administrator Steve Johnson was expecting his city's health insurance premiums to rise nearly 6 percent in 2013.
But thanks to a new health insurance cooperative, Johnson said the premiums instead will drop nearly 7 percent, saving the city thousands of dollars that can be used to pave streets and make other improvements.
“I'm sure we wouldn't have gotten as good a rate last year or this year if we would have been on our own,” Johnson said.
Beaver Falls is one of 60 local government agencies that belongs to COGCare, a cooperative that covers about 800 men and women employed mostly by municipal governments, though several water and sewer authorities and the Northern Regional Police Department in northern Allegheny County also participate.
The cooperative covers members of one of 15 Councils of Government in Western Pennsylvania. COGs are voluntary regional bodies that unite government agencies seeking to share resources.
The cooperative is the brainchild of Jeff Smith, 57, executive director of the Butler Council of Governments since June 2009 and city treasurer for Butler.
He said he began talking to other COGs and municipal agencies about five years ago, to determine whether there was a way to control spiraling health care costs. Most said at the time nothing could be done, but the idea re-emerged in 2010 as local health insurance competition heated up.
“It's the biggest cost municipalities face,” Smith said of health care. “But it took two tries before we found someone to work with us.”
COGCare accepted bids, and last year, UPMC Health Plan landed the contract. The health plan guaranteed 4 percent discounts on premiums, meaning that if cooperative members are assessed to pay $1,000 a month, they pay $960.
John Mueller, vice president of Benefits Network Inc., which administers the insurance cooperative, said one member, whom he didn't identify, saved $100,000 in annual costs. Overall, according to a survey by COGCare, of about half of those who belong to the consortium, their savings equaled a combined $1.1 million in the first year. During the next three years, cooperative members expect to save at least an additional $1.8 million.
Each COG pays an annual fee of $750 for its members to join, and individual agencies pay a one-time set up fee of $25. More than 400 government agencies in 23 counties are eligible for the coverage.
Municipalities that moved from other insurers, Smith said, didn't see drastic changes in coverage because the UPMC coverage mirrored old coverage as guaranteed by union contracts.
“In some cases, it's only taken the savings of one municipality to convince others to join,” Smith said.
Several municipalities said they haven't seen any problems with access to doctors or experienced major paperwork problems since joining the cooperative.
Before the cooperative started, “We were hearing horror stories,” said Jack Petro, White Oak's manager of health care premiums. “We were hearing possible increases of 20, 30, 40 percent. This looked like a good opportunity to put a lid on health care costs over the next couple of years.”
Petro said the borough saved about $10,000 in health care premiums when it began coverage in January — after paying more than $100,000 a year. The borough has an annual budget of just more than $5 million.
For 2013, the borough budgeted a 15 percent increase, the maximum the rates could rise, but found itself with just a 7.5 percent jump.
“It's a nice safety net,” Petro said. “We know it can only go so high.”
Smith said the cooperative has a “sentinel effect” for those who don't belong to it.
“In the past, when some of the health insurance providers knew they didn't have competition, that's when you saw 40 percent increases. Now they realize COG is out there, maybe it's tempered other people's increases.”
Johnson said Beaver Falls pays about $500,000 a year in health care premiums, with employees contributing 7 percent toward the cost.
He said the the city's savings might be a message to others that sharing services can help ease some financial woes aside from sharing equipment and other steps.
“Sometimes, sharing services is one thing, because sharing equipment can be hard to do at times. If you're paving, everybody wants it during the good, warm months,” Johnson said.
The health care savings show the power of COGs, Smith said.
“This is why the state passed legislation to create councils of government,” he said. “It's created for groups of municipalities to work together on projects that are too big to take on themselves. This is an example of what happens when government works.”
Bill Vidonic is a reporter for Trib Total Media. He can be reached at 412-380-5621 or firstname.lastname@example.org.