Pat Bershinsky has gifted his nearly 220 staff members $1,000 every Christmas for four years and once again gave bonuses this summer.
The leader of one of Colorado’s school cooperatives has the extra cash because of a decision he made four years ago on employee health care. Bershinsky, executive director of the Pikes Peak Board of Cooperative Educational Services, or BOCES, has built up nearly $700,000 in the employer’s health care account that is used to pay claims and administrative costs. The partially self-funded health insurance model is making a huge financial difference to the BOCES, which serves about 20 districts in the Colorado Springs area, at a time when health care costs are rising.
“You don’t have to do the same thing over and over again, whether it’s health care (or) whether it’s education,” Bershinsky said.
While much of the focus in education funding is on dollars spent in the classroom, health care costs are a sneaky burden on districts across the state and country. According to the American Association of School Administrators, employee benefit costs — largely made up of health care spending — are the second-biggest line item in school districts’ budgets, behind only salaries. This means that BOCES, which are cooperatives of often small rural school districts that band together to pay for some services collectively, also feel the pinch.
Traditionally, there are two ways that school districts can pay for health care. First, they can purchase a fully insured plan, where both the district and the employees pay premiums to a health insurance company, which then covers the employees’ health expenses.
But that option has grown more expensive, and often at the expense of the school district. In one example, from a 2019 report by the National Council on Teacher Quality, Cherry Creek School District in suburban Denver went from paying 38% of a teacher’s total health insurance premium in 2016 to paying 61% in 2019. According to data from the nonprofit Kaiser Family Foundation — which is not affiliated with the Kaiser Permanente health care company — Colorado employers have gone from paying about $12,000 per year for each employee’s health care coverage to paying more than $15,000, while employee contributions have jumped from a little over $4,000 to around $6,000.
These rising costs have caused many organizations — not just school districts — to go the other route: a self-funded plan. In this type of plan, employees and the company still make contributions to a health plan, but the company holds onto the money, effectively becoming the insurer while often hiring an insurance company to manage the claims process. This gives employers more control and allows them to implement more creative cost-control strategies. But it only works if the employer can actually keep the costs under control.
Fed up with soaring health insurance costs, Bershinsky reached his breaking point when his BOCES was facing a 17% increase in health insurance premiums under Kaiser Permanente five years ago and no one could tell him why. Instead of sticking with Kaiser Permanente, the Pikes Peak BOCES charted a new course in health insurance.
Since partnering with a company called Alchemy Health, the BOCES has been able to pocket hundreds of thousands of dollars it would have otherwise sunk into premiums, passing those savings onto employees while also using them to upgrade buildings.
Alchemy Health, a data analytics company that develops health insurance plans and is part of Littleton-based consulting firm Think Health Consulting, builds health insurance plans for employers component by component. The consulting firm, founded in 2019, narrows its focus on finding the best options for employers for a plan administrator, a pharmacy network, an adviser and health care providers, negotiating rates so that the cost of care becomes more affordable.
Data drives many of the options Alchemy Health finds as the company drills down into the demographics and history of BOCES employees to understand the projected cost of insuring them — analyzing their medical diagnoses, the amount they’ll likely spend on medications and the kinds of medical issues they may confront in the next year. The company then constructs a health insurance plan tailored to their needs.
“It’s taking a singular approach to each one of our employer groups and truly crafting the best benefits for them,” said Kyle Kube, CEO of Think Health Consulting.
And it gives them clear data so they can create a plan that works specifically for their staff, said Todd Evenson, COO of Think Health Consulting.
“When you look at Pat or other employer groups across the country and across the state, they’re ultimately frustrated because they lack an ability to control their health care spend and benefits spend in a way that is so different than the rest of their business,” Evenson said. “I mean, we can all measure our operational costs down to how many paper clips we use, how many pieces of paper are in the classroom and how many pencils are there. But when it comes down to their health care spend … ultimately there was no control, there was no data, there was no transparency for them to be able to take control of those decisions.”
Information drives both individuals and employers to make better health care decisions, Evenson said, “and what we’re offering up is information that makes them better financial decisions, better clinical decisions (and) better quality decisions.”
Saving on high-cost medications and provider rates
When the BOCES relied on Kaiser Permanente for health insurance, it was spending $900,000 per year — close to $90,000 per month — without understanding what was most driving its employees’ health care usage.
Alchemy Health takes a different approach, partnering with a third party administrator to set aside about $10,000 a month for administrative costs and the remaining $80,000 a month into a BOCES claims fund. Alchemy Health and the third party administrator then review every medical claim, audit each one for accuracy and necessity and determine whether it’s an eligible medical expense. That means the BOCES can control its medical payment money, have clarity on how much claims cost and save any leftover money after paying out claims.
Another area Alchemy Health racks up significant savings: high-cost medications.
The company works through a pharmaceutical advocate, which searches for cheaper options of pricey medications used by employees. Meanwhile, pharmacy rebates that can add up to thousands of dollars and that typically are funneled back to an insurance carrier are returned to the employer under Alchemy Health’s partially self-funded model.
The company sources about $300,000 worth of expensive medications for about $6,000 per year for the BOCES, adding up to about $294,000 in savings, Kube said, with no cost to the employees.
Additionally, Alchemy Health has taken measures to pinpoint health care providers that offer services, such as child births and MRIs, at lower rates. The company builds relationships with providers, negotiates rates and folds those rates into an employer’s health insurance plan, Kube said, noting that oncology, cardiothoracic and musculoskeletal services typically cost health insurance plans the most amount of money.
“The cost that they negotiate drives the cost of care down and it’s increased quality,” Bershinsky said, noting that more than 120 of his staff use the plan developed by Alchemy Health with their health care, vision care and dental care covered at no cost to them.
“Every dollar that I spend belongs to taxpayers in El Paso County,” he added. “Every dollar that I spend is taxpayer money outside of any grants or anything I get from the (federal government) or whatever. There is no way in the world that I would promote this if I thought that it had the chance of taking money away from kids or the chance of not spending the tax dollars the way your taxpayers want it spent.”
The plans that Alchemy Health develops also offer the BOCES and other employers stop-loss insurance to protect them against crippling costs in the event they have a catastrophic claim. They have a maximum financial liability they’re responsible for covering — an amount they agree upon before launching their health plan and a reinsurer covers any expenses above the contracted claims liability, Kube said.
“If they have a catastrophic claim or more than one high dollar claim, the employer pays their agreed-upon amount and the stop-loss insurance pays any amount above that,” Kube said.
The BOCES would pay a maximum of $40,000 on any claim before its stop-loss insurance kicked in, Bershinsky said.
“The main thing we’ve done is we’ve cut out the fraud, waste and abuse within the health insurance world,” he said, as he’s able to understand a dollar-for-dollar breakdown of his staff’s health care costs.
Alchemy Health works with at least seven school districts in Colorado, including Calhan School District and Edison School District 54JT, as well as school districts and other industry employers in Arizona, Florida, Wyoming and Indiana, Kube said. The company started with rural school districts in mind, where residents often have limited options for care, and has since branched out to work with commercial businesses and private employers with at least 20 employees.
Kube and Evenson launched Alchemy Health under Think Health Consulting so that they could “gain full autonomy of the (health care) components that we put in place,” said Kube, who has been a benefits adviser in Colorado for 13 years and who was a self-funded expert at a firm the BOCES previously used. He eventually left that firm to start his own with Evenson, a former COO at one of the country’s largest medical associations.
Their firm has about 300 clients whom they advise in talent acquisition, risk management, human resources and employee benefits. About 20% of its clients are partially self funded or self funded. Kube and Evenson bring in revenue through Alchemy Health by charging their clients an analytics fee that is scaled based on each employer’s needs.
So why don’t more school districts seek out a similar health insurance plan?
For one, change is hard, especially for smaller districts whose staff members are often overburdened with competing responsibilities. It’s also challenging for districts to consider a completely different approach to health insurance when they have long-standing relationships with their brokerage firms, Kube said.
“Being able to design and control your health plan is new for most of these employers,” Kube said. “They’ve been told for so long by other brokers that what they have is as good as it gets. That is not the case. It’s just the process of change management and education that takes a considerable amount of time.”
That time has more than paid off for Bershinsky and his BOCES.
“They’ve thrown every rule out,” Bershinsky said, “and built it back piece by piece by piece by piece” with the goal of helping educators and his staff boost their quality of care.
Colorado Sun staff writer John Ingold contributed to this report.