School self-insures

By Hana Al-Henaid and Michelle Nosratian

Located on the side of a small hill across from Seaver is the house where the headmaster of Harvard School used to live. The house has since been converted into the business and financial aid offices, where personnel deal with issues such as employee health insurance on a daily basis.

Chief Financial Officer Rob Levin’s rather bright, spacious office is in what used to be the headmaster’s living room. He sits upright in his chair as he discusses the school’s unique approach to employee health care.

“Only buy insurance if it’s mispriced or if you can’t afford not to,” Levin advised.

Those 13 words summarize the school’s $3.2 million insurance policy: a finely-tuned balance of primary self-insurance and secondary reinsurance for more than 300 employees.

“To put it another way, it’s just a hugely high deductible.”

The school’s health care policy covers $350,000 deductible per person, roughly $3 million overall, Levin said. “After that, insurance kicks in.”

The school’s reinsurance is provided by Blue Cross, which is also the school’s Preferred Provider Organization, so the school encourages its employees to go to doctors who work with Blue Cross.

“When our people go to Blue Cross Organizations, we save a lot of money. In turn, we give incentives for people to do that so people here save a lot of money,” Levin said. “We pay 90 percent, the teacher pays 10 percent. School wins, the teacher wins, the doctor loses.”

The policy between the school and Blue Cross is fairly unique to Harvard-Westlake.

“Blue Cross wanted to sell us a policy,” Levin said. “We told them we want your doctors but we don’t want them as our insurance company; we just want your network and your pricing. They did not like this. Apparently, it had never been done in California. We got our self-insured plan with Blue Cross’s PPO: we just pay them a fee to have access to their network.”

Over the past 17 years, self-insurance has saved the school millions of dollars in insurance company premiums, Levin said.

“A few years ago, we were at $2.6 million [spent on health insurance]. Now the insurance company would say, ‘things are going up at 15 percent a year, nationally and of course we have to make a profit,’ and our premium the next year would have been $3 million,” he said.

However, within the next two years, the amount the school was spending on health care insurance was closer to $1.5 million than $3 million, and because the school is self-insured, it pocketed the savings.

The school is also a firm believer in conservative budgets, according to Levin. For example, when the school’s health insurance cost was $1.6 million in 2007, the school’s anticipated budget was $2.7 million.

Despite the $1 million variance, the school maintained the $2.7 million budget insurance for the following year.

“We still budget at around $2.8 million because we figure good luck doesn’t last forever,” Levin said. “That’s why when the whole world imploded this past year; you weren’t reading about layoffs at Harvard-Westlake.”

“If you go to blue cross they say ‘we have 7 different plans, choose from the crummy one to the good one for your teachers,’” Levin said. “As a self-insured institution, we write our own plans. We set our percentages.”

Ever since President Barack Obama announced his plans for health care reform, it has been at the forefront of national politics. The debates between which approach is the right approach for the United States to take in regards to health care maintain a ubiquitous presence on cable news networks, talk radio, and newspapers. However, the Harvard-Westlake business office has other ideas.

“We don’t know what Obama-care is going to be because it’s going to be compromise-care, congressional care. As it becomes clearer and we have to react then we will,” Levin said. “The worst being that we will have to join some federal plan and ours will get disbanded and we’ll get less care for more money.”

Levin is pretty confident about Harvard-Westlake’s system of self-insurance.

“We have good years, we have bad years but on average we are way ahead of the game,” Levin said. “Given the realities in this country and our system of health care, is what we have decidedly better than average? Yes. Are we able to tailor it the way we want? Yes. So we’re getting a better plan and saving money.”