ITEM NO: _7a_Supp_________
DATE OF
MEETING:__April 27, 2010



Commission Briefing
Self-Funding Employee Medical and Dental Benefits

Background
Port's Medical and Dental insurance have historically
been fully insured
With self-funding third party claims administration
company processes claims and pays them with funds
provided by the Port
Port assumes some risk that claims are greater than
anticipated; stop loss insurance mitigates this risk
Port benefits when claims are less than anticipated
The Port also benefits from lower administrative fees
2

Background
Self-Funding is quite common
2009 Kaiser Family Foundation Survey reports
48% of employers with 200  999 employees
80% of employers with 1000  4999 employees
76% of transportation/communication/utility employers
59% of state and local government employers


3

Background
Self-funding is also common among Washington public
employers
Washington Risk Management Department's web site
reports the number of self-insured public employers
- 16 cities
- 6 counties
- Multiple school districts, public utility districts and
public hospitals

4

Background
Self funding is a cost containment strategy
Wellness Rewards Program aims to contain health care
costs by encouraging healthy behaviors
Self-funding may have minimal impact on employees
Plan design is independent from self-funding
Provider networks could change with self-funding


5

Advantages of Self-Funding
Fully Insured  Self-Funded  Potential Annual
Item
(current)    (proposed)      Savings
Medical Claims Admin Fee   $1,230,000     $970,000       $260,000
Dental Claims Admin Fee    $220,000      $140,000        $80,000
Taxes -premium, high risk,    $390,000       $10,000        $380,000
etc.
Stop Loss Insurance        $980,000      $730,000        $250,000
Pharmacy Rx Rebate        $0       -$114,000       $114.000
Cash Flow              $0        -$22,000       $22,000
Actuarial Services            $0         $15,000         -$15000
State Fees                $0         $13,000        -$13,000
Estimated Total           $2,820,000     $1,742,000       $1,078,000

6

Costs and Risks of Self-Funding
Claims exceed expected level
Stop loss insurance helps mitigate this risk
Wellness Rewards Program supports healthy
employees and families and also helps mitigate this
risk
Increased number of contracts to administer
Somewhat more staff time required to administer
benefits

7

Recent Actions
Meetings with other self-funded public employers
Discussions with Port departments involved in
administering self-funded benefits
Commission resolution drafted
Benefits consultant selected
Timeline reviewed
Competition exemption possibility
Impacts of health care reform analyzed

8

Remaining Schedule
Action            Proposed Date     Who
First reading, Self-Funding Resolution            May 4, 2010      Commission
Second reading, Self-Funding Resolution         May 11, 2010     Commission
Competition exemption and authorization to
execute one year claims administration contracts    May 11, 2010     Commission
with Premera and WDS
Finalize benefits consultant contract             May 15, 2010    Self-funding team
Negotiate one year claims administration
June 15, 2010   Self-funding team
contracts with Premera and WDS
Select stop-loss insurance provider             August 1, 2010   Self-funding team
File self-funded application with the State         October 1, 2010   Self-funding team
Finalize self-funded processes               October 15, 2010  Self-funding team
Convert to self-funded program               January 1, 2011

9

Conclusion
Self-funding continues to be a viable option to the Port's
current fully insured program
Cost savings are sustainable over time
Can return to fully insured if savings are not realized
Recommendations:
Adopt a self-funded approach to medical and dental
benefits effective 2011
Negotiate one year (2011) claims administration
contracts with Premera and WDS
Begin competitive claims administration selection
process service to begin in 2012
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