Standard Format Tentative Budget Submission - Southwest Florida ...

Health Insurance: Report of the feasibility study of strategies to realize cost savings, while maintaining
benefit levels.
In recent years, the Governor has directed water management districts to evaluate their health
insurance plans with the goal of identifying potential for savings. In August 2011, when the Governor
approved the Districts’ fiscal year 2011-12 budget, the Governor provided specific direction in this
regard. The Governor’s letter approving the Districts’ budget included a memorandum with items all
water management districts were to address in the coming year. (1) The memo specifically provided that
water management districts were to analyze health insurance, including an “[e]valuation of [a]ggregated
[b]enefit [p]lan [s]avings.” (2)
In response, representatives from all water management districts participated in a series of meetings in
which the districts’ health insurance plans were discussed. Each water management district had its
own health insurance plans with distinct features. Four of the five districts had plans that were fully
insured through Florida Blue. One district self-insured its plans, which were administered through
Cigna. The Districts’ plans had different plan years, contribution strategies, and levels of benefits.
Each difference contributed to the complexity of the assignment.
Ultimately, the water management districts commissioned two outside consultants to study
methodologies by which the water management districts may be able to reduce healthcare costs. The
first study, completed by Gallagher Benefit Services, Inc. focused on utilizing a self-funded approach.
The second study, completed by Siver Insurance Consultants, focused on creating a pool (self insured
or insured) for all of the water management districts, except for SFWMD .
The Gallagher report, dated May 21, 2012, analyzed the consolidation of the health insurance plans for
all five water management districts in Florida. In its analysis, the Gallagher report made the following
assumptions: (1) the districts would utilize a self-funded approach; (2) only four of the plans currently
offered by the districts would continue to be used after the consolidation; and (3) participants would
generally select a health plan that is closest to their current plan; and (4) the districts would utilize a
stop loss deductible of $250,000. Using these assumptions, the Gallagher report found that the
districts would be able to achieve a consolidated savings of $1.6 million to $2.7 million during the first
year.
The primary drivers for these savings were the reduction of administration and profit charges in the
plans that are currently fully insured (all except SFWMD) and the reduction in benefit value that
SFWMD would experience due to plan design changes. Although the report concluded that the districts
would achieve significant savings in total, some water management districts were expected to have
increased costs. Comparing the conservative to the aggressive approach, the report estimated
SJRWMD would have increased costs in the range of $129,000 to a decrease of $59,000; SRWMD
would have increased costs in the range of $206,000 to $185,000; NWFWMD would have increased
costs in the range of $21,000 to a decrease of $11,000; SWFWMD would have a decrease in costs in
the range of $813,000 to $1,016,000. SFWMD, currently self-insured, would have a decrease in costs in
the range of $1,178,000 to $1,757,000. Excluding SFWMD from the Gallagher assumptions/estimates,
the consolidated annual savings would be in the range of $457,000 to $901,000.
The report noted that the smaller districts may have challenges with the consolidation. Specifically, the
report questioned whether the smaller districts could afford to be at risk for such a high stop loss
deductible.
The Silver report looked at the savings that could be achieved by creating a self-insured pool for all of
the water management districts, except for SFWMD. The Siver report concluded that the four districts
could achieve a consolidated annual savings of almost $1,000,000 in the first year. However, the
report also concluded that the cost savings for some districts would be more substantial than for others,
and that if claims are more than projected, short term costs could be higher.
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