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Business and Policy Areas
Business and Policy Areas

Self-Funding Health and Wellness

February 27, 2015

By E. Jill Pollock

In July 2010, the University of Colorado's (CU) Board of Regents, University of Colorado Hospital, and University Physicians, Inc., established the University of Colorado Health and Welfare Trust, a 501(c)(9) voluntary employee benefit association (VEBA), to create a more cost-effective way of providing health care to the employees of our three organizations. The four campuses of CU combine to form the third-largest employer in the state of Colorado. Other participants in the trust are University of Colorado Health, a system of regional hospitals; and University Physicians, Inc., a medical management group that serves as the practice plan for physicians in the CU School of Medicine.

It took a year to move from a fully-insured environment to the self-funded VEBA structure. Employees and dependents of the three participating organizations contribute health insurance premiums, which the trust's plan administrators use to pay claims, resolve disputes, negotiate payment rates and manage other administrative duties. The trust also invests those contributions to enhance the fund and member health benefits and wellness programming.  

The trust administers the CU Health Plan through Anthem Blue Cross Blue Shield and Kaiser Permanente. Five individual and family plans are offered: 1) a health maintenance organization through Kaiser; 2) CU Health Plan Exclusive, a closed network that predominantly uses the CU School of Medicine physicians and affiliate hospitals; 3) a high-deductible plan; 4) a nationwide PPO plan; and 5) a Medicare supplement plan. Today the health trust represents nearly 60,000 enrolled participants, with an operating budget of $314 million.  

Benefits of Self-Funding  

Generally speaking, for entities of more than 20,000 employees, self-funding can be fiscally prudent. In fact, some organizations as small as 5,000 employees are choosing to self-fund based on potential cost savings. Improved cost management and ability to design health plans for specific needs of the employer population were primary factors in our decision to self-fund. In addition, self-funding allows employers to test innovative ideas and approaches to health management and to customize a network.  

As a research-extensive university with a medical school, CU believes the benefits it offers must be evidence based. In some instances, the health trust had to say no to some of the procedures and treatments enrollees have requested due to a lack of research-based evidence indicating that a particular practice or treatment is beneficial to improve health. For instance, one request made several years ago was to approve bariatric surgery for individuals who are morbidly obese. At the time the health trust did not have the evidence-based research needed to support this procedure, so the request was declined. Later, however, the health trust reversed this decision when newly published, peer-reviewed research supported the procedure.  

Testing Effectiveness and Innovation  

At the same time that the health trust is led by evidence, a broad research and outreach component enables us to develop a variety of pilot programs to test potential benefits for enrollees. As one example, we offer a diabetes-specific benefit. For enrollees who are Type 1 or Type 2 diabetic and who are adhering to the course of treatment by their physicians, their co-pays for insulin and related medical supplies are waived so that these meds are free to patients. For this pilot, we asked the CU School of Public Health to track enrollees using this benefit to determine whether the waived co-pays are increasing the rate of patient follow through with taking medications and having routine checkups and foot and eye examinations. All the health plans offer the diabetes management program, although each provides different levels of care. Depending on the plan selected, employees who have been diagnosed with diabetes may be eligible for additional disease management care, enabling them to take a more proactive role in their treatment.  

The health trust also launched a cardiac health program focused on group intervention to reduce the likelihood of heart attack or stroke in health plan members. And, we have several tele-health pilots being considered to test the use of mobile technology to improve delivery and speed of care. (Tele-health is the use of telecommunications to provide health information and care across distance.)  

In short, the goals of our trust are to:

  • Mitigate rising health-care costs while maintaining robust, desirable, and competitive plans.
  • Use data and research on effective health plan approaches to provide members and their dependents customized plans.
  • Demonstrate commitment to wellness through programs and plans.
  • Encourage members to become actively involved in understanding and taking advantage of their benefits, preventive care, and opportunities to improve their health.  

While it is too soon to adequately judge our progress on these goals, so far the cost trend is lower than that of other Colorado employers. Part of that savings has come from removing a considerable amount of the profit that previously went to the insurance company. Secondly, we are managing our plans efficiently, employing considerable technology and a small staff. We also attribute some of the success to our proactive interest in employee health, encouraging enrollees to be more persistent about preventive services and to take time to become educated on alternative sources of treatment.  

Prioritizing Wellness  

The people of Colorado are known to be pretty serious about personal health, so we have found the new wellness initiatives to be an excellent point of engagement for employees in our plan. In fact, we integrate wellness within the health plan budget to ensure that it remains funded even in down years and to underscore the importance of it to employee health. (Our wellness component accounts for about 1 percent of the overall budget of the health trust.)  

Specific initiatives within the health trust's Be Colorado ( wellness program include health assessments and digital coaching; biometric screenings and flu shots; Weight Watchers; tobacco cessation; and the Be Colorado Move program, designed to encourage increased movement and physical activity. Move participants can earn $25 per month if they complete moderate to vigorous physical activity for a minimum of 30 minutes, 12 days each month. We currently have 5,500 participants enrolled in this program, representing 20 percent of employees in the CU Health Plan.   

Engaging Kids in Fitness  

Brussels + Muscles is the latest addition to the wellness menu. Launched in September 2014, it is an innovative and mobile-rich fitness and nutrition program for children of parents participating in one of the health trust's plans. The idea for an employer-based wellness kids program grew from findings contained in a 2012 study by the Kaiser Family Foundation indicating that employers pay the health-care bill for 58 percent of children in Colorado-a statistic that supports employers investing in this young cohort in matters of health.  

The focus at this early stage of the program is on children ages 5 to 11, who represent 40 percent of the family members on our plans who are under 18 years of age. This age group also is more than 10 percent of the entire health trust population. Significantly, experts in this field tell us that these are the most critical years in forming healthy, lifelong habits. Over time, as the children grow up and are replaced by new participants, these young people will represent more than one-third of the entire trust population.  

The focus of the program is to have fun and learn about healthy living tools along the way. The program has three primary components:

1) Tracking physical exercise behavior with a technology device for kids that includes smart-phone integration for parents.

2) Gamification of fitness and nutrition though customized online adventure experiences.

3) A parent program focused on nutritional guidance and behavioral change.  

Following enrollment in the program, we send educational kits via e-mail and regular mail to the parents each quarter. To develop the nutrition content, we have worked with leading children's nutrition and gaming partners and CU's Anschutz Health and Wellness Center.  

Ultimately, this program has two goals: improve health and reduce costs. CU, the largest employer in the health trust, is a family-friendly employer, and many of these children will be enrolled in a health plan from birth through age 26. Two decades is a long time, and we believe we can affect not only the child participant's health, but also the health of his or her family through attention paid to health and wellness by the family as a unit. And, a small improvement in family health can save our employees money and further bend the cost curve.  

There is enormous potential for this program when we consider that, in recent years, families with children have spent about 35 percent more on health care than those without children. As a result of the program, if medical costs are reduced by even 1 percent for these families, the health trust and its participants should save about $1.2 million annually.   The health trust will be studying the utility of Brussels + Muscles over time. To that end-the same as for every other targeted program in the health trust-we have engaged a group of faculty for consultation as the program and our children grow. This panel of experts represents various fields-from pediatrics to psychiatry to elementary education-and they will work with us for continuous program improvement and analysis of outcomes.  

We believe we are the first in the country to have launched such a program. With a potential pool of 5,000 children in this age category, we are aiming for 1,000 participants this first year. Having a large cohort of participants allows us to model a program that could be beneficial for others well beyond our health plan. This could even become a longer-term study looking at the effects of targeting children's health and the associated impacts on family health.  

Costs and Progress  

In 2010 and 2013, CU engaged Aon Hewitt to conduct a health competitive analysis vis a vis national norms and university peer groups. University benchmarks included 12 public higher education systems and 22 private institutions. The data show that the CU Health Plan generally outperforms the relative marketplace in cost, plan design, and financial efficiency. In one measure, whereas a more common range for administrative services is between 9 and 12 percent, CU has been able to hold overall administrative costs to about 7.73 percent.  

Likewise, even as many employers have cut benefits, we have been able to enhance offerings while concurrently bending the health-related cost curve. Since shifting to self-funding-and through FY 2015-we estimate cost avoidance of more than $42 million for the university alone. Self-funding has also enabled us to keep rate increases below national, state, and other large employer averages.   

Important to keep in mind is that a variety of legal structures is available for use to self-fund. For a multiemployer effort like ours, it was critical to first come to a shared understanding about the mission and culture of each of our organizations, and to discuss the pros and cons of our various options and the value of each of those options for our plan participants. Thus far, the initiative has paid off.  

E. Jill Pollock is vice president for the University of Colorado, and chair of the University of Colorado Health and Welfare Trust; e-mail: