Hoping to share risk with other members and save on premiums, Lake Zurich officials will join a 102-municipality medical insurance pool.
The Lake Zurich Village Board voted unanimously earlier this month to end the village’s own self-contained, self-insurance program and join the Intergovernmental Personnel Benefit Cooperative, effective Jan. 1, 2017.
The IPBC, which spreads the costs of self-insurance among its members, will stabilize premiums and reduce the risk of unexpected large claims, Human Resources Manager Doug Gibson said in a report to the board.
“Entering into an intergovernmental agreement with the IPBC will allow the village to remain self-insured while sharing the risk of health claims among a large pool of like-minded municipalities and nonprofit organizations, thus reducing the problematic monetary spikes in unpredictable claims,” Gibson said.
The IPBC was established in 1976 to offer more financial stability than the commercial insurance market, he said. Members can create and change their own plans, Gibson said.
The cooperative insures about 30,000 people and maintains reserves of more than $97 million, he said. Lake Zurich will become a member of the IPBC sub-pool called the Northern Illinois Health Insurance Initiative, Gibson said.
In June 2014, Lake Zurich switched its employee health insurance program from full insurance under United Healthcare to its own self-insurance program to try and control costs while providing benefits that were competitive with other programs, he said.
“While this cost containment strategy was successful, further long-term cost containment strategies are required,” Gibson said.
Over the last year, village staff researched various options, including meeting with brokers and health insurance providers, he said. After studying various options, staff recommended the village continue some form of self-insurance to maintain benefit levels, Gibson said.
“Being self-insured allows the village to avoid the profit margins paid to (health insurance companies) but does not open the village up to exposure for unexpected claims,” he said.
The IBPC is able to get lower rates by purchasing services in bulk, Gibson said. In the past five years, its premiums have risen only 2.3 percent for Preferred Provider Organization coverage and 3.3 percent for HMO coverage, Gibson said.
“Costs that occur above the provided rates would be shared by all in the sub-group, reducing the village’s total liability,” he said.
Gibson did not return calls for additional comment.
Village President Tom Poynton said the move will provide Lake Zurich with some financial stability.
“IPBC has over 100 municipalities with over 30,000 insured that offer the village significant economies of scale, shared risk and premium stability that we do not have with our current standalone program,” Poynton said.
Phil Rockrohr is a freelance reporter for Pioneer Press.
