Background
The Lehigh Valley Association of Independent Colleges (LVAIC) is a non-profit, charitable organization established in 1969 whose member institutions include Cedar Crest College, DeSales University, Lafayette College, Lehigh University, Moravian College and Muhlenberg College. A key component of LVAIC’s mission is to engender greater economy and efficiency in institutional operations.
In recent years, LVAIC implemented an aggressive program in collaborative purchasing of over 60 million dollars in commodities and services through the Business Services Group. Seven other regional colleges, universities and private secondary institutions have joined LVAIC member schools in these programs to enhance the cost benefits and efficiencies of economic services.
Recognizing that the consortium approach could be taken with employee benefits, four of the LVAIC schools -- Cedar Crest College, DeSales University, Moravian College and Muhlenberg College --formed the LVAIC Health Insurance Consortium. Its purpose was to provide member institutions the opportunity to reduce employee benefits expenses through greater buying power and improved efficiencies.
Situation
In 2003, LVAIC chose Benecon as its Health Insurance Consortium partner over competing consulting firms due to Benecon’s track record with employer consortia and its actuarial expertise. Benecon’s experience, regional market focus, in-house actuarial team as well its size and efficiency, enabled it to provide LVAIC with the most innovative, comprehensive set of benefit solutions at cost effective and competitive consulting fees.
Benecon developed its Consortium Model to help schools and municipalities insulate themselves from excessive costs. The Model aligns trends closer to the actual cooperative performance, reducing claims based on size and purchasing power. Unlike other consortium structures, Benecon’s Consortium Model permits each member to retain its distinctive medical and prescription drug plan designs. The Model offers unique advantages including stability through safety in numbers, flexibility, efficiency, cost control, clout, price protection and increased market leverage.
“Benecon had a clear understanding of group dynamics, yet what really impressed us was their ability to meet the needs of the consortium while addressing each school’s individual needs as well. We felt that Benecon’s consortium model would assist our group in navigating through challenging market conditions to provide our constituents with the most comprehensive and affordable health care coverage available. Ultimately we chose Benecon for four reasons: their in-house actuarial staff, their level of commitment to the Benecon consortium model of purchasing health insurance, their existing relationship with carriers, and their desire to provide our group with the best possible outcomes.”
-Bill Marushak, LVAIC’s Director of Business Services
Tactic
Through its unique Consortium Model, Benecon allowed each college and university to maintain a certain level of autonomy while reaping the benefits of a larger and more powerful collective group
Benecon’s Actuarial Advantage™ was the driving factor behind the success of LVAIC’s Health Insurance Consortium. The consulting firm’s in-house actuarial staff leveraged its significant experience working with agencies and carriers to set the right price and maintain it. They negotiated LVAIC’s funding and benefits to promote creative risk sharing opportunities, predictable funding, fixed monthly premiums, controlled insurance costs and equity within the cooperative.
“Insurance Carriers want you to think there is little to no room to negotiate the cost of the premium and this simply isn’t true. Benecon knows that the premium cost is impacted by six different factors and more importantly Benecon has the ability to impact them all. That is the Benecon difference.”
-Sam Lombardo, Benecon President and CEO
Results
LVAIC experienced over $1 million in savings in the first year of engagement with Benecon and over $500,000 in the second year. Benecon’s long-term view enabled the group to insulate itself from unfavorable market conditions that, without the consortium in place, could have had significant financial impact on any of the participating members.
By tailoring its consortium model to the LVAIC Health Insurance Consortium, Benecon maximized stability through risk sharing, minimized cost and inflation by reducing vendor fees and margins, and helped to put LVAIC in control of the benefit funding structure.
“The LVAIC constituents have been very impressed with the level of reporting and follow through demonstrated by Benecon. As time progresses the consortium offers greater depth of services and additional ways to save money compared to industry averages. LVAIC can truly rely on Benecon.”
- Bill Marushak, LVAIC’s Director of Business Services
“Simply stated, the Benecon consortium model has worked extremely well for us. Since the consortium’s inception, each of the founding schools has experienced both positive and negative claims years. The bottom-line result; however, is that we have all benefited collectively and as individual institutions from the Benecon model. The almost 3 millions dollars in cost avoidance savings is a testament to that success.”
- Jon Conrad, Director of Human Resources, Moravian College
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