Colorado Springs District 11 rethinks health care.

Author:Gustafson, Glenn E.

After bidding out healthcare services and working with a VEBA trust to engage in alternative investments and improve administration, Colorado Springs School District II has found a better approach to providing health-care benefits.

For years, school districts have struggled with the escalating cost of health care. Does affordability have to entail benefit reductions? Do costs have to be shifted from the school district to the employee? After bidding out health-care services and working with a voluntary employee beneficiary association (VEBA) trust to engage in alternative investments and improve administration, Colorado Springs School District 11 has found a better approach to providing healthcare benefits.

For more than 25 years, District 11--the largest district in southern Colorado--has self-funded its healthcare benefits to cut out the middle man (insurance companies) and ultimately save on costs. The district is therefore responsible for finding its own solutions. Employees make co-payments and pay deductibles, and the district pays everything else. The district also had a long-term contract with its local municipal hospital.

This model worked well throughout the 1990s and early 2000s. Despite the occasional bumps and spikes related to a large claim, the overall long-term results were successful, and the district was able to manage its cost increases with minor plan design changes and small premium increases. Wellness and disease management were also added to create a more consumer driven health plan and encourage healthy behavior.

When the Great Recession hit, healthcare costs were virtually frozen for nearly five years. Doctors and hospitals were forced to hold down price increases, and utilization remained stable, so the district didn't have to increase premiums. But as soon as the recession was over, prices started to jump as pent-up demand was unleashed. How would the district solve the problem this time?


It was time to be aggressive and explore non-traditional options. First, the district bid out its hospital network, ultimately choosing as its preferred provider a group comprising 17 hospitals and dozens of health neighborhoods in Colorado and Kansas. Rather than focusing solely on treating illnesses, the new hospital system brought new and creative ideas to invest more in wellness and prevention, including providing biometric testing, wellness coaching, and exercise classes. The new system also provided...

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