Colorado city relies on self-funded plan to rein in health care costs

Since 2003, employer health care premiums in the U.S. have increased by 80 percent, according to industry estimates. Municipalities, in particular, have experienced a dramatic rise in health costs. In Arvada, Colo., (population 108,530; 1,600 covered employees and dependents), city administrators were struggling with year-over-year health care cost increases of 8 to 10 percent. The city has an older-than-average workforce. Arvada’s total medical claims costs were nearly 23 percent above norm when city officials looked for a solution.

In 2013, after an analysis by Chicago-based HUB International Insurance Services, Arvada decided to move to a self-funded health plan. Instead of paying periodic premiums to an insurance company for an established plan, they would pay for their employee healthcare benefits directly.

In addition, through a partnership with Paladina Health, the city provided employees and dependents with a medical-home health care option. “It was time for a bold change,” says Arvada city manager Mark Deven. “We needed a solution that could provide our employees the health care benefits they wanted and deserved. But as stewards of the taxpayers’ dollars, it was equally important to find a cost-effective, long-term solution.”

Under the medical-home model, care is redirected into a lower-cost primary care setting. Paladina Health physicians are accessible to city employees and are held accountable for delivering quality care. An on-site health clinic facilitates access to care and care coordination, while encouraging healthy behaviors. Combined with a patient-centered health management approach, the model helps improve health outcomes, while reducing claims and overall health costs.

Arvada expects to reduce health costs by $3.4 million by the third year of implementation. Employees have expressed satisfaction with the new plan. “It’s exciting for our employees to have the opportunity to take charge of their own health through coordinated and convenient care,” says Linda Haley, Director of Human Resources for Arvada. “It’s also an amazing retention tool and helps us become an employer of choice.”

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