The Alabama Rural Electric Cooperatives Self-insured Pool is a group fund which provides workers’ compensation coverage for its participating members. The success of this program can be attributed to the focus of safety that has been accepted and continues to be implemented by cooperative employees, management and boards of directors.
One hundred fourteen (114) claims were incurred during 2012, with costs of $559,034 which produced a loss ratio of 19.08 percent. This was 37 less claims than were incurred in 2011 and $135,254 less in claim cost. Individual claims resulted in cost ranging from $0 (report only claims) to $110,665.
Members of the pool continued to receive refunds during 2012 resulting from the benefits of previous years’ experience. In 2012, $138,312 was returned to participating cooperative pool members. The total amount refunded to participating Alabama electric cooperatives now equals just over $5.66 million, with another $8.24 million remaining to be returned to pool participants.
AREA and its member cooperatives established the pool on July 1, 1993, to reduce the overall cost of workers’ compensation premiums. The pool, which has 23 members, was created to enable participants to better manage their risk, provide more efficient service, and ultimately reduce the cost of worker’s compensation insurance. Since inception in 1993, the Pool has recorded 3,083 claims, collected $43,793,700 in contributions, paid $21,036,260 toward claims and still has open reserves on claims of nearly $1.22 million. It also can boast a low 48.03 percent cumulative loss ratio in a very dangerous industry.
Cooperative Health Plan
In 2007 the members of Alabama Rural Electric Association Member Services Committee began working on the issue of the constant rising costs of providing cooperative employees with health insurance. As a result of this project, 12 Alabama cooperative entities joined forces on April 15, 2008, to form the Electric Cooperative Health Benefits Plan. The Plan was established as a Voluntary Employee’s Beneficiary Association Trust under Section 501(c) (9) of the Internal Revenue Code of 1986. This trust allowed the group of 12 to self-fund a portion of the cost of the health coverage and to secure excess insurance coverage for the balance of the cost of the health. With business partners of Blue Cross and Blue Shield of Alabama and Cobbs Allen, a health benefit plan was developed.
The Plan was put into action on May 1, 2008, with 1,128 contracts representing 2,748 lives. Since then, six additional electric cooperatives (Joe Wheeler EMC, Black Warrior EMC, Pea River Electric Cooperative, Choctawhatchee Electric Cooperative, Gulf Coast Electric Cooperative and West Florida Electric Cooperative) have joined the Plan. As of December 31, 2013, the Plan had 18 participating cooperative entities with 1,693 contracts covering 4,231 lives.
For 2013, the Plan reported a loss ratio of 77.01 percent (the best since inception of the Plan) with $22,280,977 collected as contributions and $17,157,689 paid in claims costs. The Plan also incurred administrative expenses of 7.89 percent of contributions ($1,757,682). Since inception of the Plan in 2008, it has incurred a loss ratio of 88.82 percent with $84,162,201 collected as contributions and $74,755,815 paid in claims costs and maintained administrative expenses at 9.38 percent of contributions. Administrative expenses includes reinsurance coverage, claims administration, accounting fees, legal fees, actuarial fees, materials and administrative fee paid to the Alabama Rural Electric Association.
In 2011, two cost-savings measures were implemented which were continued through 2013. The first was the carving out of prescription drugs with Express Scripts, the second largest pharmacy benefit manager in the United States. During 2012 Express Scripts purchased the largest PBM, Medco, making them the largest in the United States and providing additional savings opportunities to the Plan. Through the use of this program the Plan is projected to receive savings on prescription drugs through Express Scripts large-network buying power and educational process. The second measure was the carve-out of the mental health and substance abuse program to American Behavioral, a network of mental health and substance abuse facilities and providers. Both of these programs specialize in their fields and provide savings to the Plan through their negotiated contracts.
In addition to funding the claims incurred, the participants in the Plan are striving to reduce claim costs through programs to encourage employees to make healthier decisions as well as educate on healthcare economics.