Six months after the Lafayette Parish School System began directly negotiating and contracting with providers like local hospitals, the system has saved $2.89 million on employee and retiree medical insurance.
Insurance companies, Superintendent Francis Touchet said, negotiate deals with doctors and hospitals. The school system is going directly to providers to negotiate savings above what insurance companies offer by leveraging its 10,000 employees and retirees as potential patients.
It’s a new approach for this area, Touchet said, and in the first six months, the self-insured school system has saved taxpayers $2.89 million. More than $2 million of the savings was from Ochsner Lafayette General Medical Center.
While it’s early, consultant Kelly Cox of HIC Holding Corp., told the School Board’s Insurance Committee on July 23 that direct contracting has resulted in a 66% reduction in costs to the school system, “a fairly significant savings.”
“We’re getting our employees better care and saving money on the back end,” Touchet said.
In recent years, he said, the school system has had to use reserve funds to cover some of the insurance costs for employees and retirees. Last year the deficit was $6.7 million, he said.
If direct contracting continues to save LPSS money, the school system may be able to accrue a savings that can be used when the system is hit hard by insurance claims, Touchet said.