A new way to control health cost
In 1938, Rose Reschini spent $1 and received an insurance license. Nearly 80 years later, the Reschini Group is thriving with a decidedly do-it-yourself philosophy.
The Indiana, Penn.-based company now employs 70 and continues to be family owned and led. Along the way, the small shop has become expert at building insurance consortiums among public schools, hospitals and private colleges and advising clients on the advantages and intricacies of self-insurance pools.
The small agency excels at presenting analyses to customers that clarify the cost savings over traditional insurance plans and it does so using an in-house data platform built from scratch.
Determination clearly runs in the company’s DNA. Young Rose, a 28-year-old mother without a college degree, launched the agency at the height of the Depression after working at an insurance company herself. It was a crazy idea, and, being helmed by a woman, was essentially unheard of at the time.
“Her mom convinced her she could do it better on her own,” says grandson Joe Reschini, who is now president of the company.
It was a decidedly family affair, with Rose’s aunt handling administrative duties. Rose’s husband, also Joe, joined the team when the first big life insurance policy came in. Their son, Roger, joined the company in 1959 while the business was still operating out of their home. He purchased the company in 1979 and started hiring outside the family – something his parents weren’t willing to do. He aggressively grew the business, adding new services and locations and expanding its territory.
The Reschini Group currently brings in $19 million in revenues annually and has seen 50 percent growth over the last decade, says Joe Reschini. About 60% of the business is focused on healthcare with the remainder on property and casualty insurance. The company currently has 600 clients.
A new direction
What had been a traditional insurance agency for decades took a new direction in 1989 when Roger Reschini recognized the opportunity of aggregating clients into consortia. School systems in Pennsylvania had already organized collective purchasing for textbooks and pencils to save money.
“Well, if they can buy those things together, why not health insurance?” says Joe. So the company began combining homogenous clients of 70 to 200 employees and setting up self-insurance risk pools.
“We build it and we manage it,” says Executive Vice President Chris Holuta, who joined the company in 1990. That includes administrative tasks, claim volumes, utilization, plan design and also working to educate employee unions. The Reschini Group makes the majority of its healthcare income from consulting contracts.
Early on, the challenge was convincing clients to become self- insured, as most schools and hospitals in Pennsylvania — and everywhere else — were handing all the risk to big carriers and getting charged accordingly.
The other key is working with homogenous groups of individuals that face similar health risk profiles, says Joe. Also crucial to the aggregation process is banding together outfits that are not in direct competition with each other. A local machine shop, for example, often isn’t much interested in helping a rival lower its healthcare costs, he adds.
The minimum size for a risk pool to be effective is 1,000 members, says Joe. But bigger is better as it provides more buying leverage and the claims become more predictable.
Once a group of clients is combined, Reschini looks to find the best discounts from third party administrators and negotiates the lowest possible costs. Next, the company analyzes the risk and builds in a re-insurance component to cap potential payouts — usually between $100,000 and $200,000 per individual claimant.
Reschini Group doesn’t adjudicate claims. That’s handled by a third-party administrator. It does keep a very close eye on trends. “Because our clients are self-insured they have access to claims data,” says Joe. “They’re able to make changes to their plan to keep costs down.”
Those options include changing the reinsurance carrier, third-party administrator or pharmacy benefits manager. A collective risk pool can also alter co-pays and drug formularies or narrow healthcare networks. That group can also proactively promote wellness and preventive care to help control costs.
The risk pooling and self-insurance approach creates much greater transparency and it allows the collective to see exactly what factors are driving expenses.
The Reschini group gets claim feeds directly from clients and can audit on the fly. Is a claim legitimate? Does it match against enrollment? Should another carrier have paid? “We can drill down to why claims are high and show here’s why,” says Linda Stiteler, vice president of employee benefits.
She adds that the company is good at establishing relationships with vendors and carriers. The bigger risk pools allow her to drive better deals. That translates to lower costs for clients.
“We’ve been able to have low consortium premiums — a 4% aggregate per year increase,” Joe says.
In-house data platform
Central to the Reschini Group’s success is the ability to track and analyze customer data in-house. “Ten years ago, we went shopping for a system to help us organize client information,” says Holuta. “We couldn’t find one. So we built one ourselves.”
That task fell to Systems Engineer Mark Long who admits he really didn’t want to create a platform from scratch. But he knew it was essential. “Back then, a large portion [of our system] was people in a room with Excel spreadsheets.”
As luck would have it, a college intern arrived with advanced coding skills. “The kid came in programming like he had five years of experience. We knew we had some horsepower,” Long recalls. He also knew that if the company just tried to build a platform to solve today’s challenges, “tomorrow’s problems would hit us over the head.”
The Benefits Data Base, as it is called, needed to be expandable. It now handles customer information, rates, billing and can import of tens of millions of claim records and report from that data. It also includes document management, secure messaging, customer service support, and added recently, Affordable Healthcare Act reporting and online enrollment for clients.
“It’s very much a competitive advantage for us,” says Holuta. “What was available on the market wasn’t suiting our needs.”
Saving money through self-insurance
Jack Sisk first met Roger Reschini back in 2001 when Punxsutawney Area Hospital and others in the Pennsylvania Mountain Healthcare Alliance were seeing 30% annual increases in their employee health costs. “That was unsustainable,” says Sisk, who is chief financial officer. “Roger educated us all.”
That’s when Sisk learned about the self-insurance option and building a risk pool with other hospitals in the alliance. “We wouldn’t have been able to do anything similar alone,” as his 50-bed hospital has only 350 full-time employees.
There are now 15 hospitals in the risk pool with 13,000 insured lives. That has translated to average increases of less than 6% over the past 17 years. “We spend about 95 cents on every dollar paying claims,” Sisk says. “We have very little overhead.”
The group carries stop-loss reinsurance of $200,000 per claimant. Between $200,000 and $550,000 the pool collectively shares the payouts and reinsurance again covers anything above that. “We’re been able to save reinsurance cost because we share the risk. We’re not paying for some beautiful insurer’s headquarters building,” Sisk says.
Self-insurance with stop-loss coverage puts clients inside the black box that is usually controlled by big insurance carriers. “I never thought I’d be running an insurance company, but we are in a small way,” says Sisk.
The Chester County Intermediate Unit similarly struggled with healthcare costs. The facility provides common services for public special and vocational education in Downington, Penn. In the early 2000s, the area was dominated by Independence Blue Cross of Philadelphia. But the service was poor and costs way too high, recalls Joe Lubitsky, director of administrative services for the unit.
Lubitsky’s facility and four other similar units worked with the Reschini Group to set up a self-funded pool. The company analyzed several years of claims data from the pool and painted a clear picture of how their plan could be improved.
“They really demystified the whole renewal process and claims adjudication and how rates are set,” Lubitsky says.
Once the self-insurance pool was up and running, the collective began seeing an immediate improvement in costs, from annual double-digit increases down to 6%-7% and sometimes half that. Lubitsky also says the Reschini Group is responsive, particularly with data around budgeting time.
The company’s P&C business follows a more traditional model and doesn’t depend on aggregation. Still, the Reschini Group keeps its focus tight, primarily in the energy, mining and oil and gas sectors. “You can’t be all things to all people,” says Holuta.
Over the years, the company has built in-house expertise on these industries. “We have safety professionals on staff available to clients to do safety training, policy procedures development,” Holuta says. That includes an attorney that advocates for clients during the claims process. “It’s not the same as placing coverage for flower shop.”
Reschini continues to grow and hire, but it’s also been successful retaining employees. “It’s busy and challenging,” says Stiteler, who’s been with the company 11 years. “It’s a good place to be if you’re a problem solver. We have the freedom to create something new.”