Buchanan County added another service to its repertoire for 2010 — health care provider.

Better known for maintaining roads, housing prisoners and running the Circuit Court, the county came to a crossroads toward the end of 2009 when it only received one bid from a health care provider — a 27 percent increase from Aetna. Although it provides health insurance for 280 people, the county encountered a tepid response from health care providers because of “red flags” in regard to two employees’ ongoing medical conditions.

With the county already in full budget-cut mode to compensate for revenue shortfall, increasing its $2.1 million annual health care tab by 27 percent just wasn’t an option.

“There just wasn’t any more room,” Presiding Commissioner R.T. Turner said. “We had to look at other alternatives.”

So the county commissioners turned to an option they had only considered in passing previous years — self-insurance. For 2010, the county takes what it paid a health insurance company in the past and puts that money into a separate account. The county still pays a health insurance company to administer its health care, but the costs — and the risks — all fall squarely on the county. The net result: Health care costs for its employees stayed the same in 2010.

And the county isn’t alone in taking control of its health care. With the gridlock on Capitol Hill producing no solutions and rising health care costs drowning companies’ finances, many believe the benefits of self-insurance outweigh the risks.

Altec Industries has self-insured for as long as human resources manager Rick Gronninger can remember, and other local entities are joining the fold. Herzog Companies became fully self-insured this year after partially self-funding the previous five years.

Yvonne Waterman is a vice president for PowerGroup, a health insurance broker, and she worked with Buchanan County on its self-insurance plan.

Ms. Waterman’s branch of PowerGroup works with entities of 150 employees or more — usually the threshold for becoming self-insured, she said. Sixteen of those 31 clients now are self-insured, and five just went self-insured this year.

“More fully insured clients are looking at it more than they ever thought about looking at it,” she said, “finding a way to take control of their health care.”

Being self-insured allows companies to adhere to just federal mandates, not state ones. For example, a proposed bill in the Missouri Legislature that would require companies to cover dependants to the age of 25 wouldn’t apply to self-insured companies. But the biggest benefits come when employers pull back the curtain on health care and show employees the true costs of each pill and procedure.

Buchanan County already has passed out information cards to employees listing $4 prescriptions and generic substitutes. County employees also formed a wellness committee that has launched an exercise program and a weight-loss competition. Educating employees and prompting them to take ownership over their health care is the key to making self-insurance feasible.

“This is your insurance,” Mr. Turner said of the message to county employees. “How we manage it, how we do things makes a difference in our costs.”

Herzog, which provides similar prescription drug information, is using a consumer-driver model in which the company funds the first half of a high deductible. If employees stay under that, they pay nothing extra. Neither Buchanan County nor Herzog wants employees skimping on doctors’ visits, though. After all, it’s much cheaper for all involved to catch and treat something early.

So Herzog covers 100 percent of employees’ blood work, lab, checkups and physicals. Buchanan County pays for annual health screenings.

“We are taking baby steps to change our culture,” said Kamara Roach, the human resources director at Herzog.

To offset the risk, Buchanan County purchased reinsurance on any claim that exceeds $100,000. The county hopes to build up a reserve fund in the coming year and then start implementing things like gym membership discounts and other measures to keep its employees healthy. Herzog is going a step further by including a fitness center in its new office building.

The risk still exists that a load of medium-range claims will drain the county’s funds and leave it with no reserve. But Ms. Waterman said self-insurance hasn’t backfired on any of her clients to this point, and based on past claims, Mr. Turner feels the county is in good shape.

Ms. Waterman said reform of the pharmaceutical companies and the hospital/network provider agreements also are necessary parts of health care reform. But she sees self-insurance as another piece to the solution, and it’s happening at a decentralized, local level.

R.J. Cooper can be reached

at rjcooper@npgco.com.