How Lycoming College saved $1.4 million on health benefits with ICHRA

Established in 1812, Lycoming College is one of the 50 oldest colleges in the United States. The liberal arts college delivers strong academic programs and a personalized educational experience, with just 11 students for every faculty member. Lycoming College has around 400 employees, and just over half are covered by the organization's healthcare benefits. 

• Customer: Lycoming College
• Description: Lycoming College is a small, private liberal arts school in Williamsport, Pennsylvania
• Size: <400 employees
• Industry: Higher education
   

Key Results

• Saved $1.4 million on healthcare in first year of ICHRA
• Employees saved average of $1,200 annually on premiums
• Gained control of their healthcare budget

Across the U.S., higher education institutions are facing unprecedented enrollment challenges. Student numbers have been in decline since the COVID-19 pandemic, and the resulting drop in revenue has seen budgets stretched thin. Many schools are now struggling to offer the benefits required for recruitment and retention of talented employees. 

Kacy Hagan is associate vice president for human resources and compliance at Lycoming College, where she oversees their healthcare benefits program. Hagan is dedicated to offering the best possible support for staff while also safeguarding the college’s financial health. However, budgetary pressures had pushed this delicate balance to a tipping point. Lycoming College needed to reduce healthcare spend in order to maintain spending levels for its exceptional educational programs. Hagan said.

Finding creative solutions that don’t cut your core programs or eliminate critical positions is an absolute necessity to respond to enrollment challenges.

Challenge: Difficult diagnoses result in a 100% renewal quote

Lycoming College had been grappling with the rising cost of health insurance for over a decade. Despite exploring a range of options, they were unable to find a solution that worked for the institution and its employees. Group plans were becoming increasingly unaffordable with premiums escalating year after year. This culminated in a staggering 100% renewal quote heading into 2022.

“We had a couple of employees and their family members that had catastrophic illnesses hit them,” said Hagan. “Unfortunately, when you’re not a huge employer, just a couple of high claims can shoot your loss ratios through the roof. That’s what happened to us.” 

Hagan and her team shopped heavily, including level funded and self-funded options, but not a single carrier would take them on. Forced to stay with their existing provider, they managed to negotiate down to a 60% increase. Although the college had no choice but to accept the renewal, the cost was completely unsustainable in the long run. 

“We decided we would take the year to figure out what we could do," said Hagan. “Was there a creative solution out there that wasn’t going to harm our employees?”

Solution: Instant cost control with ICHRA

Hagan began looking into the individual coverage HRA (ICHRA). Hagan teamed up with the college’s chief financial officer to form a working group with trustees; they also sought advice from an organization that had already implemented individual coverage. 

With ICHRA, employers set custom allowances for employees to spend on medical insurance. Employees shop for their own coverage on the individual market, giving them greater flexibility and control over their healthcare. For the employer, ICHRA enables more reliable budgeting by eliminating unpredictable renewals.
 
Lycoming College chose to move forward with ICHRA and began designing their ICHRA. Rather than using a one-size-fits-all contribution, ICHRA allowed the college to allocate funds based on age — ensuring fair compensation for older employees. The college prioritized clear communication during the move to ICHRA: Hagan introduced employees to the new program before the design process was even complete, something she believes contributed to a successful transition. 

After a negative experience with a different vendor, the college switched to Take Command because of the company’s in-house enrollment support. Licensed healthcare navigators assist employees in choosing the best plan based on their individual healthcare needs. Take Command is also in direct contact with the providers, resolving issues quickly and taking the burden off Hagan and her HR team. 

We wanted the full service experience: a vendor that would handle direct payments to the carriers, work directly with the carriers to resolve issues, and offer active brokers to help employees assess their options,” said Hagan. “We wanted one platform where all those things could happen and just one vendor for us to work with.

Results: More than $1 million in savings and superior coverage

Lycoming College saved over $1 million dollars in the first year after switching to ICHRA. Employees’ health issues no longer drive up the college’s insurance costs which means an end to unaffordable renewals. With increased financial resources and budget stability, the college is better prepared for the economic challenges of declining enrollment. 

ICHRA is also proving to be an effective recruitment tool for Lycoming College: “Join our team and you’ll have a choice on healthcare” is a powerful message. 

As the employer, we saved $1.4 million our first year,” said Hagan. “Our employees saved an average $1,200 a year on premiums and were also able to get significantly more valuable benefits than they were getting through our group health plan.

In addition to seeing significant savings, many Lycoming College employees are now also enjoying better coverage. Unlike group plans, ICHRA reimburses for Medicare — eligible employees now get 100% of their Medicare expenses paid, and they can choose from a rich selection of benefits with no out-of-pocket costs. 

“We have a building and grounds employee that’s been at the college for years,” explained Hagan. “He and his wife were both on our group plan, but they switched over and got a far superior quality Medicare plan. They pay absolutely nothing on premiums, and it saves them over $6,000 per year. He couldn’t be happier having that money in his pocket”.