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Inside Iowa State, a newspaper for faculty and staff, is published by the Office of University Relations.

March 11, 2005

An explanation of self-insured: the ISU Plan

by Tim Ashley, Employee benefits manager

Who pays the medical claim when a faculty member's child breaks an arm? When a P&S employee requires surgery? When a supervisory confidential secretary needs dental work? The typical response might be "the insurance company."

A more accurate response would be "Iowa State University." The university pays for all claim costs incurred by faculty, professional and scientific, and supervisory merit staff, all of whom are covered by the ISU Plan.

Iowa State self-funds the medical and dental costs of employees covered by the ISU Plan. It also pays administrative costs charged by Wellmark, Health Alliance and Delta Dental to process medical and dental claims. In the just-completed 2004 ISU Plan year, the university paid approximately $38 million for medical and dental expenses incurred by ISU Plan faculty and staff and for the administrative costs.

The premiums that are deducted from ISU Plan employees' monthly payroll checks are determined with the aid of an independent actuary. These premiums are based on the actual claim cost history of plan participants -- that is, ISU employees and their covered spouses and children. The independent actuary also takes into consideration market trend indicators.

ISU approves premiums to maintain a reserve amount required by law and to cover actual claim costs and administrative fees for the plan year. Under this model, premiums essentially reflect health care decisions made by participants.

Under the self-insured ISU Plan, Iowa State assumes full risk on any losses incurred by the plan. This is different from an insured plan in which premiums (set by the insurance company) are paid directly to the insurance carrier and the carrier assumes the risk of losses.

The advantage of the self-insured model is that Iowa State has much more control over features of the plan, such as what services are covered, what deductibles apply and the coinsurance levels.


The plans offered to faculty, P&S and supervisory merit are self-funded plans, which means that in addition to paying a third party administrator to process the medical and dental claims incurred by staff, Iowa State reimbursea them for the actual cost of these claims. The ISU Plan assumes the full risk for losses incurred by the plan.