Health care premium sharing plan adopted
University leaders will move ahead with a plan for employees to share more
in the cost of their health care benefits, Provost Paul N. Courant, Executive
Vice President for Medical Affairs Dr. Robert Kelch and Chief Financial Officer
Timothy Slottow said in a report to the Board of Regents Dec. 18. In doing
so, executive officers and the president have accepted nearly all of the recommendations
from the faculty and staff Committee on Health Insurance Premium Design (CHIPD).
“We agree with the fundamental cost-sharing principles outlined by the
committee: that the University will provide a higher share of the cost of coverage
for employees and retirees than for dependents, and will provide a higher share
of the cost of coverage in lower-cost plans than for more expensive plans,” Courant
The University will pay 95 percent of the average premium for employees who choose
the two lowest-cost comprehensive plans in 2005, and will pay 85 percent of the
total aggregate premium for employees, retirees and covered dependents. The management
team also agreed with the recommendation to move from a three to a four-tier
structure of coverage to reflect the lower cost of insuring children. The additional
tier would include one adult and any number of children.
Courant said several issues were raised by faculty and staff members who attended
five special sessions held on all three campuses during the past two months.
Among the concerns of the approximately 50 participants per session, plus more
than 100 people who sent e-mails, was that the lowest-paid employees bear a greater
financial burden in the premium sharing redesign.
“Our management team has discussed this at length, but agree with the committee’s
assessment that trying to find a solution for different levels of employee income
in not feasible for the institution and raises difficult issues of fairness,
consistency, and benefits administration,” Courant said.
“We believe the institution has to address issues related to our lowest-paid
staff more comprehensively, and we have worked over the past few years to provide
additional salary programs and targeted salary supplements as well.”
Courant said he also has talked with many employees during the past few months
who recognize that the health care challenges the University faces are not unique
to U-M or higher education.
Kelch said the challenges resulting in escalating costs are not likely to abate.
“I believe the committee’s recommendations reflect the reality of
the national landscape, while remaining true to the commitment we make to our
employees for a robust benefits package,” he said. Quality benefit packages
are essential to recruiting and retaining top-notch faculty and staff, Kelch
The report to the regents came on the heels of President Mary Sue Coleman’s
remarks about continuing pressure on the University budget, including midyear
cuts to state funding that will reduce this year’s general fund appropriation
by $16.4 million on the Ann Arbor campus. Dearborn and Flint will lose $1.3 million
and $1.1 million, respectively, under the latest round of cuts.
“On our three campuses it means $60 million less with which to teach and
support our students this year,” Coleman said.
Courant said rapidly escalating health care costs add to the budget challenges.
The provost cited a five-year increase in total premium costs from $98.5 million
in 1997 to nearly $185.7 million in 2003. The cost for Fiscal Year 2004 is $214
Kelch said the University must continue to control health care costs, including
looking at how to better promote wellness.
“I would like the see the Health System’s M-CARE and M-Fit units,
in particular, take a leadership role in helping us develop new worksite health
and education programs for U-M employees,” he said. Such programs could
include incentives for healthy behaviors, Kelch said.
In addition to cost controls, Slottow said, Human Resources and Affirmative Action
(HRAA) is trying to find another health insurance option for employees and retirees
who live outside of the area, following a recommendation in the CHIPD report.
Only one comprehensive insurance plan offered—Blue Cross/Blue Shield--is
completely portable but is the most expensive plan, he said. HRAA hopes to
have an additional plan by 2005.
The executive team differed with the CHIPD report in only two areas. One involves
separate calculations of co-premiums for prescription drugs and for health insurance.
Courant said calculating the premiums together will simplify administration of
the plan and allow the lowest cost offerings--Comprehensive Major Medical and
Grad Care--to have little or no cost in the single-person tier.
The second recommendation the team could not fully endorse was that the University
should maintain an aggregate contribution of 85 percent for three years. Courant
said that may not be possible in the current unpredictable health care environment,
but that the University will work to stay at or as close to that percentage as
“What we are committed to is providing the community with significant advance
notice before the implementation of any changes so there can be campus discussion
and the opportunity for employees to plan ahead,” Courant said.
The exact share enrollees will pay for each plan in 2005 will not be known until
after the University has negotiated with providers, a process that begins in
Slottow said employees should remember that insurance premiums are paid on a
pre-tax basis, reducing the net effect of the cost. He also pointed out that
people can take advantage of the Flexible Spending Account option, which will
set aside part of each paycheck on a pre-tax basis for use on medical expenses
that aren’t covered by health plans, such as deductibles and co-pays.
Following the report, the regents approved a motion that would replace a 1988
action item that established a formula for determining co-premiums with a process
that allows the administration the authority to create an approach to development
Administrators then would discuss with the board each year the major
trends and issues surrounding health insurance, and seek the regents’ recommendations
for the University’s offerings and premium structure.
Slottow said further campus input also will be sought as the University moves
forward with plans to address increasing health care costs.
”We heard loud and clear [during this process] that the community wants
input,” he said. “There is a lot of expertise and thought on campus
that goes into this. We will continue to do more, and we will not do it without
extensive and vigorous discussion with all of our stakeholders. ”