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 said.
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 last semester. Among the concerns of the approximately 50 participants per session, plus more than 100 people who sent e-mails, was that the premium sharing redesign put a greater burden on the lowest-paid employees.
"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.
He cited a five-year increase in the University's total premium costs from $98.5 million in 1997 to nearly $185.7 million in 2003. The cost for fiscal year 2004 is $214 million.
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 said.
The University must continue to control health care costs, including looking at how to promote wellness better, he said.
"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.
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, a recommendation in the CHIPD report. Only one comprehensive insurance plan offeredBlue Cross/Blue Shieldis completely portable, but it is the most expensive plan, he said. HRAA hopes to have an additional offering 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 offeringsComprehensive Major Medical and Grad Careto have little or no cost in the single-person tier.
The second recommendation the team could not endorse fully 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 possible.
"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 February.
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, regents approved a motion that allows the administration the authority to create an approach to the development of premiums. It replaces a 1988 action item that established a formula for determining co-premiums with a process. 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."