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Updated 9:00 AM March 20, 2009

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  Record Update First
What leaders are saying about the need for change
Health care and retirement savings plan changes >

“The committee developed a set of recommendations that work together to help control the unsustainable growth in university health care costs that we’ve experienced for quite a long time,” says Executive Vice President and Chief Financial Officer Tim Slottow. “Health care costs are increasing more rapidly than any other item in the University’s budget. Coupled with University contributions to the retirement savings plan, the cost of those benefits was $422 million last fiscal year. Without a change of direction, the cost would continue to grow as high as $2.2 billion within 20 year.”

Provost and Executive Vice President for Academic Affairs Teresa Sullivan describes the cost as an increasing threat to the University’s ability to succeed in its missions of education, research and patient care, making priorities like keeping tuition rates down much more challenging. “The changes are necessary to help control the costs. Careful planning, including financial analysis and benchmarking, and the guidance of the committees has ensured that university benefits will stay highly competitive with a generous retirement program and a choice of high-value, comprehensive health plans.” Sullivan says.

“Simply put, our health care costs will paralyze the University of Michigan unless we take action,” President Mary Sue Coleman said in opening remarks to the Board of Regents March 19. “I want to be clear about one essential fact in this new approach: We are not changing benefits for employees or retirees. We will continue to provide comprehensive, quality care through a variety of health care plans.”

“We are being particularly sensitive to ensuring that these changes are more affordable for employees who provide coverage for their children, as well as employees who earn lower wages,” Coleman said.

The impact of changes on health care cost sharing
Once fully implemented, the University’s overall contribution toward the health care of employees, retirees and dependents will be 70 percent of the total cost of premiums, co-pays and deductibles. Down from the current 80 percent overall contribution, the new target is more in line with average contributions of peer universities and health systems. The percentage applied to each individual depends on the plan choice and whether dependents are covered.

“The committee helped us safeguard some important principles,” says Dr. Robert Kelch, executive vice president for medical affairs. “After implementation is completed, eligibility requirements for benefits will remain the same, health care coverage won’t be redesigned or reduced as a result, and we will offer rates for the coverage of children that are lower than rates for dependent adults to help shield children and demonstrate that priority.”

“We asked the committee to help us consider salary in the setting of premiums to help make costs more affordable to lower-wage employees,” says Laurita Thomas, associate vice president for human resources. “Salary bands will help achieve this by providing modest reductions in the amount of increase required of lower paid staff.”

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