Office of the Vice President for Global Communications

Tuesday, September 8, 2009

Record Update First

Health care and retirement savings plan changes

What leaders are saying about the need for change >

Faculty and staff colleagues,

Learn more about:
• What this means for you
• The Benefits Information Forums in Ann Arbor, Dearborn and Flint
• The committee reports
Go to

Early last fall, we charged the Committee on Sustainable Health Benefits (COSHB) and the Committee to Study Retirement Savings Plan Vesting Options to devise the means to maintain our highly competitive health care and retirement benefits while helping to control the unsustainable growth in the university’s health care costs, which threatens our ability to carry out our core missions in education, research and patient care.

COSHB, which included members of our faculty, staff and retirement communities, was specifically charged to make recommendations on how to achieve a new aggregate cost-sharing ratio for health care of 70 percent contribution from the university and 30 percent contribution from employees and retirees. This ratio is closer to that of peer universities and health systems. The retirement savings committee was charged to recommend waiting periods and/or vesting options for future employees.

In devising a path forward, the committees were mindful of the need to make the transition as manageable as possible, and they made recommendations that will:

• Preserve access to U-M health plans for everyone who is currently eligible for benefits;

• Continue our choice of comprehensive plans without reducing or altering coverage;

• Help make the costs more affordable for those earning lower wages through a smaller increase in premiums;

• Protect children with rates lower than the rates for dependent adults;

• Maintain the current contribution percentage to retirement savings with no impact on current faculty and staff; and

• Keep our benefits at or above the market averages for our peer universities and health systems.

After careful study of the committee reports, we will adopt the following changes through a phased implementation beginning next year.

Retirement savings decisions
We will maintain the current 10-percent-of-salary contribution amount the university makes toward this important retirement savings benefit.

Faculty and staff hired on or after Jan. 1, 2010, will have a one-year waiting period before they begin to receive university contributions toward the U-M Retirement Savings Plan.

Health care decisions
The University will continue basing the contribution formula for health care on the two lowest-cost comprehensive plans and will continue our current tiers of coverage — employee, employee plus adult, employee plus adult and child(ren), and employee plus child(ren).

Employees and retirees will contribute more to their health care costs than they do today to achieve the new aggregate ratio for cost sharing. Half of the increase will occur in January 2010; the remainder in 2011. Although it is too soon to know the actual premium rates for 2010, we have created estimates to show what the employee and university contributions to U-M Premier Care would be if these changes were in place today, available at

The university’s contribution to premiums will be greatest for employees and retirees, and greater for child dependents than for adult dependents.

The university will use three salary bands to help make costs more affordable to lower-wage employees. Estimates of the salaries that fall into each band using 2008 data can be viewed on the site.

Part-time benefits-eligible employees will continue to have access to the full choice of U-M health plans, but will receive a university contribution toward premiums that will be 80 percent of the university contribution made for full-time staff in the lowest of the three salary bands (Band 1).

University contributions to premiums for retirees and their dependents will be the same as its contributions for active full-time employees in the lowest wage band (Band 1).
The co-pay amount for an office visit will change from $15 to $20 and emergency room visit co-pays will change from $50 to $75 (co-pay is waived when admitted to the hospital for care). Co-pay increases will become effective on Jan. 1, 2010.

The university will continue its commitment to creating a culture of health through MHealthy programs for prevention, early intervention and wellness.

Health care cost-sharing changes will be implemented in two phases
• Jan. 1 2010: Changes to co-pays for office visits and emergency room visits will be made, along with one-half of the increases in employee premium contributions.

• Jan. 1, 2011: The remaining one-half of the premium contribution increase will become effective.

Exact contribution amounts for U-M health plans will be available once annual rates are set, well in advance of open enrollment. Rates for 2010 will be posted on the Benefits Office Web site by Aug. 15, 2009. Health plan descriptions and rates also will be published in open enrollment material in October when faculty and staff choose their benefits for the following calendar year.

Actions to be deferred
COSHB recommended that the co-pay amount for name-brand prescription drugs in the third tier of the U-M Prescription Drug Plan be increased from $30 to $45. We feel this change warrants further study to ensure we safeguard patients who may require certain drugs in that tier; therefore we have deferred a decision on this change until 2011 pending further analysis.

Benefits information forums
To help clarify these changes, information forums will be held March 30 on the Ann Arbor and Dearborn campuses and March 31 on the Flint campus. Time will be reserved at each venue for questions. For those who are unable to attend, the March 30 Ann Arbor forum will be simulcast on the Web, and a video of the forum will be available on the Stewardship of Benefits Web site after the event concludes.

We encourage faculty, staff and retirees to learn more about these changes by visiting the updated Stewardship of Benefits Web site or participating in one of the Benefits Information Forums. For more information and forum dates, times and locations, go to

Questions for the forums may be submitted in advance by sending e-mail to

We understand that adjustments such as these are never easy, particularly during a turbulent economic climate. We are grateful to the members of both committees for their individual and collective expertise, analysis and guidance in devising a thoughtful and realistic approach that balances the imperative to manage costs with our long-standing commitment to meeting the needs of our community.

In partnership,
Robert P. Kelch, executive vice president for medical affairs
Timothy Slottow, executive vice president and chief financial officer
Teresa Sullivan, provost and executive vice president for academic affairs
Laurita Thomas, associate vice president for human resources