January 22,
2007
Health benefits task force to consider all
options, says Chuck Murphy
Murphy
President Seligman recently announced the
formation of a University-wide task force to study ways to
control the rising costs of the University’s health benefits.
In a Q&A, Chuck Murphy, associate
vice president for human resources, talks about why the task force
was formed and what faculty and employees can expect.
Why is the University looking at its health
benefits?
Like all employers, the University is
constantly assessing its costs, and health care benefits represent
one of the fastest growing components of our budget. The cost of
insuring our employees has nearly tripled in seven years. Some of
the increase can be attributed to the growth in our employment, but
not all. A recent report by Mercer Health and Benefits shows that
our costs are out-of-sync with both local employers and our
national peers. If we don’t address that, it could impede our
ability to fulfill our missions.
What specific goals did the University
establish for Mercer Health and Benefits in their assessment of the
cost of employee health benefits?
The University hired Mercer Health and Benefits
to take a hard look at our employee health care plans to help us
simultaneously control costs and continue to offer affordable and
comprehensive health care coverage to our employees. We also asked
Mercer to benchmark the University’s health care plans with
those of our peer institutions both nationally and regionally. They
confirmed that our costs are escalating at a rate that is neither
supportable nor sustainable. If we continue with our current system,
and assuming there is no growth in the employee population, the
University’s health care spending is projected to increase from
$64 million in fiscal year 2006–07 to $114 million in
2011–12.
What options will the University consider
to try to remedy its health benefits costs?
No options are being precluded from
consideration when the task force undertakes President
Seligman’s charge. We’ll look at pricing options, plan
design, disease management, and wellness programs to name a few. No
reasonable consideration is off the table.
Is the University planning a similar audit
of other employee benefits programs?
Not at this time. In 1995, we conducted a
thorough review of all benefit plans and made appropriate
adjustments. In 2005, we made enhancements to our tuition benefits
program at which time President Seligman committed to further
review in four years. We do, however, frequently evaluate our
retirement and health care benefits plans, which are our major
expenses, to ensure that they are both competitive and cost
effective.
The University benefits program has long
been used as a recruitment and retention tool. How will the
University balance its need to manage costs while at the same time
remain competitive in the war for talent?
Remaining competitive is absolutely imperative,
and we are fully committed to doing so. What this report tells us,
however, is that we are out of line with the competition when it comes to our health care plan pricing strategy. We
can continue to attract the best and the brightest employees to our
University, while mitigating costs and remaining committed to our
mission.
The University offers a number of wellness
and chronic disease management programs to its employees. Have
these programs been in existence long enough to measure their
impact and efficacy?
They have, and we have seen real success,
particularly in the chronic disease management programs for
employees with diabetes, asthma, and congestive heart failure. Each
year we invest around $250,000 in chronic disease management
programs, and each year we have seen a three-to-one return on our
investment. This accounts for a savings of nearly $800,000
annually. We expect that to level off as the health of participants
improves, but the ongoing benefits of such programs will be seen
for years to come. The success of wellness programs is considerably
harder to measure but we do know that more employees are taking
advantage of programs like Well-U than ever before. Encouraging
healthy behavior benefits our employees and is absolutely essential
to controlling our health care costs. We
will continue to support these programs, but while they are an
important piece of the solution, they are not the full solution.
Is the University exploring any new
wellness programs or incentives for employees?
We are. Just last year the University launched
its Healthy Priorities initiative providing University employees
with the most up-to-date tips and information on topics including
stress management, smoking cessation, and nutrition. Healthy Priorities
is aimed at helping employees understand the
value of their health benefits and become more informed consumers. Just
as we encourage our employees to take a holistic approach to their
health and well-being, so, too, should we as employers take a holistic
approach to controlling costs.
In the President’s remarks he touches
on the idea of “banding” employee premium costs. How
does banding work?
One of our biggest concerns in looking at the
cost of employee health benefits is that, in many cases, costs are
unevenly borne by families and employees with modest salaries.
Banding is one technique used by employers to set employee costs
for a health plan. Using this approach, some organizations have
established different prices for a health plan dependent upon the
annual wages an employee earns. Another approach is to establish a
different percentage of their salaries for health care benefits and
lower paid employees would contribute a smaller percentage. Still
other companies have established a discount for employees who earn
below a certain amount. This is one of many issues that the task
force will consider when recommending changes.
Will students be affected?
Neither undergraduate nor graduate student
health care plans will be affected. Medical residents and fellows
are considered faculty, for benefit purposes, and will be subject
to any changes.
What about retirees?
The Medicare-eligible University retirees
participate in medical plans separate and distinct from active
faculty and staff. The work of the task force is specific to the
plans offered to active faculty and staff and not applicable to
retirees, except those who may have retired prior to attaining age
65. Although the cohort of retirees under the age of 65 is
extremely small, their interests will be taken into consideration.
What about the University’s move to
self-insurance?
In 2002, the University chose to self-insure
its employee health plans. The move has cut $4 million out of the
cost equation each year since, but it is simply not enough. It is
our hope that this task force will make further recommendations to
achieve a more sustainable health care benefits package equipped to
control future cost increases, while simultaneously recommending
design changes to encourage healthier lifestyles.
(Read Seligman’s January 8 message to the
University community at www.rochester.edu/president/memos/2007/insurance.html.)
| Previous story | Next story |
