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Message from President Joel Seligman

August 6, 2007

I am today adopting each of the recommendations of the Task Force on Employee Health Care Plans. These recommendations will become effective January 1, 2008. Each of our 12,000 employees who currently is covered by one of our health insurance plans will need to choose a new plan to become effective on that date. I encourage all covered employees to take advantage of the opportunity to learn about your health care choices through careful review of Open Enrollment kits that will be mailed to your homes in September or October, attending subsequent open information meetings, and using a new Health Care Plan Cost Estimator that will allow each of you to see how each plan fits your individual circumstances.

The Task Force on Employee Health Care Plans, established on January 8, was co-chaired by Dr. Bradford Berk, Senior Vice President of Health Sciences and Chief Executive Officer of our Medical Center, and Ronald Paprocki, Senior Vice President for Administration and Finance and Chief Financial Officer of the University.

Throughout its deliberations, the task force was ably assisted by Mercer Health & Benefits, which met frequently with the task force to provide data and help analyze alternative approaches. The emphasis on the ultimate review of the task force’s recommendations was on openness. Discussion of the proposals occurred with several focus groups and town hall meetings open to all University employees.

I want to express my personal gratitude to Brad Berk and Ron Paprocki and to each of the members of the task force for their diligent and patient service during the last eight months. They have arrived at plans that are financially sustainable, fair, affordable, and encourage healthy behavior.

“Because the new health care plans are complex, over the coming months, the University will notify faculty and staff of the changes through a detailed communications strategy,” says President Seligman.

When I established the task force, it was against a backdrop of health care insurance costs which had risen from $17 million to $64.5 million between the 1998 and 2007 fiscal years. Approximately 30 percent of this increase was due to increases in the number of our employees, but even when that amount was subtracted from the total, health care costs had grown from approximately $17 million to $45 million or approximately 265 percent during that period. This represented the fastest growing major cost component in the University budget and had the potential to significantly reduce resources available for our University’s primary missions. Mercer estimated that even with no increase in the number of our employees, if no changes were made in our health insurance plans, the University costs would grow to $114 million by the 2012 fiscal year.

Mercer also presented data which highlighted other differences between the plans at the University of Rochester and peer institutions:

  • The University of Rochester pays a higher proportion of health care costs than virtually any of our peers and the University proportion is growing.
  • Approximately 4,000 of our employees receive health insurance without cost. Virtually no local or peer institutions today offer no-cost plans.
  • While most University plans require a primary care physician’s referral in order to see a specialist, many other institutions are moving away from mandatory referrals.
  • The percentage of the premiums paid by employees varies widely, with single employees in aggregate bearing approximately 3 percent of the costs of their health insurance and families bearing approximately 21 percent.

I charged the task force to address four specific questions:

  1. How can we best design health care insurance options that address the needs of the faculty and staff of the University for the specific purposes of (a) allowing the University to recruit and retain the best possible faculty and staff and (b) creating incentives to encourage the healthiest behavior of our employees?
  2. How can we design health care plans that allocate the employee premium costs in a way that is consistent with what our peers do?
  3. Should employee premium costs be “banded” so that the most modestly paid employees of our University would bear a lower percentage of their wages than the percentage cost of more highly paid employees?
  4. Should we offer plans that don’t require a primary care referral in order to see a specialist?

The key task force recommendations include:

  • Replacing the current six primarily copayment-structured health care plans with four new Preferred Provided Organization (PPO) plans. Each of these plans provides for 100 percent in-network coverage for specified preventive care; eliminates referral requirements so that employees can approach specialists directly; allows participants to receive care from any physician or facility they choose; and provides a higher level of benefits and lower out-of-pocket costs when care is received from network providers.
  • Generally equalizing the University subsidy for all plans at about 80 percent (meaning that employees pay about 20 percent of the full premium), regardless of plan type. This is a relatively lower employee cost than many of our peers, where employee costs often range up to 25 percent.
  • Providing greater University support for employees earning less than $40,000, through credits provided to help offset premium costs and through lower out-ofpocket maximum costs. On a monthly basis, single employees earning less than $40,000, for example, will be able to purchase the high deductible PPO plan for $12.86 per month.
  • Continuing to reimburse prescription drugs after a copayment.
  • Encouraging personal health care management by offering each plan participant a health assessment. In 2008, those employees who voluntarily participate in completing this confidential online questionnaire will receive a $100 cash incentive.

The University health care plans as adopted are financially sustainable. I will request a comprehensive review in three years.

I urge each of you to read this special Currents for an initial introduction to the new health care plan choices and to use the new Health Care Plan Cost Estimator when it becomes available.

Because the new health care plans are complex, over the coming months, the University will notify faculty and staff of the changes through a detailed communications strategy. In addition to printed and online materials, faculty and staff will have opportunities to have their options carefully explained and their questions answered by representatives from the Third-Party Administrators (Aetna and Excellus) and the Benefits Office. In addition, ASK-URHR (275-8747) continues to serve as a resource for faculty and staff.

Content last modified on: October 27, 2010