University of Rochester

University to Alter Employee Health Plans

August 6, 2007

Changes Slow Rising Costs, Share Costs Fairly, & Foster Healthy Behaviors

University of Rochester President Joel Seligman has accepted the recommendations of a 17-member internal task force charged with reviewing the University's employee health insurance plans and proposing new approaches that will become effective January 1, 2008.

Aetna and Excellus BlueCross BlueShield will continue to administer the University's health plans, but the plan offerings will change during this fall's open enrollment. Faculty and staff will have a choice of four new PPO (Preferred Provider Organization) plans that encourage preventive care and promote healthy behaviors.

The result is that all employees covered under University health plans will pay approximately 20% of the premium, with the University picking up the balance of the premium. (Employees currently contribute 18% of the full cost of the premium.) Costs will also be distributed more evenly among those with single versus family contracts, and enrollees will have greater ability to control their personal health costs by improving their own health. All of the new plans provide full coverage for preventive care such as well-child visits, mammograms, and cholesterol screenings and allow direct access to specialists, features not included in previous offerings.

"The task force, with the help of Mercer Health and Benefits, did a thorough analysis of our program against those of our local and national peers," Seligman said. "They've developed a competitive plan that brings the University's contribution in line with those of other employers, while ensuring that health care coverage remains affordable to all faculty and employees. We're accomplishing three critical goals: stemming the rise in costs, creating equity among employees, and promoting healthier lifestyles."

According to task force chairs Bradford C. Berk, M.D., Ph.D., Medical Center CEO, and Ronald Paprocki, University CFO, affordability for all faculty and employees was a key concern for the task force. Therefore, the program is structured so that full-time employees making less than $40,000 per year pay a lower portion of the premium, and those making over $100,000 pay a higher portion.

"Under the new program, all employees who participate in the University's benefits plans contribute toward their health insurance coverage. While that means we have to increase the cost of health insurance for some of our employees, we've worked hard to keep the increases low, and offer a range of new plans that are competitive with our peers," Berk said. "While it was our goal to have employees pay 20% of their premium, we deliberately structured the program to shift costs away from lower-income employees."

Seligman commissioned the task force in January after a preliminary assessment by the consulting firm Mercer showed the University's costs for employee health coverage had tripled over the last seven years. Mercer projected that the University's costs could top $135 million per year by 2012 if cost increases continue and the University continues to grow its employment. In addition to Paprocki and Berk, the task force was comprised of a wide group of representatives from throughout the University. Preliminary recommendations were shared with faculty and staff during open meetings held earlier this year. This week, employees are learning more about the new plan offerings and design.

"The process we used worked well and I'm pleased with the contributions made by task force members," Paprocki said. "The feedback sessions were well attended and gave us confidence that we had input from a broad spectrum of the University community."

Most employees enrolled in single coverage health plans through the University will now begin contributing $80 to $1,700 per year toward the cost of the premium (depending on the plan they choose and their income level), as the University phases out free health coverage. Others particularly those in family health plans will see a decrease in their costs depending on the plan they choose and the intensity of the health care services they use. On average, employees will pay $66 per year more to receive coverage. To ensure that cost increases don't fall too heavily on those least able to afford coverage, expenses will be lowered for those making less than $40,000 per year, while faculty and staff making over $100,000 per year will bear a higher expense.

In all, the University hopes that the changes will mitigate the overall rise in its health insurance bill and encourage more employees to take advantage of wellness programs. The University is using the initial savings from the new program to offer each employee a $100 cash incentive to complete a confidential health assessment. Aggregated results from this survey will help the University further develop its menu of wellness programs.

"We don't expect to save money immediately with these changes because we are reinvesting in employees with a health assessment survey," said Charles Murphy, Associate Vice President for Human Resources. "Our goal is to help employees make more informed decisions about how they use health care services and frankly, to lower their need for healthcare because they are healthier. The savings comes back to us with a healthier workforce that uses health care services less over time."