University of Rochester

FACT SHEET: Self-Funding of University Health Benefits

March 25, 2002

The University of Rochester will introduce a set of "self-funded" health insurance plans for its employees effective July 1, 2002. A letter announcing the shift to self-funding was mailed March 23 to all University employees. (Highland Hospital and its affiliates are not affected.)

The University's new self-funded plans will be modeled after the plan now offered. The process of choosing a third party administrator is expected to be completed soon [see 4/1/02 announcement], from among bids submitted by four companies.

"Self-funding allows the University to provide medical plans more efficiently to employees and their families and helps to contain health insurance costs that have risen dramatically in recent years," Ronald J. Paprocki, Senior Vice President for Administration and Finance and CFO, wrote to faculty and staff. "As important, self-funding will allow us to develop initiatives that will help our own employees live healthier lives.

Self-insurance will begin to give the University important aggregate data about its employees' needs that can lead to redesigned benefits programs as well as to targeted wellness programs. Currently, the University does not have access to claims data about its own population that would allow the analysis needed for such improvements.

In taking this step, the University joins a number of prominent Rochester-area employers now outside of the community rating system (either through self-insurance or experienced-rated insurance).

During the last four years, the insurance premiums paid by the University and its employees rose from $25.5 million to $50.8 million. "The magnitude of benefit program costs for the University and its employees shows why we have had to carefully scrutinize our options for the future," said Paprocki. "To remain a sound and thriving institution, and thus make our largest contribution in the long-term to the local and national communities, we must make good, prudent business decisions about our operations in support of our core missions as a research university."