BENEFITS ADVISORY COMMITTEE

MINUTES OF MEETING

JANUARY 17, 2002

[In these minutes: Welcome, UPlan Update, Review of Final Draft of Dental RFP, Review of Final Draft of Medicare/Retiree Health Plan RFP; Review of Final Draft of Life Insurance RFP]

[These minutes reflect discussion and debate at a meeting of a committee of the University of Minnesota Senate or Twin Cities Assembly; none of the comments, conclusions or actions reported in these minutes represent the views of, nor are they binding on, the Senate or Assembly, the Administration or the Board of Regents.]

PRESENT: Gavin Watt, Vice Chair, Linda Aaker, David Johnson, Pam Wilson, Jody Ebert, Phyllis Walker, Nancy Wilson, Don Cavalier, Joseph Jameson, Carla Volkman-Lien, Wendy Williamson, Carol Carrier, George Green, Gailon Roen, Susan Brorson, Amos Deinard, Peh Ng, Larry Thompson, Marjorie Cowmeadow, Theodor Litman, Steve Burrows, Dann Chapman, Keith Dunder, Barry Melcher

REGRETS: Fred Morrison, Chair, Richard McGehee

ABSENT: Frank Cerra, Rachel Estroff, Barbara Van Drasek

OTHER(S): Kathy Pouliot, Linda Blake, Tom Messervey, Khosi Nkosi, Pat Urquhart

GUEST(S): Chris Hulla, Buck Consultants

I). Acting Chair, Gavin Watt called the meeting to order and welcomed all those present.

II). Mr. Watt called on Steve Burrows of Employee Benefits to provide Committee members with an update on UPlan. Mr. Burrows indicated that all employees have been placed in a plan and most employees have received their medical cards either prior to Christmas or shortly thereafter. Plan distribution numbers are as follows:

Choice Plus 30%

Definity Health 4%

HealthPartners Classic 55%

PreferredOne 11%

A Committee member asked how Definity Health felt about receiving such a small percentage of enrollees. Mr. Burrows indicated that Definity Health is a new, enthusiastic, privately held company that is attempting to go public. Naturally, they were somewhat disappointed by the low number of enrollees from the University of Minnesota. However, Definity’s exuberance was rewarded during open enrollment at Medtronic where a significant number of employees signed up for Definity Health. Mr. Burrows speculated that for those organizations that continue to offer Definity Health, enrollment is likely to increase and maybe significantly.

III). Chris Hulla led a review of the final draft of the Dental RFP. Mr. Hulla started by giving an overview of the basic benefit sets outlined on the first page of the handout. Page one of the handout, with the exception of Plan D, illustrates current plan designs.

1. Plan A highlights:

• Broad network
• Network only – no benefits outside of the network

2. Plan B highlights:

• Broad network
• Ability to go outside network

3. Plan C highlights:

• Limited network plan

4. Plan D highlights:

• New plan offering
• No network – no requirement or financial incentive to use network providers. Theoretically this plan will be nationwide.
• Possible negative ramification of this plan would be that the patient pays the balance due amount in addition to premium charges.

A lengthy, detailed discussion of the Dental RFP ensued. Highlights included:

• Request for clarification on whether the term “usual and customary” describes the allowable charges or reimbursement.
• In an attempt to obtain the broadest network possible, the RFP will state that a contract with the University of Minnesota is not a contract with DOER. According to Keith Dunder, General Counsel for the Academic Health Center, the University needs to be circumspect when it comes to Rule 101 because it does not want to send out an invitation to amend Rule 101.
• Alternatives to Basic Set (pages two and three of handout) – the intention of the alternatives section is to price what will happen to the premium if current provisions are altered. For example, increasing the deductible may allow the University to offer a larger annual maximum etc. The goal of the ‘alternatives’ portion of the RFP is to get a variety of prices for different benefit designs.
• It is not the intent to make plan changes that will keep costs at what they are today. Instead, the purpose of the RFP is to make plan changes and weigh options based on a target price that is reasonable for 2003. No option is being considered where any out-of-pocket costs would apply to preventive or diagnostic care.
• Chris Hulla stressed that the more a given plan deviates from the ‘norm’, a carrier will associate more risk with that digression and reflect that risk in the premium.
• The last page in the dental handout asks for changes in definitions of what is a covered service. At present, the baseline includes what is currently covered in the Certificate of Coverage and benefit levels that apply to those services. The last page of the handout requests vendors to put a price on changes to services that represent a change to current benefit levels.
• Dann Chapman of Human Resources impressed upon the Committee the need to draw a distinction between benefit year 2003 and benefit years 2004 and beyond. For bargaining unit reasons in the year 2003 there remains a need to reproduce, as closely as possible, the University’s current benefit sets. As a result, the Committee’s desire to cover implants will be an issue that impacts benefit years 2004 and beyond.
• Steve Burrows of Employee Benefits explained to Committee members that in exchange for the current very competitive State Dental Plan premium the network was purposefully made smaller and more aggressively priced. Because of numerous complaints arising out the small network, the current Dental RFP will look to expand the network. A result of expanding the network will naturally mean an increase in premiums.

To conclude, the Committee unanimously agreed that the RFP was ready to be sent out, recognizing that the consultant would have to make minor typographical and technical revisions.

IV). Next, the Committee turned its attention to the Medicare (Retiree) Health Plan RFP. The overall strategy for this plan is the same as it was for the Dental Plan and that is to obtain quotes on current plan offerings in order to establish a baseline. Then, once a baseline is established, alternatives will be explored. Chris Hulla led Committee members through a review of the handout before them, outlining the current benefit sets, with the exception of Coordinated Plan Option #2. Current basic benefit sets and corresponding features include:

• Medicare + Choice HMO (also known as Medicare Risk HMO or Medicare Part C) – requires Medicare assignment. This type of HMO is a “tight network” HMO. UCare is an example of a Medicare + Choice HMO in the Twin Cities. Medicare assignment means a patient assigns his/her Medicare benefits to a specified HMO and the patient cannot see physicians outside that HMO network although there are some exceptions for traveling and emergency situations. With this plan the patient accepts a tight network in exchange for a lower premiums.

• Cost-Based Medicare HMO is a fee for service arrangement within an HMO. While it has the premium advantage of an HMO as opposed to a Coordinated Plan, no Medicare assignment is required

• The Coordinated Plans (Coordinated Plan 1 & 2) are non-network or ‘discount off services network’ style plans. No Medicare assignment is required, and so this means patients can see any physician that accepts Medicare. Because this is a very open plan the premiums are significantly higher. Coordinated Plan 2 (a new plan that is being explored) will ask for quotes on a non-network plan with higher deductibles, coinsurance, and higher out-of-pocket annual maximums and hope to see a trade-off as far as lower premiums are concerned. It is in Chris Hulla’s opinion that Coordinated Plan 1 may be in the starting phases of a “death spiral” because it tends to attract bad risk and, as a result, the premiums are continuing to go up and up. Therefore, Coordinate Plan 2 may give current retirees another option, and may also be what Coordinated Plan 1 mutates into over time.

Mr. Hulla highlighted plan features for Committee members.

• Both Coordinated Plans will allow 100% coverage after a deductible is paid for physician visits etc. and at 80% after a deductible is paid for hospital care. The main premium reduction item in Coordinated Plan 2 is a coinsurance type prescription plan.
• The HMO plans allow for 100% coverage on most services and then the RFP will explore a variety of co-pays for office visits and prescriptions.

All bidders on the Retiree Healthcare Plan, as with the Dental RFP, will be given the option of submitting bids as a self-funded, fully insured or a risk-sharing plan. Mr. Hulla is highly confident that the HMOs will bid fully insured plans and the Coordinated Plans will bid self-funded plans. Self-funded plan advantages include: with time benefits can be modified based on utilization data and this can result in an overall better plan and premium. Also, the self-funded option would not require the University to pay risk charges, but instead the University would purchase “stop-loss insurance” which is cheaper. In contrast, an advantage to an insured product would be a provider group agreeing to operate on a capitated basis and thus would be managing its own risk. (Life insurance will be a fully insured product).

The Committee unanimously agreed that the RFP was ready to be sent out, recognizing that the consultant would have to make minor typographical and technical revisions.

V). Review of Life Insurance RFP – Mr. Hulla walked the Committee through the life insurance handout outlining points of interest. The RFP’s goal is to:

• Capture lower premiums
• Increase benefits, if possible
• Consolidate contracts and simply administration of life insurance benefits
• Make life insurance benefits more uniform

While reviewing the handout in detail the following discussion points were raised:

• A provision within the employee and spouse optional life insurance plan that states if an employee and/or spouse is covered continuously five years prior to retirement then he/she owns a paid up insurance amount at retirement equal to 15% of the lowest amount he/she paid in over those five years. If this provision is to be eventually eliminated, consideration needs to be given in the meantime to plan participants that have been actively working towards qualifying to receive this benefit. As a result, there may be a need to either prorate this benefit or grandfather it out.

• The proposed life insurance plan needs to specify that basic life insurance be calculated at 1 x Pay rounded to the next $5,000. As it stands, the proposed plan does not make mention of the incremental rounding to the next $5,000 that the current plan stipulates.

• Clarification that the word “partner” in the RFP includes same-sex domestic partners being treated equivalently to spouses. Mr. Hulla noted that he is not sure how carriers will respond to this and, in fact, bidders may indicate that the IRS will require any same-sex domestic partner payout be taxable to the beneficiary.

• Mr. Hulla was instructed, as part of the ‘alternatives section’ to the basic benefit set, to ask carriers to explain their accelerated life insurance payment options.

Once again, the Committee unanimously agreed that the RFP was ready to be sent out, recognizing that the consultant would have to make minor typographical and technical revisions.

VI). Other Business – A workbook titled “How to Design Workplace Health Promotion Programs” was distributed to Committee members. Wellness Subcommittee Chair, Linda Aaker, encouraged Committee members to read the workbook and be prepared to discuss the topic of wellness at the next meeting on January 31, 2002.

VII). With no further business, Vice Chair Gavin Watt adjourned the meeting.

Renee Dempsey

University Senate