BENEFITS ADVISORY COMMITTEE
MINUTES OF MEETING
DECEMBER 5, 2002
[In these minutes: Open Enrollment Update & Statistics, Single, Dual & Family Coverage, Opt Out of Insurance Discussion, Husband & Wife (or Domestic Partners) Employed at the University, Pricing for “Under 65” Spouses of Retirees]
[These minutes reflect discussion and debate at a meeting of a committee of the University Senate or Twin Cities Assembly; none of the comments, conclusions, or actions reported in these minutes represent the view of, nor are they binding on the Senate or Assembly, the Administration, or the Board of Regents.]
PRESENT: Fred Morrison (chair), Linda Aaker, Gavin Watt, Pam Wilson, Karen Wolterstorff, Jody Ebert, Don Cavalier, Joseph Jameson, Carla Volkman-Lien, Wendy Williamson, Carol Carrier, Gailon Roen, Susan Brorson, Steve Chilton, Amos Deinard, Richard McGehee, Peh Ng, Marjorie Cowmeadow, Theodor Litman, Dann Chapman, Keith Dunder
ABSENT: Ronald Enger, Nancy Wilson, Frank Cerra, George Green
GUESTS: Chris Hulla, Monica DeGraff
OTHERS: Kathy Pouliot, Phyllis Walker, Jackie Singer, Linda Blake, Tonya Hill-Soli, Pat Yozamp, Karen Chapin
I). Professor Morrison called the meeting to order and welcomed all those present.
II). OPEN ENROLLMENT UPDATE: Although most employees did return their applications, a majority did so towards the end of the open enrollment period. Only 1,138 notices have had to be sent to people who did not make a dental selection during the designated open enrollment timeframe. Dental enrollment numbers were pretty much as expected, although 1209 employees chose University Choice and this figure was a bit larger than anticipated. Besides open enrollment activities, Employee Benefits has been spending a significant amount of time transitioning over retirees into the UPlan.
OPEN ENROLLMENT STATISTICS: There were minimal changes to the medical plans with the exception of Definity. Definity gained about 212 members, representing a substantial increase while the other plans changed very little. The only other plan that gained members was PatientChoice Duluth Plan 1. This clearly is a reflection of the pricing between Plan 1 and Plan 3 in the Duluth area.
III). Policy Issue #2: Single, Dual, Family Option – Should the University offer a two, three or four level system? Professor Morrison solicited input from the committee on this issue. The following options are being considered:
Based on an analysis conducted by Buck Consultants whichever option (listed above) is chosen there would be a budget neutral impact to the University. On the other hand, there would be cost shifting amongst coverage groups. If the University expands its coverage categories, the cost of single coverage would remain constant; the cost for employee + spouse/partner would be reduced; and the cost for family coverage would increase.
The committee weighed the pros and cons of the different options. It was noted that a fair number of concerns have been brought to the attention of the BAC and Employee Benefits, primarily by those in the employee + spouse/partner category, disturbed that they are being forced to subsidize families. At the other end of the spectrum the belief is that the University should be viewed as whole with everyone sharing in the risk, and therefore, certain groups will always subsidize others.
Based on data collected by Buck Consultants from the University’s four plan administrators, the following percentages illustrate the current distribution of the various coverage groups across the tier options under consideration:
The committee asked Buck Consultants to calculate each of the four plan’s percentage distributions separately. This item was tabled until additional information could be collected.
III). Policy Issue #3: Opting Out – Should the University allow employees to opt out of health insurance coverage? Again, based on a Buck Consultant analysis:
Professor Morrison stated that one reason an employee may want to opt out of the UPlan is because they already have coverage under their spouse or partner who is employed elsewhere. These individuals often face billing nightmares due to the coordination of benefits process. Director of Employee Benefits, Dann Chapman, noted that the process is set up so that a primary insurer is required to contact a secondary insurer to determine whether the secondary insurer has any payment responsibility on the claim. The major problem that would be resolved by offering an opt-out provision would be the inconvenience of the paperwork associated with coordination of benefits.
Historically, the state has resisted the opt-out option because they believe the people most likely to opt out of the system are individuals with low claims. If this were to happen, program revenues would decline while the costs and risk associated with offering the benefit would not. This is a factor that needs to be considered, especially for a self-insured plan such as the University. Assuming the state’s theory is correct, as employees opt out fewer dollars are going into the pool to pay for the claims and, therefore, costs would have a tendency to increase for the remainder of the participants in the pool. Then, as time goes on and costs continue to increase even more people will chose to drop out of the plan.
Based on actuarial data compiled by Buck Consultants, the University, as a self-insured entity, should not experience a negative impact such as that described above if it decides to offer an opt out option. It is expected that the University could actually experience some savings because any decline in revenues typically generated by employee contributions into the pool would be offset by reduced fixed costs, the amount the University would no longer have to pay to its plan administrators for administrative fees for employees that have opted out of the UPlan.
Next, the question was raised that if the University allows its employees to opt out of insurance coverage, under what circumstances should this be permissible? Should employees be required to certify through a signed statement to the University that they have coverage elsewhere?
Committee members participated in a lengthy discussion concerning the opt-out option and possible ramifications. It was noted that the University of Minnesota is the only university in the ‘Big 10’ that does not allow its employees to opt out of insurance coverage. Although Professor Morrison was uncertain whether this fact had any relevance to the discussion other than illustrating the traditional Minnesota social welfare approach to managing its employees, he decided to share the information regardless. Mr. Chapman added that of the ‘Big 10’ schools only about 1/2 require an employee to have insurance elsewhere in order to opt out and the remaining schools allow employees to opt out regardless if they have coverage or not.
A concern was raised that employees may ask to be reimbursed for the University’s contribution that would have otherwise been put toward their health insurance coverage. Professor Morrison noted that common practice in Minnesota is that if an employee opts out of coverage and receives reimbursement they are prohibited from enrolling in their spouse’s/partner’s plan. According to Monica DeGraff the actuaries believe if no incentives are given to employees to opt-out, an opt-out policy would be a cost neutral concession on the part of the University. Ms. DeGraff agreed to research this matter further.
Members were reminded that the University is in a self-insured situation. Ms. McGraff of Buck Consultants explained that premiums paid by employees and departments (included in the fringe rate) go into a fund that is maintained by the University. This fund then is used to pay for insurance claims and administrative fees. Technically, in a self-insured environment there are no real premiums per se. With the help of actuarial consultants the University calculates insurance ‘premiums’. In the case of the University of Minnesota, the University is the actual insurance company who has hired out the delivery of services to its four plan administrators. Thus, the University carries the risk. Each month the University pays the claims it has received as well as the fixed fees to each of the administrators for having issued insurance cards, processed claims, etc.
It is unlikely, based on federal grant regulations, that the 11% of the total 36% fringe rate paid by University departments for an employee’s health insurance coverage continue to be collected if an employee opts out of coverage. As a result, would departments be more apt to discriminate in favor of employees that do not need insurance? After a lengthy discussion on the impact of the fringe rate to the department should an employee opt out of health insurance, Mr. Chapman asked members if they would support an opt-out option if there were no impact on the fringe rate? The committee tabled discussion of this policy issue until further information could be collected on fair implementation.
The committee unanimously endorsed a motion to postpone making any decision on the opt out option at this time and revisit this item in a year once the committee has more information on how the UPlan is evolving.
IV). Policy Issue #4 involves situations in which both a husband and wife (or domestic partners) are employed by the University. Currently, in this case, both individuals must enroll for coverage and if they have a family one of the employees must take family coverage while the other employee must take individual coverage. To compound the problem, the employee that signs up for the individual coverage cannot enroll in the family plan so if these employees sign up for anything but the low cost plan they are paying significantly more in premiums than if the spouse worked elsewhere or not at all. In essence, couples in this situation are being penalized.
The consultants noted that this problem exists at several companies and it is called “split enrollment”. Professor Morrison suggested that these families, as a whole, be allowed to enroll as a family, paying one family premium rather than two employee paid premiums. The University would only be collecting slightly less revenue, the amount of one single employee’s share, because it would still be able to collect from each department because both employees would be receiving benefits. Members were reminded that the University pays the same dollar amount no matter which plan an employee is enrolled in while employees pay the differential. Besides losing the amount of one single employee’s share, a member noted that another cost to the University would be in the form of drug co-pays.
The argument with the state has always been that an employer does not have a relationship with a family unit. Instead, an employer has a relationship with individual employees. Therefore, if the employer recognizes its relationship with the family unit, an inequity is created. The inequity arises when one employee gets an advantage that another employee cannot have. In this case, the advantage is for the person with a spouse or partner who also works at the University.
The committee unanimously endorsed a motion to support a “split enrollment” policy. The motion does not contain a sunset clause and will continue unless the committee re-evaluates the policy at a later date and determines it is not working. Professor Morrison stated that the committee will need to devise a better name other than “split enrollment”, ensure that the policy put in place complies with federal grant rules and make sure that all parties affected by this provision have a contract with the University, if necessary, in order for “split enrollment” charges to be the same as regular family charges.
V). Currently, the under age 65 spouse of a retiree is paying the dependent rate which is approximately 1.5 – 1.75 times the normal single rate. Should the University continue to do this or should the University charge this person an individual premium? Actuarial data indicates that most individuals in the COBRA category as well as most people in the retiree pool cost, on average between 2 - 2.5 times more than an active employee. Currently, the University is only charging these individuals approximately 1.5 times the cost of an active person. Another idea noted was to consider having each person be an individual cost group and charge premiums accordingly. A member wanted it noted that retirees pay the full premium and there is no contribution from the University.
The tiering question (Policy Issue #2) should be looked at separately from the retiree issue. According to Mr. Chapman, an argument could be made that if the tier 1 + 1 is added that the University would be subsidizing retirees to a level they are not currently being subsidized. Retirees are a higher risk and are, therefore, more expensive than the active pool. The case being heard for changing the tier system is that it seems to be more equitable to retirees, however, the older one gets the higher the cost.
Coverage for those 65 and over is in a fully-insured plan managed by the University while retirees and/or their spouses under 65 are part of the self-insured UPlan. The question before the committee is should the University charge those under 65 a single rate or a dependent rate? Up to this point, the University has charged these individuals a dependent rate which is the difference between a single and a family rate.
Employee Benefits will find out the number of individuals that would be impacted by such a policy change and feed the data to Buck Consultants who will provide the committee with a cost calculation. The committee will take this item again at its January 23rd meeting. Professor Morrison reminded members that because of how Medicare is set-up, once an individual turns 65 there is no such thing as family coverage. Instead, each family member has a separate, individual policy.
VI). Hearing no further business, Professor Morrison adjourned the meeting.
Renee Dempsey
University Senate