BENEFITS ADVISORY COMMITTEE

MINUTES OF MEETING

APRIL 19, 2007

[In these minutes: AFSCME Proposal, RFP Updates, Announcements]

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

PRESENT: Gavin Watt (chair), Tina Falkner, William Roberts, Karen Wolterstorff, Jody Ebert, Jennifer Imsande, Rhonda Jennen, Sandi Sherman, Joseph Jameson, Michael Marotteck, Carla Volkman-Lien, Carol Carrier, Amos Deinard, Richard McGehee, Fred Morrison, Theodor Litman, Rodney Loper, Dann Chapman

REGRETS: Don Cavalier, Peh Ng, Carl Anderson, George Green

ABSENT: Linda Aaker, Jerremy Mlenar, Frank Cerra, Keith Dunder

OTHERS ATTENDING: Kelly Ahern, Bob Altman, Ted Butler, Joyce Carlson, Nancy Fulton, Murray Harber, Jim Jorstad, Shirley Kuehn, Kathy Pouliot, Kelly Schrotberger, Curt Swenson

I). Gavin Watt called the meeting to order.

II). Employee Benefits’ Announcement: Open enrollment for long term care (LTC) ends tomorrow, Friday, April 20, 2007.

III). Gavin Watt called on Sandi Sherman to speak to the AFSCME proposal, which asks the BAC to take a stand and call on the University to:

1. Cap employees' share of health care premiums at current levels for both the base plan and HealthPartners Classic Plus.
2. Restore annual prescription out-of-pocket maximums to $500 for individuals and $1000 for families.

Before discussing the proposal, Ms. Sherman made the following introductory remarks:

• Anecdotally, some people have mentioned that the proposal asks for too much; however, in her opinion, it is very doable.
• Health benefits need to take priority over other University initiatives, e.g. retention packages, recruiting packages, the Gopher Stadium.

• Comments have been made that this proposal/discussion is not germane to the BAC because AFSCME bargains its benefits. Ms. Sherman believes, however, that nothing precludes the BAC from weighing in on this proposal, and, therefore, the discussion should take place.
• AFSCME has received feedback from some of its members concerning the hardships they are facing due to rising health care and prescription drug costs.
• A report prepared by the School of Public Health indicates that there are millions of people across the United States without health insurance, and this number continues to grow.
• An article in today’s newspaper noted that uninsured patients seeking emergency care and low reimbursements for Medicare and Medicaid providers are, in part, responsible for driving the increase in health care costs across the state.

A member asked whether AFSCME actually has a say in its benefits or whether the administration comes to the negotiating table with benefit decisions that are already made leaving little to no room for negotiation. According to Ms. Sherman, by the time Labor Relations representatives sit down at the bargaining table with union representatives, benefits decisions are virtually a done deal. Mr. Bob Altman from Labor Relations noted, however, that from the University’s perspective, Labor Relations is well aware of its obligation to negotiate health insurance benefits. Dann Chapman added that part of the reason issues are fairly fleshed out by the time they reach the bargaining table is because the unions have participated in the BAC discussions where many of these benefit conversations have already taken place. The University finds a lot of value in having the various employee groups represented on the BAC as it discusses issues that are eventually bargained.

During today’s discussion, the question of what is the comparison group that the University compares itself to when deciding on its health care benefits arose. Professor Morrison noted that the University compares itself to:

• Comparable public and some private universities, e.g. University of Michigan, Northwestern University, University of Wisconsin. The University’s benefits are definitely comparable with institutions in this category.
• Other Minnesota public employers, e.g. State of Minnesota, Hennepin County, Ramsey County. While the University’s benefits had generally been equivalent with this comparison group, some public institutions, particularly counties and cities benefits packages have been eroded away.
• Large employers in Minnesota.

Professor Morrison reported that while he was the legislative representative, legislators would ask why the University should get better benefits than other large Minnesota employers. He added that in his opinion, the University has done a good job in keeping its benefits whole and not allowing them to be eroded. In addition, a result of a good benefits set is that people want to work for the University. Prior to the implementation of the 4-tier rate structure, increasingly spouses/same sex domestic partners of University employees declined health care coverage with their employers in favor of coverage through their University employed spouse/same sex domestic partner at a relatively low rate. 

While Professor Morrison is in favor of being creative in holding down health care costs while remaining competitive with comparable institutions of higher education, he is concerned about this proposal because it does not speak to holding down costs.

Gavin Watt noted that at one time the University’s health care benefits were through the State. As the University and the State drifted apart, it has become increasingly difficult to compare benefits packages. Professor Morrison added that the University inherited the ‘10% Rule’ from the State. Since departing from the State, the University modified this rule so that employees with employee only coverage still pay only 10% of their health care premiums and families pay 15% of their premiums. The State, on the other hand, while keeping the 10% rule for employee only and family coverage, raised its deductible.

There are pieces of the AFSCME proposal, noted Professor Morrison, that are somewhat problematic, e.g. capping employees’ share of the premiums at current levels for those enrolled in the base plan and HealthPartners Classic Plus, because different groups of providers in these plans are charging significantly more than others. In these cases, the UPlan would be subsidizing the providers that charge a higher cost. It is very important that the University continues to put price pressures on all providers. Under this proposal there would be no incentive for UPlan participants to choose high quality and economically efficient providers. Professor Morrison voiced his concern over supporting a proposal with a dollar amount cap on the employees’ share of the premium without an incentive for employees to choose quality, and economically efficient providers.

What are the costs associated with this proposal asked a member? Along these same lines, the question of how much the University has saved with respect to pharmacy benefits was also raised. Mr. Chapman stated that it is always dangerous to talk about ‘savings’ because this word suggests that costs went down, but this is not the case. Rather than pharmacy costs going down, he noted, the trend is slowing and, as a result, costs are not rising as fast as expected. Therefore, it made sense for the University to encourage this trend and share the cost difference back with the participants that actually created the cost difference in the first place (co-pay for Generic Plus category drugs to be reduced from $10 to $8). He added that all health plan deficits are dealt with through the fringe pool; deficits are not added back into the UPlans’ cost by raising rates in the future. In the same way, if there were to be an over collection, these funds would stay in the pool to help level out costs going into the future.

Ms. Sherman reported hearing from some AFSCME represented employees that after the University moved to a 4-tier health insurance plan, their pay actually decreased. In response to this Dann Chapman noted that the only way this would be possible would be if employees elected to purchase one of the buy-up plans. This did not occur for any University employee that selected the base plan.

To address item two in the AFSCME proposal, Employee Benefits distributed a handout comparing organizations with separate pharmacy out-of-pocket maximums and organizations without separate pharmacy out-of-pocket maximums. Ted Butler walked members through the information contained on the handout. Dann Chapman stated that Ms. Sherman’s comments that pharmacy costs for UPlan members have gone up under the new pharmacy plan are simply not accurate. Costs for prescriptions for UPlan members have gone down by more than $1 per filled script from 2005 to 2006, and this trend will continue to go down as long as there is an increase in generic utilization among the UPlan population. He added that the UPlan is unusual in part because of its Generic Plus category, and also for its prior authorization process, which allows members, when there is a medical necessity, to get their prescription co-pay reduced to the lowest level. In response, Ms. Sherman stated that the prior authorization process is not easy to navigate.

After much discussion, the BAC went on the record and noted that health care costs are an extremely important issue, which the University needs to continue to monitor closely. The University should work to hold the line on health care costs, especially for lower paid employees and work to proactively reduce these costs. Furthermore, the committee requests the administration explore the feasibility of reducing UPlan members’ pharmacy out-of-pocket maximums. Employee Benefits was asked to report back on the cost of reducing pharmacy out-of-pocket maximums at the committee’s next meeting.

IV). The committee was given an RFP update. Gavin Watt noted that RFPs for retiree health insurance, dental insurance and life insurance were issued this year. He thanked members of the BAC that were involved in this process as well as Tom Messervey from Dentistry Administration who also participated in the dental RFP process. With this said, Mr. Watt reported that the current retiree health insurance vendors were retained and costs were generally held down.

Professor Ted Litman reported that 6 vendors bid on the retiree health insurance RFP. The 4 current plans was were retained – Blue Cross/Blue Shield, HealthPartners Freedom, UCare and Medica. He added that Medica proposed a new program with a more national scope.

Professor Litman stated that many retirees have asked whether they can do any better by purchasing health insurance in the open market instead of through the University. This question was posed to each of the vendors. From this question it was learned that the University has a rich plan that does not have a “donut hole.”

How many of the 4 options allow retirees to go to the Mayo Clinic in Rochester asked a member? The only plan that does not cover services rendered by the Mayo Clinic is Medica who claims that it is a contractual issue. Ironically, however, retirees with Medica coverage can go to the Mayo Clinic in Florida and Arizona.

Mr. Watt stated that in terms of dental insurance plans, Delta and HealthPartners were retained. Two other vendors submitted responses, but neither had the broad network that the University needs nor did they appear to be able to offer the services that the University wanted.

Three of the 10 life insurance bidders were interviewed; Minnesota Life was selected. Rates went down slightly. As an added benefit Minnesota Life is offering a one time, limited open enrollment for guaranteed issue additional employee life insurance for 2008. The two options that have been presented to the University are:

1. Offer $50,000 (not to exceed the guaranteed issue limit) of additional life insurance to actively employed individuals currently enrolled in Additional Employee Life Insurance. The exception to this offer would be employees who were previously declined additional employee life insurance coverage through Minnesota Life since UPlan Life inception on January 1, 2003. (139 employees would be ineligible).
2. Offer $25,000 (not to exceed the guaranteed issue limit) of additional life insurance to all actively at work employees except for those employees that were previously declined additional employee life insurance coverage through Minnesota Life since UPlan Life inception on January 1, 2003. (139 employees would be ineligible).

Ted Butler provided members with background information about additional employee life insurance so members could make an informed decision about which would be the best option for the University.

Each of these options penalizes the 139 employees that tried to get additional life insurance through Minnesota Life, but were declined, noted a member. The University had extensive discussions with Minnesota Life to see if they would reconsider this exception, but they would not. Dann Chapman added that if this is a significant concern to the committee a third option would be to decline Minnesota Life’s offer. He went on to note that employees can enroll for new or additional coverage with evidence of insurability. Professor Morrison noted that this offer was not part of Minnesota Life’s original bid.

After a fair amount of discussion the committee voted to recommend the University take option 2.

V). Additional announcements:

• Gavin Watt stated that the RxAmerica discussion has been scheduled for May 3^rd. At the conclusion of the May 3^rd meeting, the committee will be asked to recommend a course of action, which will be forwarded to the Administrative Working Group (AWG).
• The AWG has discussed a Pharmacy Management Program at UMD. More information about this program will be forthcoming.
• The BAC will meet on August 2^nd to have a rate discussion.
• On a sad note, Gavin Watt announced that Professor Steve Chilton died on March 28^th. Professor Chilton served on the BAC from 2002 – 2004. Gavin Watt drafted a letter on behalf of the committee to Professor Chilton’s daughter expressing members’ condolences. He read the letter aloud to the committee and asked if members were agreeable to him sending the letter. The committee agreed and thought the letter was nicely written.

VI). Hearing no further business, Gavin Watt adjourned the meeting.

Renee Dempsey

University Senate